The Audit Commission has announced a "radical" plan to cut back on the red tape it imposes on local councils.

Setting out a plan for "strategic regulation", the spending watchdog estimated the move could save up to £24 million per year.

But the Conservatives slammed the amount saved as "piddling" when compared to the annual local government inspection bill of over £1 billion.

The commission is set to place a greater emphasis on spreading best practice and reducing risk.

As a result, it will be reducing the amount of work done overseeing areas "which do not represent good value for taxpayers' money".

While the first steps in the strategic overhaul will apply largely to local authorities, further announcements are expected to cover the auditing of the health service.

Seeking to lead by example, the watchdog said taxpayers have a right to know that their money is being spent correctly and is leading to real improvements in public services.

"Just as we ask the public sector tough questions about value for money we also need to question with equal rigour our own regulatory value for money," said James Strachan, chairman of the Audit Commission.

"Strategic regulation aims to maximise our impact on improving public services both through constructive challenge and by spreading excellent practice.

"Also, it seeks to minimise the burden of regulation by being proportionate to risk and need. In essence we are arguing for significant deregulation."

Areas where the level of audit activities are set to be cut back include the certification of grants and the vetting of council plans.

"We shall be working with government, other regulators, auditors and inspectors to promote strategic regulation with its two-pronged aim of maximising improvement while minimising bureaucracy," added Strachan.

"As this is Guy Fawkes Night we make a plea to all our colleagues in the public sector to add with gusto to the bonfire of bureaucracy that we have started today."

But the Conservatives said the plan was "a classic case of moving one step forward after taking 20 steps backwards".

"We don't need 'strategic regulation' what we need is a war on red tape," said shadow local government secretary Eric Pickles.

"The commission calls for a bonfire of bureaucracy but will actually keep many red tape generators such as Best Value and Comprehensive Performance Assessment.

"And we must not forget that the number of commission bureaucrats has increased by 88 per cent rising from 1,277 staff in 1997 to 2,400 in 2003.

"Since 1997 the Audit Commission budget has increased by 95 per cent from £111.1 million in 1997 to £217 million in 2003."

Pickles said the Conservatives would tackle the problem by abolishing comprehensive performance assessment and best value.