Examination of Witnesses (Questions 220
- 237)
TUESDAY 1 FEBRUARY 2000
MR RICHARD
HARBORD, MR
BILL ROOTS
AND MS
LESLEY HALTON
220. A Labour Government Minister would say
that due guidance was given to that in the sparsity factor of
what you receive from central government?
(Ms Halton) It does not meet our costs.
221. So it does not meet your costs, but in
Westminster, for instance, they are getting an enormous amount
of money for clearing snow?
(Ms Halton) For example, authorities which have a
population of, say, only 6,000 or 8,000 more than us, it does
not cost that much more, even though they are a rural area, getting
the same sparsity factor; they are better off, because it does
not cost the amount of money they get extra per head of population
in order to look after that per head of population extra. There
are no extra contract management costs. You begin to get the economies
of scale, which we do not have.
(Mr Roots) I was just going to say, I think the previous
speaker sort of summed it up, I know nobody in local government
that thinks their authority gets the right slice of the cake,
and I do not think the Audit Commission is actually going to add
to that process by just adding its voice to that. I think the
Government, for some time, both the recent Governments, have spent
a lot of time and money asking academics, amongst others, to try
to come up with a better system, this has been going on for a
number of years, and there is a fundamental review under way at
the moment, which all, the Local Government Association and various
other bodies, are engaged in, for the Government to come up with
a decision.
222. Let us be realistic though. You heard Mr
Freer not give a definite answer, because you were all sitting
at the back; the Local Government Association will not agree with
each other about funding formulas. Should not the Audit Commission
have a stronger voice in that?
(Mr Roots) I think the Audit Commission can draw out
any apparent inconsistencies, but, frankly, the distribution of
£50 billion to 400-plus different local authorities is not
an easy task for anybody, and you are going to come down to some
sort of formula. And everybody argues, for every year, for as
long as I can remember, for the last 30 years, about the distribution
that year, and, frankly, a lot of the decisions are judgemental,
at the end of the day, and they rest with Ministers.
(Mr Harbord) Can I just add to that. I would not disagree
with anything, except, clearly, Westminster's generous treatment,
as opposed to Hammersmith and Fulham's, is a case in point. But
I would say that I do think the Audit Commission could use its
independent voice to make comment generally on major issues facing
local authorities, and I do not think it uses that sufficiently,
not only the grant distribution but the bidding processes for
all the various competitive funds we are now into, and things
like this, which are time-consuming and very difficult for a lot
of local authorities to comply with. There are general issues
that I think they ought to be using their independent voice to
comment on.
Chairman
223. What you are really saying is, it is a
bit odd that they can actually comment about the amount of litter
that there is in Fulham and Hammersmith, compared with Westminster,
and yet not comment on the amount of resources you have got to
clear it up?
(Mr Harbord) Yes. I think they ought to be doing both.
Mr Olner
224. Can I perhaps move on, and you spoke, Ms
Halton, about the fees from the Audit Commission, and what have
you; how do you think the fees could be determined in a more objective
and independent manner?
(Ms Halton) I think it should be more based on per
head of population rather than having such a large fixed fee element.
We have done some investigation on how much of our RSG is available,
the split of the £24.5 million in the EPCS bloc, and we `phoned
up an expert in this, and, apparently, in our authority, we will
get £17,927 in our SSA towards Best Value and inspection
fees. According to the consultation paper that came out last week,
it looks as though our Best Value Performance Plan audit is going
to cost £19,500; so already we have got a discrepancy. On
top of that, we are going to have to pay for inspection, which,
apparently, in a full year, will be about £58,000; if we
abate that for the first year, that comes down to £32,000.
Perhaps we will have to pay about half of that, I am not sure,
it is not quite clear. But, clearly, we are talking about an £18,000
minimum discrepancy between our SSA allowance and what it is going
to cost us; and I put that down to the fact that there is such
a large fixed fee element, which means that, for an authority
like ours, which is so small, without economies of scale, we are
going to have to take money away from other resources in order
to meet it.
(Mr Roots) I think my concern about fees is, and I
accept that the larger authorities perhaps are in a much better
position than the small districts, in terms of—
225. So what would be the better and more objective
way of doing it?
(Mr Roots) What I would like to see is more flexibility
in the scale of fees, because I think what one should be able
to do is adjust the depth of the audit, depending on the general
performance of the authority. If you have had a number of years
with no objections, no problems, the accounts balance, there are
not issues around debtors and creditors, then it would seem to
me that the scale of the audit could be reduced, and that, in
fact, would offer some savings to those local authorities. If
it were the other way then I would expect the audit costs to go
up.
226. Do you think the fixed element is the one
that is a difficulty? Energy companies are now doing away with
the standing charge, you just pay for what you get; would that
be a better way?
(Ms Halton) Yes, I think so. I think it should be
more based on our transactions, which are bound to be much less
than a larger authority.
227. Perhaps to Hammersmith and Fulham; does
the `managed audit' concept lead to real reduction in external
audit fees?
(Mr Harbord) Yes, it does, and the managed audit is
to be greatly welcomed. But I think that, again, we would welcome
a little more transparency in the credit we get for our managed
audit and in the negotiation of the fee generally, and I would
not differ from the views of my colleagues on that.
228. Do you think a similar approach could ultimately
be applied to Best Value inspections?
(Mr Harbord) Yes. But I think it is very early days
to make a judgement about that, because clearly you need to have
standards set, to start with, in Best Value inspection, and we
will have to pay for that to be put in place; but, as time goes
on, there must be an element of self-assessment that would be
possible, in the same way as the managed audit is possible currently.
229. Perhaps I could ask you all, briefly, we
talk about the Audit Commission, we talk about Best Value with
local authorities, do you reckon the Audit Commission itself should
be subject to Best Value and Value For Money?
(Mr Roots) That is what you are doing today, Chairman.
Chairman
230. It is no good smiling, we have to have
it actually in words?
(Mr Roots) It is very difficult, because it is a unique
body, but I assume that is fundamentally one of the reasons that
you are reviewing the purpose and the performance of the Audit
Commission. I know of no other way to do it.
Mr Olner
231. So you think there should be a body established
to ensure that they are giving Best Value?
(Mr Roots) Yes.
(Ms Halton) Yes; absolutely.
(Mr Harbord) I would be a bit cautious about the inspectors
inspecting the inspectors who are inspecting the inspectors. I
think that the Audit Commission ought to be able to demonstrate
Value For Money and Best Value, and they ought to be subject to
some sort of regime to ensure they do that; but I would not go
too over the top about having a body to judge the Best Value of
the Audit Commission.
232. You do obviously all agree that local authorities
have the capacity to assess themselves; how do you think that
can best be fostered, and are all local authorities trusted to
do this?
(Mr Roots) I think, by and large, there has to be
some trust, and I think that is where a strong external audit
role is key. But, I have to say, personally, I do have some concerns
about the current inspection regime that is arriving with Best
Value. I think our external auditors are quite capable of assessing
whether we carry out those service reviews effectively, fairly
and thoroughly. What personally I am finding very hard to cope
with is the concept of a separate inspectorate, looking at every
single one of our Best Value reviews, we will be doing 20 next
year, and every one of those reviews will be inspected, and personally
I find that difficult to understand.
(Mr Harbord) I think that there is a danger, in the
way we are going, that there are so many inspections that local
authorities suffer somewhat from inspection fatigue, and that
I hope and trust there will be some working together of all the
various inspectorates, in order to minimise the intrusive nature
of their work with local authorities. It is very time-consuming,
inspection, and there ought to be some inspection, but it ought
to be perhaps on a more test basis and not quite so comprehensive
as it appears to be going at the moment.
233. We have already heard from West Devon that
that local authority will not be reimbursed substantially with
inspection costs by the Rate Support Grant for Best Value; is
that the same in your other two authorities as well, will you
have a satisfactory reimbursement?
(Mr Harbord) We do not think that we shall be fully
reimbursed, no.
(Mr Roots) And it is not just the audit costs, it
is the cost of the staff, the staff that we have tied up in the
inspection process. At the moment, we have got about six inspections
going on in Westminster from different Government agencies.
234. And can I ask if, as separate authorities,
you have made those views known to the Local Government Minister,
that your costs are not going to be fully reimbursed within the
Rate Support Grant, Revenue Support Grant?
(Ms Halton) Not yet, but I will do.
(Mr Harbord) We have made our views known to the Local
Government Association.
Chairman
235. On this Revenue Support, the theory is,
the Government gives you money to make choices in local government
as to how you spend it. In the sense, in audit and probity, and
now in Best Value, you are not going to get any choices, are you?
(Ms Halton) I am actually quite looking forward to
the inspection process, I am hoping it is going to show us ways
of a bit of business process re-engineering, cutting out—
236. Yes; but you are not going to have any
choices over the costs that it is going to incur?
(Ms Halton) No; no, but if they pay their way, that
is fine.
237. But would not it be logical for the Government
not to give you the grant and simply to pay, themselves, directly,
for the audit and the Best Value regime?
(Ms Halton) I would be very happy with that. We had
this situation with the Dartmoor National Park, where we were
given an extra SSA, which we just handed over to Dartmoor National
Park for their levy. And we all argued, why not hand over the
money directly and save the bureaucracy of coming through the
district councils; but I think the Government's opinion was that
this helps make us feel we are more part of that organisation.
And I assume that is the reason for this as well. Of course, one
could be a little malicious and say perhaps it is because this
support is going to be gradually withdrawn and we will be left
paying substantially all of it ourselves; but we will wait and
see.
(Mr Harbord) We would welcome, clearly, central government
paying the cost, particularly of Best Value inspection.
Chairman: On that note, can I thank you very
much for your evidence. Thank you.
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