This has been a lively debate on an important Bill and it is a pleasure to follow the contributions of many hon. and right hon. Members. The hon. Member for Bromley and Chislehurst (Robert Neill) spoke with experience of local government, and it may not surprise him that I want to start on a note of consensus with him and the hon. Member for Meon Valley (George Hollingbery) by saying that I for one recognise that the Audit Commission went beyond its remit. Indeed, my right hon. Friend the Member for Leeds Central (Hilary Benn) made clear at the outset that we do not seek the restoration of the Audit Commission, and we understand that, to be frank, no one will lament its passing.
However, even though the Bill has been three years in the making, it is full of holes. My hon. Friend the Member for Derby North (Chris Williamson) said that the Bill is a dog’s breakfast. He made a strong speech in which he talked about the important functions of the Audit Commission, such as auditing and providing value for money in an independent way. Although we might not lament the Audit Commission’s passing, we should be concerned about those vital functions.
We must explore critical issues in Committee that are currently unclear, such as the arrangements for the future management of audit contracts and the transfer of Audit Commission functions. We do not know, for example, who will maintain the vital value-for-money tools. As a result of pressure in the Lords, not least from my hon. Friends, we have been promised improvements, such as amendments on opting into centralised arrangements for audit procurement. We can only hope that when the details are forthcoming in Committee, they meet the aspirations of their lordships and of the many organisations, including the LGA, that have pressed for those sensible amendments. It was good to hear the hon. Member for Mid Dorset and North Poole (Annette Brooke) pressing the Government on that point. I hope that she will take forward the good work of her colleague, the noble Lord Tope, in Committee.
There is doubt about the amount that the proposals will save. When the Minister responds, I expect that he will make claims about the level of savings, as did the Secretary of State in opening the debate. However, it
would do Ministers much more credit if they stopped double-counting and deliberately inflating the estimated savings. We all know that most of the savings have already been banked with the axing of the Audit Commission’s inspection work and with most of the audit work outsourced.
It is disappointing that the Government ignored the advice of the draft Local Audit Bill ad hoc Committee, which, after receiving conflicting evidence on the savings, recommended that a new financial impact assessment be made. The Committee believed that only modest savings were likely and was concerned about whether a real market would develop. As my right hon. Friend the Member for Leeds Central said, in the last financial year, only seven firms were appointed for the nearly 800 councils, health bodies and fire and rescue authorities that were audited by private firms, and 90% of those bodies were audited by only five firms.
The Audit Commission has raised fears that some local authorities might find it hard to attract a suitable auditor:
“In a free market, we believe there is a risk that some local authorities may find it hard to attract an auditor with the necessary skills and experience, at a reasonable price.”
It continues:
“We are aware that the firms are already considering which audits they would look to drop under the new arrangements.”
As my hon. Friend the Member for Derby North, the LGA and the National Association of Local Councils have said, that will be a particular concern for smaller authorities.
On new entrants to the market, I share the scepticism of the draft Local Audit Bill ad hoc Committee, which said:
“We heard evidence to suggest that it is not realistic for smaller firms and organisations such as mutuals and co-operatives to bid successfully for one-off audits without an inevitable impact on quality, consistency or cost.”
The Local Government Information Unit, whose evidence and advice should always be considered—I should declare an interest as its former chief executive—points out that a 10% increase in audit fees would wipe out any predicted savings. Grant Thornton said that
“it is likely that fees will increase, not decrease, as a result of the draft Bill”.