In a Pickles

AUDITORS, ESPECIALLY THOSE employed by the Audit Commission, probably didn’t raise a New Year’s glass to toast Eric Pickles, the communities secretary. The Cameron government’s Mr Nasty went out of his way to denigrate that organisation after announcing its abolition.

And yet, the minister’s whimsical gesture has forced open a long-suppressed debate about the content and organisation of public sector audit. During 2011, the government, firms, public auditors and parliamentarians have no choice but to address big questions.

The most obvious is why have two separate audit regimes for the same public money. Councils raise so little finance directly, they are, to all intents and purposes, spending taxpayers’ money: one band of auditors could do the fair and true duty.

In Scotland, Wales and Northern Ireland, post-devolution common sense dictated a unified regime. Now the same structure oversees the spending of councils as of quangos and civil servants. Just because England is bigger is no objection: all sorts of regional adaptations could be made.

Against common sense stand, on one side, the massed weight of the Big Four, highly influential in Tory circles, with a strong lien on the status quo. On the other, the institutional inertia of the National Audit Office and MPs.

But both are going to have to give ground this year, thanks to Eric Pickles’ determination to win brownie points by slashing at quangos. He has created a vacuum. His civil servants, in the Department of Communities and Local Government, have no experience with audit and, bluntly, don’t know what to do.

Before he acted, Pickles’ consultation with the Department of Business Innovation and Skills – which does have an auditor agenda – was cursory; his conversation with the comptroller and auditor general at the head of the NAO even briefer.
Pickles said the Commission would be wound up entirely by the end of next year. Yet it is now five months since the announcement and there is no sign of even a first draft of a bill. The longer the legislative delay, the less likely local authorities will get the choice of auditor promised them by Mr Pickles for financial year 2012/13.

His political failure opens a grand opportunity. Already peers are examining the market weight of the Big Four; the European Commission wants to change the audit regime for companies. MPs this month begin inquiring into the future of local audit. Meanwhile the health secretary has opened Pandora’s box with his plans for GP consortia in the health service, forgetting to say how their spending is to be accounted for. For the first time in a long while, audit will be the subject of fierce parliamentary debate.

This ought to give auditors’ professional bodies a wonderful chance to think afresh. Is public audit overloaded; time to consider stripping from public audit some of the performance management excrescences of recent times. Why shouldn’t the regime be broadly the same for all organisations, non and for-profit? Public sector audit could be much cheaper. Its expense often follows from the way auditors have been dispatched to remedy deficiencies in the broader accountability of public bodies.

The government’s plan for ‘armchair auditors’ have a role to play in addressing them, as perhaps so do elected mayors and other ways of regenerating public confidence in local spending decisions.

The NAO will surely have to expand its remit, and take charge of the unified audit regime. It must become the grand commissioner of public audit, in a market revivified by the entry of new players.

Audit and auditors are in the political frame, whether they like it or not, and for that they are obliged to Eric Pickles’ overreaching himself.

David Walker is a contributing editor at the Guardian and was formerly director of communications at the Audit Commission