The Audit Commission has made it onto the front page of the Sunday Times this morning. The commission is not the most exciting bit of government but superficially at least they look like an important bit. They started off as in-house auditors for the government but under New Labour their role in performance assessment has come to the fore as they have been used by Labour to try to drive their agenda through to the local level. They started off under the Thatcher administration, created as a result of the 1982 Local Government Act, as a tool to impose some financial discipline on local councils from the centre.
According to the Sunday Times:
ENGLAND’S local government spending watchdog has paid a lobbying firm with links to Labour for advice on how to undermine Tory frontbenchers who challenged its activities.
The Audit Commission, which is supposed to be politically neutral, paid nearly £60,000 to the lobbyists, who advised it to “combat the activities of Eric Pickles”, the Tory party’s chairman.
The story is essentially how ex-GLC Labour councillor head of the Audit Commission has been illegally using £60,000 of public money to pay a Labour insider public affairs company to lobby the government. Why? The reason is organisational self-preservation. The Tories see the Audit Commission as being largely unnecessary and will certainly curtail it, if not destroy it entirely. The organisation employs 2,000 people and costs £216 million per annum to run, see their annual report and accounts here. Most of their income comes from fees they levy on public bodies so it is easy for the central government to dictate an increasingly onerous oversight regime on local government as they don’t pick up the bill – councils and the NHS pay. This all means that the red tape is paid for by ordinary people in the form of higher council tax or worse services.
If you go to Ealing statement of accounts (page 27) here you will see that Ealing spent £533K last year and £681K the year before on audit costs. If you compare with the private sector you will see how costly the Audit Commission is. Take WH Smiths. Their turnover is £1,340 million, compared to Ealing’s £1,107 million. But they only spent £200K on audit last year and £300K the year before. It is straightforward to argue that our one council is paying a premium of over £300K for the Audit Commission’s “added value” service over regular plc auditing practices. (If anyone wants to argue that local government accounting is more complex I would merely say let’s make it simpler and more comprehensible for everyone involved!) This is not the only cost of the Audit Commission. It costs us at least the same again to jump through the Audit Commission’s hoops, to collect the metrics they want, to prepare and take part in their assessments, etc. The total bill for the whole central control mindset imposed by the Audit Commission is in the order of £500-1,000 million per annum. Losing this cost is one of the main points of the Tory’s localism agenda.
Laughably in their annual report the Audit Commission claim to be the 5th biggest audit firm in the UK. You wonder how big they would be if they had to compete with real audit firms?