Why Tories are attacking good governance by axing Audit Commission


10:00 pm - August 13th 2010

by Guest    


      Share on Tumblr

by Councillor Jason Kitcat

I was astonished to learn today that Eric Pickles will be axing the Audit Commission. Or more precisely, according to the leaked memo on the FT site, the commission will be privatised. Pickles is notorious for being ideologically wedded to cuts as shown from his time as leader of Bradford Council.

From the Telegraph’s one-sided report you’d think the Commission were a bunch of no-good layabouts responsible for, among other things, the terror of the fortnightly bin collection which keeps all good Tories awake at night.

No doubt mistakes have been made by the Commission at times, and they have overpaid some top staff – but which public or private sector organisation hasn’t in recent times?

In my three years on the Audit Committee at Brighton & Hove City Council I have been struck by the conscientious, helpful and detailed work Audit Commission staff have done for the council. The Commission has also helped to make the performance of public bodies more accountable, such as with the OnePlace site which barely got the chance to get going before being canned.

All the staff are experienced and understand local government – because that’s what they do. They also are public servants and take their duties seriously. It must be especially galling that these highly skilled, dedicated staff have been given the axe in a way that, without any consultation or debate, goes against all that might be called ‘good governance’.

How on earth does Pickles think we are going to get the same kind of scrutiny of our public bodies from corporate auditors, inexperienced in local government, and who failed to prevent a litany of corporate fraud and failures? Furthermore, why are private-sector corporate auditors going to be any cheaper to hire in than the Audit Commission who didn’t need to make a profit from their work?

As public bodies continue to be rocked by the cuts and upheavals being rained down on them, I don’t think that now is a sensible time to also completely uproot the key scrutiny and overview body which works to ensure services are robust and money well spent.

I’m appalled by this political meddling in what is an arms-length commission to hold local government to account. This is yet another ill-judged, ideological and unnecessary cut which will end up costing us all a lot more in the long term.

—-
Jason Kitcat is a Green on Brighton & Hove City Council

    Share on Tumblr   submit to reddit  


About the author
This is a guest post.
· Other posts by


Story Filed Under: Blog ,Local Government

Sorry, the comment form is closed at this time.


Reader comments


This decision will surely mean greater payments by the taxpayer for auditing services.

Maybe this has something to do with the decision?

Accountancy firms give Tories free financial advice http://www.timesonline.co.uk/tol/news/politics/article7025819.ece

Windfall for Tories as firms eye £4bn contracts: Accountancy giants channel £500,000 in resources and staff to Conservatives ahead of election
http://www.independent.co.uk/news/uk/politics/windfall-for-tories-as-firms-eye-1634bn-contracts-1764007.html

Donations roll in to top Tories’ coffers
http://www.heraldscotland.com/news/politics/donations-roll-in-to-top-tories-coffers-1.1004900

Donations to Oliver Letwin by Ernst and Young and KMPG http://news.bbc.co.uk/democracylive/hi/representatives/profiles/25415.stm

And so on and so on.

Great investment in helping the Tories make decisions that are not in the taxpayers interest!

Never mind, private audit businesses will in future audit local councils, hospital trusts and most of the other client organisations of the Audit Commission. Hopefully, they won’t screw up again and allow the likes of Enron, in America, to pass undetected:
http://en.wikipedia.org/wiki/Enron_scandal

Btw whatever happened to Lord Wakeham? Wasn’t he a non-executive director of Enron and chairman of its audit committee?
http://www.independent.co.uk/news/uk/politics/enron-and-the-shadow-over-lord-wakeham-is-this-a-fix-too-far-for-the-ultimate-fixer-671909.html

Btw how ever did the Audit Commission miss this?

“The South Yorkshire Trading Standards Unit is to close on 31 July over a £14m shortfall in its accounts.”
http://news.bbc.co.uk/1/hi/england/south_yorkshire/5149450.stm

It is also important to point out that the Audit Commission are the auditors of all NHS Trusts and can be contracted by Foundation Trusts as their auditors. This means that they have immense experience and expertise as auditors of hospital trusts, far more than any private sector auditor and what’s more, I know from my own experience of commissioning the auditor for a Foundation Trust that the Audit Commission also provide the cheapest quotes.

The fact is, this is ideological privatisation. And the disgraceful aspect is that it will push up costs for hospitals at a time when they will have to make huge cuts caused by Lansley’s ludicrous and expensive NHS changes and the £20bn “efficiency savings” that have to be made by 2014.

Once upon a time, (and to my eternal shame), I used to work in recruitment. When it came to auditors, if we couldn’t get them a job anywhere else, due to being incompetent or having suspicious qualifications, we could always get them a job as government auditors.

This idea may have significant costs but at least there is a decent chance the people doing this will have sufficient talent to spot a corrupt set of accounts.

@falco

Just like the auditors of, say, the Financial Services industry, these past few years.

Where on earth does your confidence “there is a decent chance the people doing this will have sufficient talent to spot a corrupt set of accounts” come from?

@5 From the fact that private companies had far higher standards, unlike the FSA auditors we recruited for instance.

Cameron & Co. Reputable auditors since May 2010.

Number of cans of Stella for £5? Number of BSF contracts axed? Proportion of British troops in WW2?

I’d continue but I tend to lose count when I get above 3. Must be the Tory in me.

More news about my local hospital and others from 2001 but which shows why regular audits of healthcare performance are essential:

“A dozen hospital trusts in England are so bad they have failed to gather any stars in the government’s performance tables.”
http://news.bbc.co.uk/1/hi/in_depth/health/2001/nhs_performance_2001/1562247.stm

9. alienfromzog

Maybe this is paradoxically good news.

The decision to axe the cost-effective and effecient audit-commission, thereby pushing up the cost of auditing for local authorities and NHS Trusts is so demonstrably a bad idea that it shows the Government cuts policies for what they really are:

Ideologically-motivated-ill-thought-out-poor-policies.

AFZ

10. astateofdenmark

The undemocrat pile of heaving parasites that are th audit commission begone. Take your ludicrous and undemocratic star system as well.

If Pickles wanted to save a bit from the Commission’s budget, he could have simplified the frameworks used for audit. I’m sure many, including those in the Commission itself, would have had many suggestions on those fronts.

But as we have it now the coalition have dumped the all of current audit framework and now axed the Audit Commission itself. Either Pickles doesn’t understand the role of audit or he doesn’t recognize it’s importance.

In response to some points above:

– Trading Standards were re-organised by Labour into regional bodies a few years back. I don’t believe the Audit Commission were responsible for oversight of these new bodies.

– The star system for rating authorities was administered and applied by the Audit Commission. But, as I understand it, the framework was created by their political masters. I’m sure the Commission had input in its development though. And I personally thought the star system was an accessible way of summarising audit results.

Thanks for the comments from the Cllrs

Three things from the coverage

a) “champagne lifestyle” do what? Has Eric actually seen the average audit room, we go on taining events like the rest of people in work to ensure we ae able to do the work
b) £8k at Newmarket – was the fee for a conference hosting local govt accounants on a course about finance – day at th races indeed
c) If you look up Steve Bunded’s letter to the Times, the AC did’t spend money lobbying against sir Eric, it was £9k on reserching the impact of work done, i.e. market research
d) the staff were told by e mail as Eric only gave a few hours notice and we are spread all over the country, doing the accounts at your council!

Strange how myth is perpetuated if quoted enough

@11: “And I personally thought the star system was an accessible way of summarising audit results.”

Exactly. But there other ways such as this:

Dr Foster report shows 12 NHS hospital trusts ‘significantly underperforming’
http://www.telegraph.co.uk/health/heal-our-hospitals/6682768/Dr-Foster-report-shows-12-NHS-hospital-trusts-significantly-underperforming.html

And this regular private venture assessment of hospitals by Dr Foster:
http://www.drfosterhealth.co.uk/hospital-guide/full-hospital-list/

The essential issue is that we surely need regular league tables of healthcare peformance by hospital trusts based on patient outcomes. GPs need to easily access this information if they are to take on the task of commissioning.

14. David Boothroyd

Stronger auditing and performance checking procedures ought to be the quid pro quo for greater financial freedoms for local councils. Instead it looks like we will get no significant financial freedoms, but no firm auditing either.

I just hope no-one I know is living in the council where the officers decide to try some ‘innovative’ and ‘experimental’ approaches like Hammersmith and Fulham’s Director of Finance did with interest rate swaps in 1988. The members didn’t really understand it and it took the Audit Commission to get them out of that pickle, pun intended.

“I just hope no-one I know is living in the council where the officers decide to try some ‘innovative’ and ‘experimental’ approaches like Hammersmith and Fulham’s Director of Finance did with interest rate swaps in 1988. The members didn’t really understand it and it took the Audit Commission to get them out of that pickle, pun intended.”

An excellent example – here is more detail:

“In June 1988 the Audit Commission was tipped off by someone working on the swaps desk of Goldman Sachs that the London Borough of Hammersmith and Fulham had a massive exposure to interest rate swaps. When the commission contacted the council, the chief executive told them not to worry as ‘everybody knows that interest rates are going to fall’; the treasurer thought the interest rate swaps were a ‘nice little earner’. The controller of the commission, Howard Davies realised that the council had put all of its positions on interest rates going down; he sent a team in to investigate.

“By January 1989 the commission obtained legal opinions from two Queen’s Counsel. Although they did not agree, the commission preferred the opinion which made it ultra vires for councils to engage in interest rate swaps. Moreover interest rates had gone up from 8% to 15%. The auditor and the commission then went to court and had the contracts declared illegal (appeals all the way up to the House of Lords failed); the five banks involved lost millions of pounds. Many other local authorities had been engaging in interest rate swaps in the 1980s, although Hammersmith was unusual in betting all one way.”
http://en.wikipedia.org/wiki/Interest_rate_swap

As I recall, the Hammersmith and Fulham Council ran up losses of well over £100 million which would have had to be paid off by ratepayers were it not for that fortunate decision of the courts that the swaps were beyond the legal competence of the council (ultra vires) so the banks which took on the swaps had to bear the losses.

A funny personal thing is that I knew the chief exec of the council. He was previously a tutor at a university which used to run courses for senior local government officials and I was sent to attend one – for my own good, of course. He and I clashed! I would get sued if I said more. Btw the council was Conservative controlled.

16. Charlieman

The Telegraph report includes this snippet: “The Commission, set up by the Conservatives in 1983, employs more than 2,000 people and has a budget of more than 200 million pounds a year.”

At first glance, that sounds expensive. About £100,000 per employee. But when you factor in the costs of employing people who collectively need access to almost every professional journal and who may spend a lot of working time on field visits, those costs seem reasonable.

Another way of looking at it is that the Audit Commission employs, for the sake of argument, 1,500 auditors. Then count up the public sector pay roll for the bodies that the commission inspects. Divide the latter by the former, and draw your own conclusion.

This is a straight forward pay off by the tories to the big accounting firms that provided people, expertise, etc to them while in opposition. It will be a bonanza for the big four who will hoover up auditing contracts across the country by throwing in a few loss leaders at the beginning, it’ll mature over the next few years into a steady guaranteed income stream.

18. snout-in-trough

Imagine the situation. Tenders for road scheme/recycling scheme/IT project come in between £6m and £9m. The relevant Executive member (elected councillor) plumps for the middle one at £8m and no-one knows the firm belongs to his brother-in-law’s private equity scheme. The “armchair auditor” can’t be expected to know there was a cheaper and better option, she just sees £8m.

No Audit Commission to check the scheme. No Standards Commission to require that the conflict of interst was declared. Bingo! Council tax payers robbed of £2m trousered by the family. Multiply that by 400 odd local authorities and the £50m spent on the Audit Commission looks measly.

The rotten councillors have sneaked away from councils and into some dodgy “partnerships” of late. Don’t worry, they will be back once the rules are lifted. As for those councillors’ brothers-in-law on here, nice one! Snouts in trough time, and front trotters as well. Tell me how the ballot box sorts this one out.

19. Charlieman

@18. snout-in-trough: “Tell me how the ballot box sorts this one out.”

In theory, it should be the Freedom of Information Act, but there are probably enough wiggle clauses in it to disguise improper conduct in commercial transactions.

However, axing of the Audit Commission does place a responsibility on opposition councillors to function as investigators. Similarly, it is an opportunity for local newspapers and journalists to reinvent themselves.

@Charlieman

Unfortunately contractors and contracts often are exempted from FOI requests due to ‘commercial confidentiality’.

Furthermore, with opposition councillors being low-paid part-timers already dealing with piles of casework and existing council meetings, I’m not sure many are going to have the ability to pursue audit-type investigations too…


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  2. tonybovaird

    Why does Pickles think priv auditors can better scrutinise local govt than Audit Comm, given awful priv sector record? http://bit.ly/aZ4HBn

  3. beaubilly10

    RT @tonybovaird: Why does Pickles think priv auditors can better scrutinise local govt than Audit Comm, given awful priv sector record? http://bit.ly/aZ4HBn

  4. johnnymacone

    RT @thegreatignored The folly of axing the Audit Commission@libcon http://bit.ly/9Wn4Bu >funny how the Cons used to use it to bash Lab with

  5. langtry girl

    RT @tonybovaird: Why does Pickles think priv auditors can better scrutinise local govt than Audit Comm, given awful priv sector record? http://bit.ly/aZ4HBn

  6. minacab

    RT @tonybovaird: Why does Pickles think priv auditors can better scrutinise local govt than Audit Comm, given awful priv sector record? http://bit.ly/aZ4HBn

  7. oxfordunilabour

    RT @libcon: Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  8. Jason Kitcat

    My latest piece on @libcon Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  9. magsnews

    RT @libcon: Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  10. roybailey

    RT @libcon: Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  11. iamchrisevans

    RT @libcon: Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  12. grahamjeffery

    RT @thegreatignored: Worth a read on the folly of axing the Audit Commission from @libcon http://bit.ly/9Wn4Bu

  13. daveip1966

    WTF? RT @libcon Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  14. itsmotherswork

    RT @libcon: Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  15. tiggertherese

    RT @tonybovaird: Why does Pickles think priv auditors can better scrutinise local govt than Audit Comm, given awful priv sector record? http://bit.ly/aZ4HBn

  16. andrewducker

    Why Tories are attacking good governance by axing Audit Commission http://bit.ly/9KN80n

  17. tjm 77

    This sucks ass: RT @libcon Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  18. Stephen Hughes

    RT @thegreatignored: Worth a read on the folly of axing the Audit Commission from @libcon http://bit.ly/9Wn4Bu

  19. Little Metamorphic O

    RT @libcon: Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  20. Teresa Cairns

    RT @tonybovaird: Why does Pickles think priv auditors can better scrutinise local govt than Audit Comm, given awful priv sector record? http://bit.ly/aZ4HBn

  21. Jason Kitcat

    In case you missed it… My latest piece on @libcon Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  22. Steve Searle

    RT @libcon: Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  23. Pucci Dellanno

    RT @libcon: Why Tories are attacking good governance by axing Audit Commission http://bit.ly/aZ4HBn

  24. Therese

    Lib Con: "Why Tories are attacking good governance by axing Audit Commission" http://bit.ly/bYWJsQ

  25. Therese

    Lib Con: "Why Tories are attacking good governance by axing Audit Commission" http://bit.ly/bYWJsQ

  26. Rose Darling

    RT @TiggerTherese Lib Con: "Why Tories are attacking good governance by axing Audit Commission" http://bit.ly/bYWJsQ [Well said.]

  27. Robin Dalton

    Good blog RT @TiggerTherese Lib Con: "Why Tories are attacking good governance by axing Audit Commission" http://bit.ly/bYWJsQ

  28. VSlade

    govt £ by big 4? shurely not. RT @TiggerTherese: "Why Tories are attacking good governance by axing Audit Commission" http://bit.ly/bYWJsQ





Sorry, the comment form is closed at this time.