Section 35(1) of the Local Government in Scotland Act 2003 imposes a duty on local authorities to determine and keep under review the maximum amount which they can afford to allocate to capital expenditure. Section 35(2) requires that in discharging that duty, local authorities must comply with regulations made by the Scottish Ministers for the purposes of section 35.

These Regulations require local authorities in discharging their duty under section 35(1) to have regard to the Prudential Code for Capital Finance in Local Authorities issued by the Chartered Institute of Public Finance and Accountancy. It is the current version of the Code when the duty under section 35 (1) is being discharged to which regard is to be had.