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Budget 2017: Chancellor scraps VAT on Scottish police and fire services Budget 2017: Chancellor scraps VAT on Scottish police and fire services
(35 minutes later)
Scotland's police and fire services will not be liable for VAT from next April, the chancellor has confirmed.Scotland's police and fire services will not be liable for VAT from next April, the chancellor has confirmed.
Philip Hammond announced in his budget that the two emergency services will have their tax bills refunded in the 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.
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 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.
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 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.
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.
In his budget speech, Mr Hammond said he had been persuaded by Scottish Conservative MPs to make the change.In his budget speech, Mr Hammond said he had been persuaded by Scottish Conservative MPs to make the change.
He added: "The SNP knew the rules, they knew the consequences of introducing these bodies, and they ploughed ahead anyway.He added: "The SNP knew the rules, they knew the consequences of introducing these bodies, and they ploughed ahead anyway.
"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."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.
"So we will legislate to allow VAT refunds from April 2018"."So we will legislate to allow VAT refunds from April 2018".
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 also be refunded, arguing that the £140m would make a "real difference to frontline services in Scotland" 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 also be refunded, arguing that the £140m would make a "real difference to frontline services in Scotland".
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. Mr Hammond said the measures in his budget would see an additional £2bn go to the Scottish government, but did not specify over how many years.
A Scottish government source told BBC Scotland that they believe it is over four years, including the current year - and that more than half of it is made up by capital spending which must be spent on private projects and falls to be repaid.A Scottish government source told BBC Scotland that they believe it is over four years, including the current year - and that more than half of it is made up by capital spending which must be spent on private projects and falls to be repaid.
The source said it was "more of a con than a consequential".The source said it was "more of a con than a consequential".
Analysis by Brian Taylor, BBC Scotland political editor
The Scottish secretary, David Mundell, has confirmed that more than half of the £2bn for Scotland mentioned by the chancellor is capital. He is right in saying that in the past it has had a potential benefit to Scotland.
The Scottish government's quibble with it is that they cant spend it on day to day spending to improve the health service or education, and they cant spend it on public sector projects - it has to be on something in the private sector.
This is quibbling, but it is an important quibble.
David Mundell again rightly points out that they have found innovative ways in the past of diverting capital resources through non-profit distribution schemes.
But the point is it isn't straight up, here is the dosh, spend it as you will - it is money, but it is money that has a series of strings attached.
The chancellor also said progress was being made on city deals for Tay Cities and Stirling, and for a growth deal for Borderlands.The chancellor also said progress was being made on city deals for Tay Cities and Stirling, and for a growth deal for Borderlands.
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".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".
Mr Hammond again credited his party's 13 Scottish MPs for convincing him of the merits of the move.Mr Hammond again credited his party's 13 Scottish MPs for convincing him of the merits of the move.
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.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.
It will be up to the Scottish government in its own forthcoming budget to decide whether to follow the chancellor's lead.It will be up to the Scottish government in its own forthcoming budget to decide whether to follow the chancellor's lead.
'Smoke and mirrors''Smoke and mirrors'
In a lengthy Twitter thread, First Minister Nicola Sturgeon welcomed the announcements on oil and gas, and on VAT.In a lengthy Twitter thread, First Minister Nicola Sturgeon welcomed the announcements on oil and gas, and on VAT.
But she said both were "overdue", and that it was "disappointing and unfair to emergency services" that VAT that had already been paid would not be refunded.But she said both were "overdue", and that it was "disappointing and unfair to emergency services" that VAT that had already been paid would not be refunded.
She also cast doubt on the chancellor's claim of £2bn in extra spending for Scotland, which she said had "much less to it than meets the eye" and would still leave the Scottish government revenue budget facing a £239m next year - although the UK government disputes that figure. She also cast doubt on the chancellor's claim of £2bn in extra spending for Scotland, which she said had "much less to it than meets the eye" and would still leave the Scottish government revenue budget facing a £239m next year.
The first minister concluded: "Lots more to mull over - but early indications are of more smoke and mirrors than substance."The first minister concluded: "Lots more to mull over - but early indications are of more smoke and mirrors than substance."
Among the other budget measures which the Treasury said would impact on Scotland were:Among the other budget measures which the Treasury said would impact on Scotland were:
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".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".
He set out his vision for a "Global Britain" after Brexit, which will have a "prosperous and inclusive economy where everybody has the opportunity to shine wherever in the UK they live, whatever their background".He set out his vision for a "Global Britain" after Brexit, 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 described this Global Britain as an "outward looking, free-trading nation, a force for good in the world, a country fit for the future."And he described this Global Britain as an "outward looking, free-trading nation, a force for good in the world, a country fit for the future."
'Driverless vehicle''Driverless vehicle'
But the chancellor also said that the Office for Budget Responsibility had revised down forecasts for Britain's GDP to 1.5% in 2017, down from the 2% it had previously predicted.But the chancellor also said that the Office for Budget Responsibility had revised down forecasts for Britain's GDP to 1.5% in 2017, down from the 2% it had previously predicted.
But Scottish Labour's new leader, Richard Leonard, said Mr Hammond had "delivered a failing budget, on a failing economy from a failing government". Scottish Labour's new leader, Richard Leonard, said Mr Hammond had "delivered a failing budget, on a failing economy from a failing government".
He added: "They are rudderless and without a plan to grow our economy, help our industries and create the work of the future. This Tory government is a driverless vehicle. This budget is insufficient, inadequate and insincere.He added: "They are rudderless and without a plan to grow our economy, help our industries and create the work of the future. This Tory government is a driverless vehicle. This budget is insufficient, inadequate and insincere.
"This budget reminds us how years of Tory failure have damaged our economy. We urgently need a long-term industrial strategy which will invest in Scotland's future and investment in our public services.""This budget reminds us how years of Tory failure have damaged our economy. We urgently need a long-term industrial strategy which will invest in Scotland's future and investment in our public services."