The importance of being prudent on investment

By Richard Lloyd-Bithell | 07 September 2021

The Chartered Institute of Public Finance and Accountancy (CIPFA) will be issuing its revisions to the Treasury Management and Prudential Codes in December 2021. CIPFA developed the code as part of a flexible framework to support the financial decision-making of local authorities. The upcoming amendments follow the recommendation from the Public Accounts Committee after an upsurge in local authority commercial investment. The changes were decided in consultation with local government finance professionals.

One of the most notable revisions was to paragraph 45. We advise that the new code continues to uphold a key principle of the prudential agenda: that borrowing primarily for return investment is not permissible under the code. While we acknowledge that some commercial investments are part of regeneration efforts, we see some instances of such activity as representing an unnecessary risk to public expenditure.

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