I can find no reference to the matter in the rating act and…

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I cited the wrong act, but this section from the act is where they derive the power to allow for depreciation from the Local Government Act 2002

100 Balanced budget requirement

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  (1) A local authority must ensure that each year's projected operating revenues are set at a level sufficient to meet that year's projected operating expenses.

  
  
  
  
  
  

  (2) Despite subsection (1), a local authority may set projected operating revenues at a different level from that required by that subsection if the local authority resolves that it is financially prudent to do so, having regard to—

  
  

  
  
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    (a) the estimated expenses of achieving and maintaining the predicted levels of service provision set out in the long-term plan, including the estimated expenses associated with maintaining the service capacity and integrity of assets throughout their useful life; and

    
    
  
  

  
  

  
  
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    (b) the projected revenue available to fund the estimated expenses associated with maintaining the service capacity and integrity of assets throughout their useful life; and

    
    
  
  

  
  

  
  
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    (c) the equitable allocation of responsibility for funding the provision and maintenance of assets and facilities throughout their useful life; and

    
    
  
  

  
  

  
  
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    (d) the funding and financial policies adopted under section 102.

    
    
  
  

  
  
  
  

And in particular (c)

In addition section 111

111 Information to be prepared in accordance with generally accepted accounting practice

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  (1) All information that is required by any provision of this Part or of Schedule 10 to be included in any plan, report, or other document must be prepared in accordance with generally accepted accounting practice if that information is of a form or nature for which generally accepted accounting practice has developed standards.

  
  
  
  
  
  

  (2) Subsection (1) does not apply to the preparation of a funding impact statement.

  
  
  
  

Depreciation is a generally accepted accounting proactice