The Audit Commission, the watchdog that monitors town hall waste, is to be scrapped with the loss of 2,000 jobs, the Government announced yesterday.
The head of the organisation learned only yesterday that it had fallen victim to the squeeze on state spending. Eric Pickles, the Communities and Local Government Secretary, said the commission had "lost its way" and shutting it down would save more than £50m a year. He added: "Rather than being a watchdog that champions taxpayers' interests, it has become the creature of the Whitehall state."
The Audit Commission, set up in 1982, was charged with overseeing spending by local councils and health service trusts in England. Soon after the election it was accused of extravagance by Mr Pickles. Tory sources claimed it had resisted efforts to get it to open its books to scrutiny and that a culture had led it to spending £8,000 on days at the races for staff.
Mr Pickles said he wanted its duties to be transferred to auditors in the private sector, although he suggested he would be sympathetic to a management buy-out of the organisation.
John Denham, the shadow Communities and Local Government Secretary, said: "Without the function of the Audit Commission there will be no one to step in when a council is failing. This move by the Government shows they are only interested in the cost of everything and the value of nothing."