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8. Design issues
8.1 In deciding how best to achieve the objectives set for the SFT investment vehicle (paragraph 13) the first consideration is the shape and positioning of the vehicle on the public/private spectrum.
8.2 One of the difficulties in attempting to devise a single body which secures all of the primary objectives is that there is a tension between securing cheaper funding costs on the one hand and continuing to secure the additionality of private sector investment on the other.
8.3 To secure the best borrowing rates, any SFT investment vehicle should be placed in the public sector and have clear government backing. This placement would offer the prospect of access to government funds such as those available at low rates from the Public Works Loans Board ( PWLB) and strengthen its credit rating * when seeking to raise funds on the commercial money markets, for example by use of "municipal bonds"
8.4 Conversely, to secure the additionality of private sector investment, the vehicle would need to be positioned in the private sector, and, drawing on a provisional interpretation of IFRS, demonstrate it was independent of the public sector and was able to control the assets it creates.
8.5 Having taken this consideration into account, the Government has decided to introduce a body which is private sector classified but which has a public interest ethos. The decision to place SFT in the private sector seeks to build greater flexibility into the investment vehicle. It would also harness commercial know how and disciplines as well as offering the prospect of a significant annual addition to overall investment.
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