Budget 2017: Chancellor to scrap VAT on Police Scotland and fire service
Budget 2017: Chancellor scraps VAT on Scottish police and fire services
(about 3 hours later)
The chancellor is to confirm that Scotland's police and fire services will no longer be liable for VAT.
Scotland's police and fire services will not be liable for VAT from next April, the chancellor has confirmed.
Philip Hammond will announce in his budget that the two emergency services will be eligible for VAT refunds in future.
Philip Hammond announced in his budget that the two emergency services will have their tax bills refunded in the future.
It will bring Police Scotland and the Scottish Fire and Rescue Service into line with their counterparts elsewhere in the UK.
It will bring Police Scotland and the Scottish Fire and Rescue Service into line with their counterparts elsewhere in the UK.
But VAT paid since the creation of the national forces will not be reimbursed.
But VAT paid since the creation of the national forces will not be reimbursed.
Scotland's police and fire services pay about £35m in VAT each year. They only became eligible for the tax after the country's regional forces were merged into single national services four years ago.
The Scottish government says the two services pay about £35m a year in VAT - bringing the total bill since they were set up four years ago to £140m.
The Scottish government has repeatedly called on the UK government to end the "glaring disparity" in the way that VAT affects emergency services across the UK.
It has repeatedly called on the UK government to end the "glaring disparity" in the way that VAT affects emergency services across the UK, pointing out that territorial police and fire services in England and Wales already get refunds on their VAT bills.
It has pointed out that territorial police and fire services in England and Wales already get refunds on their VAT bills.
The UK government says the Scottish government knew of the VAT implications before the police and fire service mergers were approved, but pressed on with them regardless.
The UK government says the Scottish government knew of the VAT implications before the police and fire service mergers were approved, but pressed on with them regardless.
'Fix the anomaly'
In his budget speech, Mr Hammond said he had been persuaded by Scottish Conservative MPs to make the change.
BBC Scotland understands that the chancellor will confirm in his budget, which is due to start at about 12:30, that both of the emergency services will be refunded the tax in the future - with a Treasury source saying that it was going to "fix the anomaly".
He added: "The SNP knew the rules, they knew the consequences of introducing these bodies, and they ploughed ahead anyway.
But it is understood the services will not receive a rebate on the tax they have already paid since being set up in 2013.
"But my Scottish Conservative colleagues have persuaded me that the Scottish people should not lose out just because of the obstinacy of the SNP government.
The Scottish government has calculated that the total bill amounts to about £140m, which it says would have made a "real difference to frontline services in Scotland".
"So we will legislate to allow VAT refunds from April 2018".
Scottish Conservative finance spokesman Murdo Fraser tweeted on Wednesday morning that the budget move was a "victory for @ScotTories at Westminster - clearing up the SNP's mess for them".
'Long overdue'
He added: "13 Tory MPs achieving more for Scotland in 6 months than 56 SNP MPs did in 2 years."
Ahead of the chancellor's statement, the SNP had called for all VAT that had been previously paid by the police and fire services to be refunded, arguing that the £140m would make a "real difference to frontline services in Scotland".
But calling for the tax that has already been paid to be refunded, SNP MP Kirsty Blackman said: "If the Tories are prepared to right their wrong and allow our police and fire services to reclaim VAT in years ahead, how can they then justify keeping the money which has already been taken?"
First Minister Nicola Sturgeon said the scrapping of VAT charges was "long overdue", and that it was an "absolute disgrace that it has taken the UK government so many years to do the right thing here".
First Minister Nicola Sturgeon welcomed the news that the emergency services would no longer have to pay VAT - but called for previous payments to be refunded.
Mr Hammond said the measures in his budget would see an additional £2bn go to the Scottish government, largely through Barnett Formula consequentials, but did not specify over how many years.
She said: "It's long overdue and it's an absolute disgrace that it has taken the UK government so many years to do the right thing here.
He also said progress was being made on city deals for Tay Cities and Stirling, and for a growth deal for Borderlands.
"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."
And he said the government would introduce transferable tax history for oil and gas fields in the North Sea - which he described as an "innovative tax policy that will encourage new entrants to bring fresh investment to a basin that still holds up to 20 billion barrels of oil".
Ahead of the chancellor's statement, Ms Sturgeon's finance secretary, Derek Mackay, called on Mr Hammond to "support economic growth in the wake of continued Brexit uncertainty and set out measures to protect households from further austerity".
Mr Hammond again credited his party's 13 Scottish MPs for convincing him of the merits of the move.
Among his list of demands were for Mr Hammond to:
Many of the measures announced by Mr Hammond - such as homebuyers no longer having to pay stamp duty for properties of up to £300,000 - will not apply in Scotland, where the tax is devolved and known as Land and Buildings Transaction Tax.
Mr Mackay said: "The Scottish government remains resolute in our opposition to the UK government's austerity agenda, which disproportionately hurts the poorest and most vulnerable in society.
It will be up to the Scottish government in its own forthcoming budget to decide whether to follow the chancellor's lead.
"The chancellor must meet key tests in his Autumn Budget to repair some of this damage, to recognise the serious challenges we are facing as a result of Brexit and to bring forward substantial measures to boost the economy and to ease the pressure on the public sector and those who work in it."
Among the other budget measures which the Treasury said would impact on Scotland were:
Labour's shadow Scottish secretary, Lesley Laird, urged the chancellor to "change course, abandon tax giveaways to a wealthy few and deliver a budget which works for every part of the United Kingdom."
The chancellor said the budget was proof that the Conservative government was "giving power back to the people of Britain and driving prosperity and greater fairness across our United Kingdom".
Global Britain
Mr Hammond will use his budget to outline his plan to set the UK on the path to a "more prosperous tomorrow".
The chancellor is expected to say that the budget is proof of the government's resolve to "look forwards, to embrace change, to meet our challenges head on, and to seize the opportunities for Britain" after Brexit.
He will add: "For the first time in decades, Britain is genuinely at the forefront of a technological revolution, not just in our universities and research institutes, but this time in the commercial development labs of our great companies and on the factory floors and business parks across the land."
He will also set out his vision for a "Global Britain", which will have a "prosperous and inclusive economy where everybody has the opportunity to shine wherever in the UK they live, whatever their background".
And he will describe this Global Britain as an "outward looking, free-trading nation, a force for good in the world, a country fit for the future."
