The Audit Commission has proposed increasing its audit fees by an above-inflation 1.25% this year, just days after its chief executive urged public bodies to exercise ‘severe' financial restraint.

Commission chair Michael O'Higgins launched the watchdog's three-month consultation on its audit fees last week. 

He claimed new international financial reporting standards (IFRS) meant higher workloads for auditors and a 6% increase in audit fee scales. But the actual increase passed onto councils, the Commission explained, would be mitigated by subsidies and efficiency savings.

However, the proposed 1.25% fee increase would still impose above-inflation costs onto councils. Only last weekend, Commission chief executive Steve Bundred called on public bodies to exercise ‘severe' financial restraint during the recession. He claimed public workers would ‘tolerate' moderate pay cuts and said cuts to public services budgets, including education and health, were ‘inevitable and perfectly manageable'.

Asked by LocalGov.co.uk's sister title, The MJ, whether the Audit Commission considered itself exempt from the financial restraints sought by Mr Bundred, a spokesman said: ‘The fee increase is only a proposal. Councils may well come back to us and point out that we have opted for an above-inflation rise.'

Mr O'Higgins said he was ‘committed to keeping fee increases as low as possible'.

‘However, the introduction of IFRS means that we have to pass on the costs of additional work by our auditors.

‘The Commission is holding these increases to less than half the level these increases to less than half the level of the private sector. It is also absorbing other professional cost increases, as well as delivering year-on-year efficiency savings,' he said.