Ministers reject creation of new Audit Commission-style watchdog

The government has ruled out setting up a new Audit Commission-style watchdog to oversee scrutiny of council finance – seemingly irrespective of the findings of the Redmond review.

A formal response document to a report from MPs on parliament’s Housing, Communities and Local Government Select Committee cited the “scale and cost” of the commission, which was scrapped by the coalition government.

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The response, delivered by communities and local government secretary Robert Jenrick on behalf of the government, said ministers looked forward to Sir Tony Redmond’s recommendations on the purpose, scope and quality of local authority audit.

But it strongly suggested that a future Conservative government would not countenance the setting up of a successor body – whatever former Chartered Institute of Public Finance and Accountancy president Redmond’s recommendations are when he reports next spring.

It said: “Whilst we would not propose recreating an oversight body at the scale and expense of the Audit Commission, we look forward to receiving the response from the Redmond review and taking the opportunity to further strengthen the accountability and assurance frameworks already in place for local government.”

Even though it was set up in 1983 under a Conservative government, the Audit Commission increasingly became the focus of criticism from the party for its cost.

When then communities secretary Eric Pickles announced plans to abolish the body in 2010, he said the move would save the public purse £50m a year.

The Institute for Government said the commission had a turnover of £200m a year. It was formally wound up in 2015.

Jenrick’s predecessor at MHCLG James Brokenshire launched the Redmond review in July – the same month that he left office in the reshuffle that followed Boris Johnson ascension to prime minister.

In a statement to parliament at the time, Brokenshire said the Redmond review would look at whether the nation’s audit and related regulatory framework was operating in line with the policy intent set out in the Local Audit and Accountability Act 2014.

It is also probing whether the reforms have “improved the effectiveness of the control and governance framework”, along with the transparency of financial information presented by councils.

Elsewhere in its response to August’s report from MPs, the government rejected calls to “make substantial changes to the business rate retention system” – in particular making it simpler by bringing back the Revenue Support Grant to “redistribute to councils in need”.

The Ministry of Housing, Communities and Local Government said it recognised that the business-rate retention system was “complex, but it insisted that it reflected the need to balance the redistribution of resources at the same time as incentivising local growth.

The response said: “Within these constraints, we are committed to making the system simpler, in line with the recommendations of the Hudson review.

“Whilst looking to increase the proportion of business rates revenue that is retained locally, we are therefore looking to reduce the fiscal risk from backdated appeals and valuation changes.”

MP’s concerns about the long-term viability of business rates as a funding stream for councils were noted – against a backdrop of changing retail patterns.

MHCLG said that while potential changes to the overall system of business rates was “an important consideration” in designing wider reforms, ministers believed business rates retention continued to be “a viable source of valuable and flexible funding” for councils to meet specific local needs.

The government dismissed calls for a review of council tax in response to MPs’ call for the introduction of new tax bands at the upper and lower ends of the current scale.

“Revaluation would be expensive to undertake and could result in increases in bills for many households,” the government said.

“Phasing changes would simply postpone the reality of increases in bills for many households, while also possibly creating interim costs for local or central government.”

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