A set of proposals which would more tightly define borrowing rules and set up new committees within councils as another layer of financial oversight have been slammed as “using a sledgehammer to crack a nut” by council leaders from across the political spectrum.
The proposed amendments to the prudential code and treasury management code - both part of the prudential framework - are laid out in a consultation launched last month by the Chartered Institute of Public Finance & Accountancy. But the changes have been widely disparaged as too prescriptive by members of the Local Government Association’s resources board.
Cipfa is proposing adding new statements to the prudential code spelling out in stronger terms that councils should not borrow purely to generate income. One proposed addition states that councils "must not borrow to fund primarily yield generating investments”, clarifying that this “does not cover borrowing where the primary aim is rooted in the function of the authority and the making of the return is incidental to the function” such as “regeneration”.