FGN2020/04 SPFM amendments: July 2020
FGN2020/04 SPFM amendments: July 2020
The purpose of this note is to announce recent amendments to the Scottish Public Finance manual (SPFM). The amendments are as follows:
The section on Banking has been updated to reflect the re-tenders of the Government Banking contract in 2015-16 and Scottish Government banking contract in both 2013-14 and 2017-18, which has resulted in a mixture of continuity with and change from the previous contracts.
Government banking contract
Bodies to which the SPFM is directly applicable continue to be required to have their core bank accounts under this contract, and each new bank account continues to be required to be authorised in advance by H M Treasury. Government Banking is part of H M Revenue and Customs, and continues to oversee the provision of banking services under the contract. The banking services continue to be provided by commercial banks. However, the re-award of the contract introduced a number of changes:
- Government Banking has adopted a dual supplier approach when letting this contract. The model for the previous contract was bank accounts provided by two different banks, each used for different but complementary services, so that each customer would have a minimum of two Government Banking accounts, each provided by a different bank. The model used for the new contract retains dual suppliers, but in this case the main banking services supplied under the contract are divided into two lots, each awarded to a different bank which is the sole supplier to the customers in each lot. One lot has two customer bodies, H M Revenue and Customs and the Driver and Vehicle Licencing Agency, the other all other customer bodies, including the Scottish Government and other Scottish customer bodies.
- One result of the two lots model of the new contract described above is that only customer bodies within the same lot may use inter-departmental transfers to make payments between Government Banking bank accounts. This payment method is mandated in order to maximise the amount of cash available to the UK Exchequer: the cash represented by a payment made by inter-departmental transfer remains within the “Exchequer pyramid”. This is in effect a pooling arrangement for cash held within a number of repositories, including Government Banking bank accounts. Government Banking advice is that payments made by bodies within one lot to bodies within the other should be by BACS. Hence payments by Scottish customer bodies to H M Revenue and Customs and the DVLA should be by BACS.
- The new contract introduced a “direct to banker” business model. Under the previous contract, banking administration services such as maintenance of roles and users on the supplier’s system were performed centrally by Government Banking. Under the new contract, responsibility for administration has been devolved to customers. Government Banking requires that staff who perform the administrator role may not also occupy other roles with input access to the system, such as payment preparer or payment authoriser.
- New customers to the contract (or existing customers wishing to open an additional bank account) are required to complete an application for each new bank account. Each application is subject to approval by H M Treasury.
- Applicants for new bank accounts must explicitly state whether or not they intend to join H M Treasury’s Cashflow Management Scheme. The expected response is that the applicant will join the Scheme. H M Treasury will only accept an application that does not include assent to joining the Scheme on successful presentation of a business case to the contrary. In the absence of either assent to join the Scheme or acceptance of a business case to the contrary, it is possible that an application for a new bank account will be rejected. Participation in the Scheme for all Scottish Government Banking customers is managed by Treasury & Banking branch, and involves preparation of forecast cash flows incorporating all participants monthly in advance.
- A UK Government service, GOV.UK Pay, is available to UK public sector organisations, including (subject to certain constraints) those that are not Government Banking customers. Services provide include merchant acquiring and direct debit collection. Full details are set out on the GOV.UK Pay web site, link: https://www.payments.service.gov.uk/#main
Scottish Government banking contract
Bodies within the scope of this contract continue to be required to use it. The normal banking model for applicable bodies remains to use a Government Banking account or accounts for receipt of funding and for processing of main payments and receipts, together with a Scottish Government bank account or accounts for BACS sponsorship and local banking requirements such as deposits and cash withdrawals. However, the re-awards of the contract introduced several changes:
- The contract no longer offers merchant acquiring services (debit and credit card receipts and refunds). These are available to Government Banking customers via a Crown Commercial Services framework Merchant Acquiring, Merchant Acquiring Equipment & Payment Gateway Services, link: https://www.crowncommercial.gov.uk/agreements/RM3702
- Merchant acquiring services are provided by GOV.UK Pay (see above), including (subject to certain constraints) to public sector organisations that are not Government Banking customers.
- The contract has introduced a new service, project bank accounts for use in construction projects. The objective is to ensure that payments to all members of a construction supply chain are made timeously, and are mandated in certain circumstances. Full guidance is to be found on the Scottish Government web site at https://www.gov.scot/publications/construction-projects-implementing-project-bank-accounts/
- A formal call-off procedure for new customers of the contract has been introduced. Please contact Treasury and Banking for details.
Property acquisition, disposal and management chapter:
The Appendix: specific exceptions to scope has been updated to reflect that the Forestry Commission Scotland, ceased to be responsible for the management and regulation of forestry in Scotland when the devolution of forestry was completed in April 2019. Now the Forestry and Land Scotland undertakes disposals or acquisitions in pursuance of its stated economic, environmental and social policies. Such activities are governed by the Forestry and Land Management (Scotland) Act 2018.