Spending watchdog makes meagre savings

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The public's principal spending watchdog, the National Audit Office, made savings worth less than half of a tenth of 1 per cent of the public spending it examined last year. That means taxpayers, civil servants and benefit receivers are amazingly honest and proper in their handling of public money, or else the NAO has some catching up to do.

Its own report suggests the latter - for example for the past seven years it has refused to sign off on the accounts of the Lord Chancellor's Department because of "limited evidence" that procedures had been followed in granting legal aid.

A recent joint exercise between the NAO and the Audit Commission, the watchdog on local government spending, found large amounts of the money paid out in housing benefit are still going astray. And the NAO is also keeping a watchful eye on proposed expansion of student loans, a fruitful area for fraud.

Each year the NAO audits a huge amount of public money - pounds 557.2bn. This represents income from taxpayers and charges and spending on everything from bedpans to debt interest. The NAO says its suggestions for better accounting by public bodies generated savings of pounds 13m (0.002 per cent) while its proposals for getting better value for public money produced savings of about pounds 290m (0.05 per cent).

Nowadays much of this money is processed at arm's length from Whitehall by agencies and contractors - the NAO's remit extends to some 4,350 separate departments and quangos. Sir John Bourn, the Comptroller and Auditor General, the official head of the NAO, has been pressing for extra powers to allow him to track the flow of public money when it is passed to private firms, including farmers.

The NAO says its record stacks up well against its administrative costs. It claims to save pounds 7 for every pounds 1 spent on its 750 staff at its London headquarters.