Councils could be left picking up a substantial bill following the abolition of the Audit Commission, with potential fee increases for audit and costs associated with a new self-regulation framework, expert witnesses have told MPs.
The communities & local government committee was told the £50m of savings ministers claim will be achieved by ditching the watchdog could simply be shunted on as costs to councils.
Professor Steve Martin, director of the centre for local & regional government research at Cardiff University, said: “The LGA say they have had further discussions about supporting councils to regulate themselves and they found out that councils are going to need support and funding to do that.
“Well that is not a huge surprise…Who is going to fit the bill for that? Is this alleged £50m simply now going to be for local authorities to pick up the tab now they have to regulate themselves.”
University of Aberdeen Business School Professor of Accountancy David Heald warned audit fees could increase for some councils if the Commission was sold off to the private sector.
“My speculation is that there would be upward pressure on fees,” said Prof Heald, warning that authorities which were “geographically remote or politically risky” could be at risk of seeing sharp fee rises.
Prof Heald also raised concerns about councils selecting their own auditors, which communities secretary Eric Pickles has proposed should be part of the new framework.
“There is a really fundamental issue that people who spend public money should not be responsible for appointing their own auditors,” said Prof Heald.
The audit & inspection of local authorities inquiry also took evidence from the Audit Commission’s former head of communications, David Walker.
Mr Walker robustly defended his former employer’s record, notably on spending on entertainment and its communications budget.
He accused ministers of carrying out the abolition “on a whim” and said the £50m in savings from cutting the watchdog promised by ministers could take up to 20 years to materialise.
Mr Walker said “The figure of £50m was plucked from the ether. There is no empirical basis for that figure.”
“I am not speaking on behalf of the Audit Commission, it does not employ me. The costs of winding down, it could turn out to mean that any savings from the abolition might well be deferred by 10,15,20 years.”
The inquiry follows communities secretary announcing plans to ditch the watchdog last August and stating that councils should be able to appoint their own auditors.