Clause 15 — Assignment of VAT

Part of Bills Presented — Local Area Referendum (Disposal of School Playing Fields) – in the House of Commons at 8:15 pm on 29th June 2015.

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Photo of David Gauke David Gauke The Financial Secretary to the Treasury 8:15 pm, 29th June 2015

Let me address the issues that have arisen during the debate, starting with new clause 20 and the refund situation. It is correct to say that there is a refund scheme for Government Departments and the NHS. This scheme refunds the VAT incurred on certain outsourced services. It was introduced to ensure that irrecoverable VAT does not dissuade Government Departments from contracting out services where this results in greater efficiencies of scale. There is also —this is relevant to the discussion—a refund scheme in respect of matters that can draw funding directly from local taxation. The Scottish Fire and Rescue Service is funded by the Scottish Government, rather than through any legal call on local taxes, so it does not meet this criterion.

That was not the case prior to the reforms brought in by the Scottish Government. I stress that this was a choice of the Scottish Government, with their eyes wide open to the fact that the VAT refund scheme would not be available in the event of that reform. They decided, as they were perfectly entitled to do, to proceed with those reforms, notwithstanding that loss.