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<p>Through the sale, the government has exchanged a stream of uncertain future cash
flows spread over thirty years for a certain lump sum now. When assessing whether
or not to sell the loans, the government therefore has to determine today’s value
of those future cash flows to be able to compare it against the price being offered
by the market. To make this assessment, the government forecasts the repayments and
then takes into account: the time value of money, the effect of inflation, the riskiness
of the asset, and the opportunity cost of having money tied up in that asset that
could otherwise be used for purposes or policies with greater social or economic returns.
This follows the guidance set out in Her Majesty’s Treasury’s (HM Treasury) Green
Book:</p><p> </p><p><a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/191488/Green_book_supplementary_guidance_asset_valuation.pdf"
target="_blank">https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/191488/Green_book_supplementary_guidance_asset_valuation.pdf</a>.</p><p>
</p><p>In accordance with this assessment, the government has concluded that the
sale achieved value for money in accordance with HM Treasury’s Green Book guidance.</p>
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