CIPFA has consulted on the Prudential Code, and we await the outcomes of that process, but history tells us that authorities that wait for the final Code publication will be too late to react - the work needs to start now.
The direction of travel from CIPFA’s consultation is clear. The next iteration of the Prudential and Treasury Management Codes will place far greater emphasis on proportionality, clarity of risk, and governance. This is not just an update. It will require many authorities to rethink how treasury strategies are constructed, presented, and evidenced.
The consultation points consistently towards three themes.
Authorities that assume their current strategy is “broadly compliant” are likely underestimating the scale of any change that is required.
In practice, several areas are already showing strain against the anticipated changes.
Many treasury strategies still rely on boilerplate wording. Risk appetite is often described in vague terms, with limited linkage to actual borrowing or investment decisions. Under the revised Codes, this lack of specificity could be difficult to justify.
Capital financing decisions are another weak point. Authorities often present their borrowing need, CFR, and MRP policy, but without clearly tying these back to affordability and risk over time. This disconnect will come under greater scrutiny as capital budgets become strained.
There is also a tendency to treat treasury and capital strategies as parallel documents rather than integrated frameworks. The revised Codes will push authorities to demonstrate a clearer link between capital plans, funding strategies, and treasury risk.
Prudential indicators remain one of the most misunderstood and underutilised parts of the framework. A common issue is that indicators are treated as compliance thresholds rather than management tools. Limits are often set with significant headroom, which reduces their usefulness in guiding decisions. This creates a false sense of control.
The operational boundary and authorised limit for external debt are frequently disconnected from realistic borrowing scenarios. In some cases, they are effectively redundant.
Indicators relating to interest rate exposure and maturity structure are often presented without meaningful interpretation. Members are given the numbers but not the insight.
The next Code is likely to challenge this approach. Indicators will need to be more tightly calibrated, clearly explained, and actively used in decision-making.
The liability benchmark is becoming central to how treasury strategies are expected to operate. Authorities that treat it as a technical exercise, or worse, a compliance add-on, are missing its purpose. The benchmark should be the foundation of borrowing strategy, informing decisions on timing, tenor, and the balance between internal and external borrowing.
Under the revised framework, authorities will be expected to demonstrate how their actual borrowing position compares to the benchmark and why any deviation is appropriate.
This has practical implications. It requires robust cashflow modelling, credible assumptions, and regular updates. It also requires officers to be confident in explaining the benchmark to members, which is not always the case at present.
Governance is likely to be one of the most challenging areas for many authorities. There is a growing expectation that members should not only approve treasury strategies but also understand the key risks and trade-offs. This places pressure on how information is presented.
Lengthy, technical reports are not the answer. Clarity, structure, and relevance are what matter. Authorities will need to improve how they communicate concepts such as borrowing risk, interest rate exposure, and liquidity.
Training will become more important, but it must be targeted and practical. Generic sessions will not deliver the level of understanding that is now expected.
Officers should also expect greater challenge. The days of treasury being seen as a purely technical back-office function are fading.
Waiting for the final Code is not a viable strategy. The lead time required to implement meaningful changes is simply too long.
Authorities should be stress-testing their current treasury and capital strategies against the likely direction of travel. This includes reviewing the relevance and calibration of prudential indicators, reassessing the role of the liability benchmark, and evaluating how clearly risk is articulated.
There is also a strong case for early engagement with members. Building understanding now will make formal adoption of the new requirements far smoother.
The scale of change creates a clear opportunity for targeted support, and the impact of LGR is also providing an opportunity to revisit capital and treasury activity.
Full treasury strategy rewrites will be required in many cases, particularly where documents rely heavily on legacy wording. Prudential indicator frameworks will need redesigning to ensure they are meaningful and defensible.
There is also demand for structured member training that goes beyond theory and focuses on real decision-making. Independent compliance reviews can provide assurance that authorities are not only aligned with the Codes but are applying them effectively.
The next CIPFA Codes will not introduce entirely new concepts. What they will do is raise expectations on how existing concepts are applied.
Authorities that act early will not only ensure compliance but also strengthen their overall treasury framework. Those that delay will find themselves making rushed adjustments under scrutiny, which is never a strong position to be in.
At Arlingclose we are experienced in helping our clients navigate changes to CIPFA Codes, and with impending changes and LGR on the horizon, now is the time to get in contact if you require any assistance in these areas.
14/05/2026
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