Experts line up to slam 'hasty' abolition of Audit Commission

8 Feb 11
The government's decision to scrap the Audit Commission was not evidence-based, MPs have been told

By Lucy Phillips

8 February 2011

The government’s decision to scrap the Audit Commission was not evidence-based, MPs have been told.

The Common’s communities and local government select committee inquiry into the abolition of the Audit Commission took its first oral evidence session last night. All the expert witnesses agreed that the spending watchdog did not ‘deserve’ to be given the chop without the alternatives being examined.

Local Government Secretary Eric Pickles announced he was scrappingthe commission in August last year in a move that came as a shock to many – including the watchdog’s own senior management. Pickles claimed the quango had ‘overreached’ itself, that it no longer safeguarded public money in the way it should and that it cost too much to run. Instead, from 2012, local authorities would be able to appoint their own external auditors.  

But David Heald, professor of accountancy at University of Aberdeen Business School, told the select committee that there had been no evaluation of the performance of the commission before the secretary of state’s announcement. Reform would have been a better option, he said.

Heald added that his biggest concern was the government’s decision to breach the ‘fundamental principle of public audit’ by allowing councils to appoint their own auditors.

He warned: ‘The Audit Commission regulated audit and acted as a buffer between the auditee and the audit form. It removed a lot of liability issues that a private firm would face... The reason why the Audit Commission was established was because there were scandals that audit was too close to local authorities.’

David Walker, former director of communications at the Audit Commission, told the committee that there was ‘a very strong case for at least an evidence-based review’ before the abolition.

He suggested a ‘cleansing or cheapening’ of the body would have avoided many of the problems the government is confronted with as a result of the closure.

Walker also claimed the government’s figure of £50m a year operational savings from the abolition was based on no empirical evidence and ‘plucked from the ether’. In what became a heated exchange with Conservative committee member Bob Blackman he added that the cost of winding down the body could mean that any savings ‘might well be deferred for 10, 15 or 20 years, even if then’.

The third witness, Steve Martin, professor of public policy and management and director of the Centre for Local and Regional Government Research at Cardiff University, warned that the abolition would ‘leave quite a gap’. He also said alternatives should have been considered first.

‘This was not an evidence-led policy decision,’ he said, adding that local authorities would be preoccupied with balancing their books during the current period of budget cuts. ‘If we had an alternative model in place before we jettison the previous one, that might have been a more sensible way to proceed.’

Martin was also sceptical about the government’s idea of using armchair auditors as a replacement for a role previously carried out by professionals, claiming his research showed there was ‘no appetite’ from the public to get closely involved.

Martin described the removal of the inspection role carried out by the Audit Commission as ‘a huge gamble’. 

All the witnesses also agreed that the turmoil surrounding the abolition could ‘distract’ those currently working for the commission. ‘There is a danger that people doing the in-house part of the Audit Commission auditing are going to be more worried about their futures,’ said Heald.

Walker added: ‘There may be some risk to local public expenditure during the period when the Audit Commission is less attentive than it would have been.’

Heald also told the MPs that audit fees were likely to ‘go up quite sharply’ without the Audit Commission there to manage the market. Geographically remote and politically risky areas would be worst hit.

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