Saving money can cost a fortune. The government's decision to scrap the Sustainable Development Commission will save £3m a year. It is likely to cost the taxpayer many times more.

The environment department's announcement that it would stop funding the SDC coincided this morning with the publication of the commission's latest (and last) report on the government's green progress. This report shows that even the modest measures the previous government introduced to save energy and water and reduce waste have cut the state's annual bills by £60m to £70m.

It goes on to find hundreds of millions of pounds of further possible savings, by identifying the kind of waste which – or so you would imagine – the government would be glad to uncover. It shows how civil servants can cut their use of road fuel, extend the life of their computers and drive down energy costs in government buildings.

That – among other things – is what the SDC is for. Junking it is the definitive false economy: spoiling the ship for a ha' pence of tar. It blows away two of the government's central claims: that its spending decisions will be rational and rigorous, and that it will be the "greenest government ever". When you remember that the £1.9m Westminster spends on the SDC (the rest is supplied by the three other UK governments or assemblies) is no more than a rounding error on the costs of renewing the Trident missile system, which it refuses even to include in the defence review, you begin to suspect that this decision has little to do with saving money and a lot to do with ridding itself of a turbulent priest.

The commission is a strange beast: while it makes reams of constructive suggestions, it has also been one of the government's harshest critics. This is a dangerous place to be for an organisation wholly dependent on government funding, but it is also an essential function. Without critical scrutiny of their decisions, governments mess up. This is why we have parliamentary committees; but the SDC was able to extend and supplement their work with reports much more detailed and probing than parliament has been able to produce.

As well as holding central government to account, it has helped schools and the NHS greatly to reduce their carbon emissions, pushed the last government into launching its Great British Refurb programme for improving the energy efficiency of housing, waged war on construction waste and pressed the state to protect consumers from the predatory behaviour of energy companies.

It has also been an amazingly radical voice within the government, asking questions that scarcely any MPs dare to put. It has, for example, championed the idea of a steady-state economy, publishing Tim Jackson's ground-breaking report Prosperity Without Growth?. The government won't be hearing such messages from any other agency or department.

Scrapping the commission is stupid, irrational and counter-productive. It suggests that, for all its talk of listening and engaging, the new government can't handle criticism and fears effective scrutiny. That's another way of saying that its instincts are not very democratic.