Capital finance
Produced in partnership with Stephen Sheen of Ichabod's Industries Limited
Capital finance

The following Local Government practice note produced in partnership with Stephen Sheen of Ichabod's Industries Limited provides comprehensive and up to date legal information covering:

  • Capital finance
  • Local authority budget-setting process—the capital budget
  • The Prudential Code and the Treasury Management Code
  • Key elements of the Prudential Code
  • Investments
  • Financing capital expenditure
  • Supported capital expenditure
  • Capital receipts
  • Self-financing (prudential borrowing)
  • The Private Finance Initiative, finance leases, etc
  • More...

Capital finance differs from revenue finance as revenue expenditure has to be met from current income whereas capital expenditure can be met by borrowing or capital receipts and the costs can be spread over the period in which the benefits of the expenditure are expected to accrue.

The current system, generally referred to as the Prudential Framework ( for England and Wales) is found in Part 1 of the Local Government Act 2003 (LGA 2003). It is a framework that encourages investment in the capital assets that local government needs to improve services and relies on accounting concepts, plus professional and self-regulation. It allows local authorities to raise finance for capital expenditure, without government consent, where they can afford to service the debt without extra government support.

In England, LGA 2003 is supported by the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003, SI 2003/3146. These regulations have been amended several times, with the list of amending regulations comprising the following:

  1. the Local Authorities (Capital Finance and Accounting) (Amendment) (England) Regulations 2004, SI 2004/534

  2. the Local Authorities (Capital Finance and Accounting) (Amendment) (England) (No 2) Regulations 2004, SI 2004/3055

  3. the Local Authorities (Capital Finance and Accounting) (Amendment) (England) Regulations 2006, SI 2006/521

  4. the Local Authorities (Capital Finance and Accounting) (Amendment) (England) Regulations 2007, SI 2007/573

  5. the Local Authorities (Capital Finance and Accounting) (Amendment) (England) Regulations

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