Danger of over-inspection and
proliferation of inspectorates
40. Witnesses were particularly exercised about the
potential burden of inspection activity which would have to be
borne by local authorities as a result of Best Value. Authorities
are already subject to inspection by the Social Services Inspectorate,
the Benefit Fraud Inspectorate and Ofsted, but the introduction
of Best Value will represent a significant step change in the
level of inspection. In particular, witnesses expressed concern
over the sheer number of inspectorates now in place and the risk
of audits and inspections being uncoordinated.[82]
The London Borough of Sutton commented that "the Council
has a general concern about the large number of inspection regimes
now operating in local government", and observed "it
can feel like one continuous inspection process. For example in
Sutton in 1999 we have had an SSI inspection and report, an IDEA[83]
visit, an Audit Commission Inspection on a Best Value review,
an audit of our PI's for 1998-99 and notice of an Ofsted inspection
of the LEA early in 2000".[84]
The potential burden of inspection was also highlighted by Mr
Roots of the City of Westminster who told us "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".[85]
41. Responding to and hosting an inspection is very
time consuming. However, the consequences of over-inspection go
further than simply the commitment of officer or member time.
Some evidence suggested that there may be significant adverse
effects on local authorities' ability to provide services, and
the emphasis on audit and inspection may serve to stifle creativity
and innovation. Steve Bundred was concerned that local government
was being "inspected to destruction and that this is diverting
resources from service provision, stifling innovation, lowering
morale and creating confusion".[86]
The view of the Local Government Association was that "there
is a risk that reliance on auditors for an assessment of authorities'
overall corporate response to Best Value will lead to an over-mechanical
application of the legislation and guidance, including an over-emphasis
on process rather than results".[87]
42. Another undesirable consequence may be that authorities
are discouraged from developing 'cross-cutting' approaches to
service delivery. The Local Government Information Unit told us
that authorities may be deterred from adopting innovative, cross-cutting
approaches to Best Value "for fear of the increased inspection
burden it might bring".[88]
Cipfa was also concerned that Best Value inspections may have
a negative impact by encouraging a "culture of dependency"
and stifling independence.[89]
This is of some concern since there is evidence that already authorities
feel constrained by audit and inspection and may be unwilling
to adopt innovative policies. As a result the activities of local
authorities are being increasingly driven by external agencies.
We received evidence expressing concern about auditors' reluctance
to give advice in advance on innovative projects.[90]
This can cause difficulties for local authorities in deciding
whether to go ahead with such projects because they are concerned
about audit 'come back' later on. In our inquiry
into the Government's proposed Urban White Paper, Mr Brown of
the Royal Institute of Chartered Surveyors, told us that "officers
in local authorities are in many instances more concerned about
what the district auditor will say than being
public sector entrepreneurs and taking a risk".[91]
43. The Audit Commission was aware of these concerns.
Ms Thomson, Director of Inspection at the Audit Commission, told
us that "we are very sympathetic and conscious of the time
involved for local authority staff and their concern about the
burden placed on them for audit and inspection".[92]
She countered some of the local authorities' fears about the potential
burdens, claiming that, by comparison with inspection in other
parts of local services, the time which local authorities would
need to commit to Best Value inspections would be relatively short,[93]
and that the benefits (in terms of service improvement) would
justify the costs. The Commission's guidance to local authorities
on Best Value inspection[94]
also gives some reassurance that the coordination of inspections
will be an integral part of the Best Value inspection cycle.
44. In addition, the Government has introduced two
initiatives to help avoid duplication of audit and inspection.
These are the Best Value Inspectorate Forum and the Public
Audit Forum. The Best Value Inspectorate Forum comprises the
Heads of the Inspectorates which are involved in improving local
services under Best Value (ie Ofsted, the Benefit Fraud Inspectorate,
HM Fire Services Inspectorate, HM Inspectorate of Constabulary,
the Social Services Inspectorate and the Audit Commission's Best
Value Inspectorate). The Forum is currently chaired by Ofsted,
but a different inspectorate will take the chair each year. Its
purpose is to consider the scope for joint working; to coordinate
inspection programmes; and to disseminate best practice in inspection.
Steve Martin of Warwick Business School explained the rationale
for its establishment: "The need to at least coordinate the
work of the various inspectorates has been acknowledged by the
Commission and is one of the main reasons for the creation of
the Inspectorate Forum. It is though too early to judge whether
the Forum will lead to more integrated inspections".[95]
Importantly, the Forum will ensure that a lead inspector is nominated
for each authority to coordinate inspections and to avoid duplication
or undue overlap.[96]
45. The Public Audit Forum was established in October
1998 to ensure the coordination of audit work between its member
agencies (the National Audit Office, the Northern Ireland Audit
Office, the Audit Commission and the Accounts Commission for Scotland).[97]
The National Audit Office told us that the Forum would focus on
"how auditors can further coordinate their work with the
activities of other audit, regulatory or inspection agencies so
as to minimise the impact on bodies being audited".[98]
46. However, despite these efforts, we continue to
be worried about the sheer difficulty of coordinating inspections
across over 430 local authorities. One option we considered was
whether it would be desirable to merge the various inspectorates
to create a single body charged with inspecting the standards
of all local services. Whilst establishing a single Standards
Inspectorate has its attractions and, indeed, is an option we
have supported in a previous Report,[99]
the evidence we received on this was inconclusive. A number of
witnesses argued that this would be the most sensible option.[100]
However, others told us that a full scale merger would be difficult
and that instead a 'looser' partnership was required.[101]
Two of the Inspectorates concerned submitted evidence setting
out the benefits of retaining separate bodies.[102]
The Benefit Fraud Inspectorate argued that:
"this separation of
responsibilities is important to the ongoing successful operation
of inspectorates. Without a distinct role and purpose, the danger
of duplication arises. The separation of Inspectorate roles coupled
with a commitment to work in partnership where appropriate, provides
a structure in which to allow specialist inspection work to continue
whilst minimising the impact on those being inspected".[103]
In addition, there are a number of practical difficulties
in effecting such a change. Not only does each Inspectorate have
a distinct culture, a unique approach and numerous duties which
are outwith and separate from their Best Value responsibilities,
there would also be "huge legislative changes"[104]
required.
47. Given these obstacles, we are not convinced that
a move towards a single Inspectorate would result in a net benefit
at this stage. We are, however, conscious that the evidence on
this from the existing
Inspectorates and the Government may be biased since "central
government may be somewhat fearful of any such super-regulatory
body because of its potential clout, and existing regulators may
be somewhat reluctant to merge together given their functional
specialisms".[105]
However, at present we are of the view that it would be more effective
to build up the role of the Best Value Inspectorate Forum. The
Forum has developed a Memorandum of Understanding for co-operation
between auditors and inspectors, which has been in place since
April.[106]
The Social Services Inspectorate, one of the members of the Forum,
told us that "a more consistent approach [to inspection]
will be possible in this context".[107]
48. We are alarmed at the current and future impact
of a developing culture of over-inspection in the public sector.
This burden seems to be particularly acute for local authorities.
The Government must recognise the potentially dire consequences
of failing to minimise and co-ordinate inspections of local government.
First, evidence suggests that the entrepreneurial spirit and
willingness to innovate is already being squeezed out of local
authorities. This will only get worse as they increasingly feel
a need to watch their backs pending an inspection. Secondly, the
inspection culture may also reduce the quantity and quality of
existing services as staff involved in the delivery of local services
are diverted to spending time preparing for and participating
in inspections of one kind or another.
49. While welcome, the establishment of the Best
Value Inspectorate Forum does not allay our fears about over-inspection.
There is a real risk that the Forum will achieve little, given
the very different cultures and approaches of its constituent
inspectorates. We therefore recommend that there should be
an expanded role for the Best Value Inspectorate Forum which should
meet more regularly and be supported by a formal, dedicated team
within the DETR to provide a central 'pool' of overall policy
analysis and advice to the different Inspectorates, and to ensure
coordination of inspection effort. We also call upon the Government
to increase the level of formal and genuine joint inspections
so that, in time, this should be the norm rather than the exception.
At the same time, the Government must take some positive steps
to address a more fundamental issue: whether the benefits accruing
from the current and planned scale of inspection outweigh the
very real costs, in terms of resources, time and the impact on
service provision. While a case can often be made for individual
inspections, we are sceptical whether the collective cost of inspecting
all local authorities can be justified. Rather than playing a
game of wait and see, we recommend that the Government undertake
a study to ascertain whether the inspection regime in local government
delivers the significantly enhanced overall benefits required
to justify the overall cost of an onerous inspection regime.
Move to managed inspection
50. The extent to which local authorities could—ultimately—be
relied on to 'self regulate' (with respect to Best Value at least,
as opposed to financial auditing) was an issue raised by many
witnesses.[108]
They argued that there will be a diminishing need for external
inspection as authorities improve through Best Value. The Improvement
and Development Agency and Local Government Association promote
this view:
"as Best Value develops,
authorities will develop the capacity for self-improvement and,
over time, a growing number will demonstrate their ability to
review and improve services without external help. In parallel,
the need for in-depth external inspection will diminish".[109]
51. Specifically, a number of witnesses argued that
a 'managed inspection' approach should be adopted, modelled on
the Audit Commission's 'managed audit' principles. This type of
financial audit had been introduced for those authorities deemed
to have effective financial management systems and therefore in
need of a less rigorous external audit. A more streamlined audit
is then applied with greater reliance on self assessment and a
corresponding reduction in audit fees.[110]
Mr Harbord of LB Hammersmith & Fulham and other witnesses
told us that this more 'hands off' approach should also be applied
to Best Value inspection.[111]
Cipfa concurred, suggesting that:
"The Commission should
promote a 'managed inspection' approach where the emphasis would
be on validating an organisation's own self governance and assessment
arrangements which, if they prove to be sound, would reduce the
'depth' of the inspection subsequently needed".[112]
Should such an approach be adopted, this would mean
that, in time, only a sample of authorities' Best Value reviews
would be subject to full inspections.
52. The Government and the Audit Commission seemed
to support this principle. The Audit Commission told us that after
the first or second year of Best Value, it would consider a 'light
touch' approach, where most inspection efforts were targeted at
those services which were either performing poorly; represented
a high expenditure; or were very important to the public.[113]
It would adopt a principle where inspection effort was "proportionate
to risk".[114]
53. However, the Minister for Local Government and
the Regions, Rt Hon Hilary Armstrong, was vague about how in practice
this would work. She talked at some length about lifting the burden
of inspection for the better performing authorities,[115]
but was unclear about the exact implications of such a policy
for councils. She also told us that "I think there will always
be a need for that external look at what you are doing".[116]
Cipfa told us that there was still "an element of confusion"[117]
around the Government's proposals for lighter touch inspections.
54. We are concerned that the Audit Commission's
Best Value Inspectorate will become self-perpetuating and that,
as the Local Government Association put it, "once you get
the Inspectorates in they will want to justify their existence".[118]
We conclude that not only should a mixed supply be introduced
for the Best Value inspection function, but the Inspectorate's
objective should be to ultimately put itself out of a job.
55. We recommend that the Audit Commission introduce
a 'managed inspection' approach for the inspection of Best Value,
with only high risk local authorities and a sample of other Best
Value reviews being subject to full inspections. We urge the Local
Government Association and the Improvement and Development Agency
to initiate more peer reviews, thus reducing the need for Best
Value inspection.
81 The Local Government Act 1999 requires
authorities to publish annual 'best value performance plans' which
report on past performance and include future priorities and targets
for improvement. Authorities are obliged to prepare or up date
a plan each year-by the 31 March Back
82
AC26, Q123, Q342 Back
83
The Improvement and Development Agency (IDEA) was created
on 1 April 1999 to develop skills and competence in local government Back
84
AC20 Back
85
Q232 Back
86
AC27, para 6.1-see also Q344, 345 Back
87
AC17 Back
88
AC02, para 4.2, see also the evidence submitted by Warwick
Business School-AC13, para 8 Back
89
AC10, para 6.14 Back
90
AC07, Q213, Q214, Q215, Q218 Back
91
Q308, 15/3/00, inquiry into the proposed Urban White Paper;
to be printed as HC185iii (Session1999-00)
Back
92
Q448 Back
93
Q448 Back
94
Audit Commission, April 2000, Seeing is Believing Back
95
AC13, para 10 Back
96
Q447 Back
97
AC11, para 8 Back
98
AC19, para 18 Back
99
Implementation of the Best Value Framework, HC705-I
(Session 1997-98) Back
100
AC17, AC20, Q43, Q360 Back
101
Q355 Back
102
AC31, AC32 Back
103
AC32, para 2 Back
104
Q514 Back
105
AC33 Back
106
QQ 440, 444 Back
107
AC31, para 14 Back
108
AC02, para 4.3, QQs 51, 52, AC23-see also Q313 Back
109
AC17, see also AC18 Back
110
Q322 Back
111
Q228, see also Q232 Back
112
AC10, para 6.7-see also AC03) Back
113
Q451-see also the Audit Commission document, Seeing is
Believing, which explains: "when the authority can demonstrate
that is has carried out a comprehensive Best Value Review and
can prove this to the inspection team, the inspection it likely
to be 'light touch'". (para 19, p4) Back
114
Q451 Back
115
QQ520-526 Back
116
Q526 Back
117
Q176 Back
118
Q126 Back
