The Local Government Act 2003 introduced the first major change to local authority capital finance in over ten years. Local authorities are now able to determine how much they can afford to borrow based on a prudent assessment of their finances using professional codes of practice.
The legislation provides the broad framework for the ‘prudential system’ but the new system places the emphasis on local authorities planning their needs for capital expenditure in a sensible and long term way based upon sound management of assets and finances.