Time to unleash the watchdogs of waste: They would be treated as pariahs in Whitehall - which is exactly as it should be

PRIVATISE it. Set it free from the shackles of state power. Liberate it to speak for itself, politically, plainly, in words the rest of us can understand. I refer to a body many people will barely recognise but which scares incompetent public servants and was yesterday given powers to look into the Security Services. It is the taxpayer's only proper defender against waste and incompetence throughout the central government machine. It goes by the glamorous title of National Audit Office.

No, no, I beg you] Don't go away. Just think of all the terrible, frightening choices ahead in the combined tax- and-spending Budget next week. Then consider that the unglamorous, anonymous accountants of the NAO have recently been responsible for proven and delivered savings equivalent to pounds 238m in the last financial year. That's nearly enough to account for a penny off the lower rate of income tax. In spending terms, it's more dramatic - enough to educate 120,000 primary school children for a year, buy 24 new secondary schools, run four smallish hospitals for a year, or run 34 big, fully equipped embassies. And if all that education and diplomacy failed, it would get you another 10 Tornadoes for the RAF, or keep 16 infantry regiments on the war-path. Not peanuts.

But this money is as nothing, naturally, to what has been wasted already by government bureaucracies, the dosh that won't ever be fully recovered. Just a few minor, recent, examples: the Benefits Agency made overpayments of Income Support of pounds 465m (and underpayments of pounds 136m). In a report on the repeat prescription of drugs, the NAO noted that pounds 60m of medication prescribed in England each year may not be fully used. The National Health Service raises pounds 25m each year from so-called income-generation schemes - charging for parking, doing laundry for local hotels, etc - but the NAO reckons it should be getting an extra pounds 50m. Then there was the pounds 234m grant for the Malaysian hydroelectric project agreed by the Foreign Secretary but described by the NAO as 'a very bad buy' (24 more schools).

And on it goes, month in, month out, report after report . . . University purchasing in England ( pounds 30m could be saved). . . Government telephones ( pounds 15m a year wasted) . . . Payments to Training and Enterprise Councils ( pounds 14.9m 'incorrect or of uncertain propriety') . . . I repeat, these are some, recent, examples.

Nor is it certain that the NAO finds it all, or anything like. It operates, you see, under strict rules. It can, by law, see almost all internal papers and question all civil servants, though recent leaks from the Department of Transport about correspondence marked 'not for the eyes of the NAO' sound more like the real world of bureaucracy in action. But in return for its access, the NAO must agree its reports, before they are completed, with the department that is being investigated.

This is meant to prevent unseemly argy-bargies between officials, and to give Parliament an unchallengeable basis of fact. But it's a little like demanding that the prosecutor agrees the charge with the defendant before calling in the jury. It results, too often, in obscurely worded reports. The negotiated language can be hard to penetrate and rarely grabs the attention of MPs, except for the small coterie interested in such matters. So scandals of public waste mostly don't feature in party-political argument. Which is, when you think about it, bizarre.

But not only are NAO reports rarely headline-grabbing; the process of negotiation means they are often quite late. They are then sent to the Public Accounts Committee, the MPs who investigate them on behalf of Parliament. By the time that committee has reported, government departments are generally able to assure everyone that action was taken long ago - no need to worry, all sorted out. Recent government responses to the NAO are littered with stuff about 'new guidelines' being now in place . . . 'the Department has already improved its analysis' . . . 'monitoring procedures are being strengthened . . .'

Because of the rules under which the NAO operates, no civil servants are named. When the MPs come to investigate, those responsible have often already moved on. The recent scandal involving the Welsh Development Agency was exceedingly rare in that it involved actual sackings and demotions.

It makes you wonder what a free and fearless, unshackled NAO could get up to - a body that retained its powers of investigation, but was able to speak out publicly, write its own reports in plain English without having them vetted by departments, name guilty individuals and return, regularly, to attack ministers and officials who had failed to follow up its earlier recommendations. That really would be open government with teeth.

So here are some modest proposals. The NAO already pays for itself six times over in recovered savings. Let the Government tear up the current rules. Let it work to a contract with the state and let its budget be directly related to the amount of waste it uncovers. If the day comes when it fails to find enough waste to pay for itself six times over, then put the job out to tender. Meanwhile, let a proportion of the money saved flow through to the salaries of its officers, turning them into bounty-hunting accountants.

They are already good and that would make them hungrier. It would also make them pariahs in Whitehall - which is exactly as it should be. A national auditing system that is admired by the civil service is a duff one. In the NAO's entrance hall you can read the assessment made by Samuel Pepys, when he was on the Navy Board, of the accountants appointed by Charles II in 1667 to examine 'defaults, frauds, negligences and abuses' in the management of the Royal Navy. These predecessors of the NAO he first praised as 'men of understanding'. But as their inquiries progressed, Pepys, like many a mandarin after him, took fright. 'I find these gentlemen to sit all day and only eat a bit of bread at noon and a glass of wine, and they have resolved to go through their business with great severity and method,' he noted with alarm. Later still, he complained that they were 'very strict and not easily put off'.

As the Chancellor may mention next week, we are not a country that can afford to lose many gold coins in our public business. We have a few, only a few, corrupt public servants. But we have many more unelected placemen running things than before; there are great temptations and there is a decline in standards of public service. These are circumstances in which we need thin, bread- nibbling ladies and gentlemen, who cannot be put off and are terribly, terribly, strict.