Shapps will 'eat his hat' if abolishing Audit Commission fails to save £50m

5 Apr 11
Local government minister Grant Shapps has promised to eat his hat if the Audit Commission abolition fails to save at least £50m by 2015.
By Mark Smulian

5 April 2011

Local government minister Grant Shapps has promised to eat his hat if the Audit Commission abolition fails to save at least £50m by 2015.

His remark came during exchanges with MPs on the Commons communities and local government select committee yesterday, when he repeatedly refused to say how the £50m figure had been calculated.

Shapps told the committee that ‘really significant savings’ would be made from opening the public audit market up to competition and ending the 20% charge imposed by the commission on audited bodies to cover ‘top heavy corporate administration’.

When committee chair Clive Betts asked how the £50m figure had been calculated, Shapps said it was ‘an estimate’ but declined to share the details with the committee, even in private correspondence. He said: ‘You have got everything you are going to get until the impact assessment comes out, which will have tremendous detail.’

The minister added: ‘Nothing I have seen leads to me to think those savings will be any smaller than the £50m predicted.

‘If there are not £50m of savings by the end of 2015 I will eat my hat.’

Shapps said ministers decided to abolish the commission because it ‘had lost its way and was unwieldy’.

He added: ‘It is quite an old-fashioned way of working to have a body that is a centralised regulator and a provider [of audit services].’

Auditors’ independence would be ensured by regulation by professional bodies and a National Audit Office code of practice, he said.

Shapps said council audit committees should be independent, but insisted auditor appointments should be made by full council meetings.

‘People are elected to take decisions and councillors are the right people to decide on auditors,’ he said.

‘If the audit committee publicly disagrees with [the council’s choice] it will be very difficult to defend. The best way to protect independence is transparency.’

Asked what would happen if a council sacked an auditor who was probing embarrassing matters, Shapps said: ‘If a council dismisses an auditor the next one will tell them to do the same thing. An audit firm’s reputation is bigger than one audit.’

The committee also took evidence from NAO head Amyas Morse, who told MPs he had been aware of the commission’s intended abolition only shortly before it was announced by Local Government Secretary Eric Pickles in August.

He said he was not consulted, except on whether the NAO could take on parts of the commission’s work, because: ‘I am an officer of Parliament so I do not get involved in policy [decisions].’

Morse said independence of auditor appointments was ‘very important’ and achievable ‘by audit committees with strong non-executive external elements’.

He added that he would not ask for more resources until it was clear what additional work the NAO would do after the Audit Commission’s abolition.

Last week, ministers published a consultation on the future of local audit.

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