Prudential Borrowing is the administrative framework applying to Authorities that allows them to borrow in accordance with the Code. The objective of the Code is to help ensure for individual Authorities that:
• Capital expenditure plans are affordable;
• All external borrowing and other long term liabilities are within prudent and sustainable levels; and
• Treasury management decisions are taken in accordance with professional good practice.
Such borrowings are usually in the form of a loan from the Public Works Loan Board ("PWLB"), at rates of interest marginally above those at which the Government itself can borrow from the gilts market; although other forms of borrowing, including commercial bank loans and bond issues, are permitted.
Prudential Borrowing is sometimes referred to as an alternative method of procurement to PFI/PPP. This is misleading, as Prudential Borrowing is simply a source of finance - not a procurement route in itself. In fact, Prudential Borrowings can be used in conjunction with conventional, PPP or PFI based procurements (see Question 3).