A bit of a spat has developed today, inasmuch as a spat in the quiet world of audit can ever develop.
It concerns the decision of Eric Pickles to axe the Audit Commission, partly in response to a “culture of excess” at the spending watchdog.
I’ll leave to one side the question of whether external judgments about an organisation’s spending on specific items as a result of transparency is a judgment easily or fairly reached.
The points I want to make address Bob Neill’s view and logic that the Audit Commission was “behaving as a large corporate” and that introducing a competitive market in public audit would reduce costs.
Point 1: Auditors in the private sector will also behave like large corporates because they are, erm, large corporates (e.g. KPMG, PWC). As Neill himself noted, if such auditors want to include in their costs things like bagels for lunch at £6.50 a head and training events hosted at race courses charged at £67 per head, then that’s fine since it’s part of their business model. But that cost will still ultimately be met by the taxpayer, even if it’s within a financial envelope acceptable to the government.
Neill is therefore not arguing about specific items of expenditure; he’s arguing about the cost of audit.
Point 2: Given Neill is arguing about the cost of audit, why didn’t Pickles simply reduce the overall budget of the Audit Commission to the level of funding the government is willing to pay for audit?
As Pickles and Neill are currently defending it, the decision to axe the Audit Commission therefore doesn’t stack up.
If, however, you work from the assumption that the coalition government thinks the public sector should provide as little as possible, and that the market will fill the void, it makes perfect sense.
Why, then, didn’t they just come out and say so?