Budget lifts Scots blue light VAT liability

22 Nov 17

The chancellor has lifted a controversial £35m VAT liability imposed uniquely on Scotland’s police and emergency services.

He credied his decision to “having my ear bent” by the 13 Conservative MPs elected in Scotland last June.

But the heavily trailed decision to remove the liability from next April does not meet demands from ministers and others in Scotland to restore the £140m collected from the services since they became liable for VAT on conversion from regional to national bodies four years ago.

The Scottish National Party government in Edinburgh, which has argued from the outset for the charge to be withdrawn and repaid, said the decision was welcome but overdue. 

“It's an absolute disgrace that it has taken the UK government so many years to do the right thing here,” first minister Nicola Sturgeon said.

“Police Scotland and the fire service in Scotland should never have been paying VAT and they are the only emergency services in the UK that do so.”

But Philip Hammond told the Commons: “The SNP knew the rules. They knew the consequences of introducing these bodies, and they ploughed ahead anyway.

“My Scottish Conservative colleagues have persuaded me that the Scottish people shouldn’t lose out just because of the obstinacy of the SNP.”

His decision was characterised by Scottish Conservative finance spokesman Murdo Fraser as “13 Tory MPs achieving more for Scotland in six months than 56 SNP MPs did in two years”.

The chancellor told MPs that the measures in his Budget would increase public spending in Scotland by an additional £2bn a year in consequential changes through the Barnett Formula. But the downgraded growth projections will dismay Scottish ministers, since fiscal devolution means that from next year half of Scottish spending is dependent on Scotland’s economic performance.

Budget announcements affecting the other devolved nations included the start of negotiations for growth deals for North Wales and Mid-Wales and a reconfirmation of the abolition of tolls on the Severn Bridge by the end of next year.

In Northern Ireland, talks for a Belfast City Deal will begin. Hammond said this was “part of our commitment to a comprehensive and ambitious set of city deals across Northern Ireland”.

A review of the effect of Air Passenger Duty and VAT on tourism in Northern Ireland will also report at next year’s budget, the chancellor promised.

Barnett consequentials mean an additional £1.2bn for the Welsh Government next year and more than £650m for the Northern Ireland Executive.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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