Lord Harrison
To ask Her Majesty’s Government how the functions of the Audit Commission will be replaced following its abolition.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, subject to Parliament enacting the necessary legislation, local audits will be regulated within a statutory framework overseen by the National Audit Office and the audit profession. Councils will appoint their own independent external auditors and there will be new audit arrangements for local health bodies. The commission’s in-house audit practice will be moved to the private sector and other functions of the commission will cease or become the responsibility of auditors or other existing bodies.
Lord Harrison
Why, without consultation and at a time of financial retrenchment, do the Government abolish the established Audit Commission, whose value is demonstrated by its extracting value for money when public money is spent on the National Health Service and in the local authority sector? Does the Minister agree with the ACCA and with CIPFA that what will happen if we give this to private audit firms is that there will be many more conflicts of interest; that often they will have no appetite to take up the work; and worst of all, that the independent voice of the Audit Commission, which was able to criticise government, will be lost? Has not the pretty Mr Pickles got the Government into yet another pretty pickle?
Baroness Hanham
My Lords, in the current financial climate, it makes absolutely no sense for Whitehall to own the fifth largest audit practice in Britain, particularly when it provides services that can readily be obtained in the private sector. The commission’s monopoly on appointing local auditors weakens competition and also weakens the localism that should be available to local government. Certainly in my time in local government, one of the things that irritated me most was the fact that you could not choose your own auditors. Now there will be much better and more open ways of doing that.
Lord Christopher
My Lords, I declare a past interest in that I have been a member of the Audit Commission. The noble Baroness has said exactly the opposite of what the noble Baroness, Lady Thatcher, said when she was Prime Minister in 1981 and set up the Audit Commission in 1982. I quote Mr Pickles when he said:
“I'm not interested in research and evidence—I'm here to take decisions”.
We know the basis on which this decision has been taken. If the noble Baroness, Lady Thatcher, was wrong, how, according to what the Minister has described, do the Government aim to take forward the then three aims of the noble Baroness, Lady Thatcher—namely, to raise and maintain the quality of audit, to increase cost-effectiveness, and, above all perhaps, to get value for money? How will each of those aims be advanced?
Baroness Hanham
My Lords, 1981 was quite a long time ago, just in case that has not been appreciated. Also, since then, the Audit Commission has assumed far greater roles than my noble friend Lady Thatcher ever envisaged it doing. It is now our view that it is time to put audit into the hands of local authorities so that they can demonstrate for themselves that they can choose auditors. Some inspection powers will still be in the hands of Ofsted and the Care Quality Commission to ensure that there is value for money and propriety in those services. Local authorities will have to take a very keen interest in how their services are run, the value they get for the money they pay, and the standards that they achieve.
Lord Greaves
My Lords, it is good to know that this coalition Government are not very Thatcherite. There was rejoicing among local authorities throughout the land when Eric Pickles announced that the Audit Commission was being abolished. The succession of top-down schemes, from best value to the comprehensive performance assessment and the comprehensive area assessment and so on, have wasted vast amounts of time and money in local authorities. Although it will take time to close down the commission, will the Minister confirm that new Labour attempts to micromanage anything on the ground that moves have come to an end and that local authorities can now use their resources to get on and do the jobs that they were elected to do?
Lord McKenzie of Luton
My Lords, the Minister has talked about value for money. Please will she tell the House what impact assessment has been undertaken of the proposals to abolish the Audit Commission and whether she will publish it? In particular, will she say what are the estimated winding-up costs and how long it will be before any savings are anticipated?
Baroness Hanham
My Lords, clearly there will be savings. At the moment, the estimate is about £50 million, but I expect that may vary either up or down. The Audit Commission has appointed Gareth Davies to see how the commission is taken into the private sector, which is an excellent move forward. I look forward to seeing how that goes and the Audit Commission’s proposals for the future.
Lord Tebbit
My Lords, without regard to the merit of this particular decision, does my noble friend agree that we should look rather closely at the record of the major accountancy and audit firms in this country? After all not one of them detected anything wrong with any of the bank accounts which they audited.
Baroness Hanham
My Lords, nor did the previous Government. They missed that, as well as the audit companies. The private sector can only be strengthened by having another major audit company within it and the Audit Commission will, I hope, become that. There will then be a wider market for local authorities to delve into for audit.
Lord Barnett
My Lords, given the various new bodies that will carry out the functions previously done by the Audit Commission, can the Minister say whether, before abolishing the commission, any estimate will be made about the increased or reduced cost and how that will help to do the job of auditing?
Baroness Hanham
My Lords, clearly there is more work to be done. The announcement has been made quickly so that there is no hold up or detriment to the Audit Commission. As I have said, at the moment the calculated savings are £50 million, so presumably that will also include other work to be done.