VAT Charges (Police Scotland and Scottish Fire and Rescue Service)

Part of the debate – in the Scottish Parliament on 31st October 2017.

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Photo of Ben Macpherson Ben Macpherson Scottish National Party

I thank the Presiding Officer for allowing debate time on the current unfair situation in which Police Scotland and the Scottish Fire and Rescue Service are the only police and fire services in the whole United Kingdom that are unable to reclaim VAT. I also thank members who have supported the motion so far, including many Scottish National Party, Green and Labour MSPs. Unfortunately, no Lib Dems or Tories have signed the motion. However, I hope that our Lib Dem and Tory colleagues will take the opportunity that is afforded by today’s debate to show their support for Scotland’s police and fire services, and to help to get back their VAT.

As I have mentioned, Police Scotland and the Scottish Fire and Rescue Service are the only territorial police and fire services in the whole UK that are unable to reclaim VAT from the UK Treasury. That anomaly needlessly costs our public services £35 million a year, which unfairly deprives Police Scotland of about £25 million and our Scottish Fire and Rescue Service of about £10 million. There is no justification for that discrepancy: it is totally unjust.

Although the Scottish Government is protecting the police budget in real terms and has increased the operational resource of the fire service this year, paying the VAT charges means that the UK Government is needlessly depriving Scotland’s police and fire services of extra resources—resources that would be better spent on front-line services in communities in my constituency and across Scotland.

Some people have previously argued that the Scottish Government was aware that there would be VAT implications when the Scottish Parliament passed the Police and Fire Reform Act (Scotland) 2012. However, the SNP never accepted or agreed with the position that our police services and fire services should be unfairly treated as a result of their mergers in 2013. There was no good reason to accept the glaring disparity then, and it should not be accepted now. The anomaly that penalises Scotland’s emergency services did not make sense in 2012, and it does not make sense now. The UK Government’s rules on VAT have needlessly disadvantaged communities across Scotland. They should, and must, be changed.

The chair of the Scottish Fire and Rescue Service, Pat Watters, described the injustice of the current situation in the Justice Committee as follows:

“When the people of Scotland have to provide for major emergencies, it costs them 20 per cent more than it costs anywhere else in the UK. ... It is not right that it costs the people of Scotland 20 per cent more to get the same protection as elsewhere in the UK. That cannot be right”.—[

Official Report

,

Justice Committee

, 27 May 2017, col 25.]

There can be no reasonable arguments for the UK Government to maintain that discrepancy.

Furthermore, there are no legal reasons why the current rules and position cannot be changed. Through section 76 of the Finance Act 2011, the UK Government has amended VAT rules to allow academy schools to reclaim VAT. Some time after the mergers of the previous police forces and of the previous fire services, Highways England was granted the ability to reclaim VAT by the UK Government by way of the Finance Act 2015. The BBC is also exempt from paying VAT. All that the UK Government needs to do to rectify the unfair anomaly is legislate similarly to how it already has for academy schools, Highways England and the BBC. It would be a very simple process for the UK Government if it were to decide to do the right thing and treat Scotland’s police and fire services equitably.

Moreover, recently some people have erroneously tried to excuse the UK Government’s indefensible position by referring to European Union legislation on VAT. However, as the UK Government well knows, individual member states have latitude on how they implement the sixth VAT directive: how individual countries operate VAT refunds is principally down to national legislation.

Considering all that, the UK Government should and must use the forthcoming UK budget to end the unfair disparity for Police Scotland and the Scottish Fire and Rescue Service when it comes to reclaiming VAT, and it should give Scotland’s police and fire services parity with other forces in the UK, with academy schools, with the BBC and with Highways England. Because the UK Government could have made such changes several years ago, it would only be right for it to refund Police Scotland and the Scottish Fire and Rescue Service the £140 million that they have already paid in VAT, which has been taken away from Scotland’s front-line emergency services since 2013.

All that is being asked for is an equitable solution from the UK Government. For that reason, in good faith, I hope that all speakers in today’s debate will join me in pressing the UK Treasury to change its rules. That includes Scottish Conservative MSP colleagues.

The Sunday Post reported on 8 October that 13 Scottish Conservative Members of Parliament in London had written to the Chancellor of the Exchequer requesting a change in the VAT rules for Police Scotland and the Scottish Fire and Rescue Service. I hope that Tory MSP colleagues will clarify that today, and that Tory MSPs will also do the right thing by Scotland and by their constituents and join me and many others in pressing the chancellor to treat Scotland’s police and fire services with equity, parity and fairness.

The Tories like to think that they are the party of law and order. If that is to hold any credibility whatever, they need to support Scotland’s police and fire services on this matter. As MSPs, supporting our police and fire officers means much more than words. It means standing up for them as much as we can. That is what this debate and this issue is all about. It is not about grievance; it is about fairness. It is not about party politics; it is about making sure that our police and fire services are treated with parity—that they are treated the same as every other police and fire service in the UK.

The UK Government has said several times in recent years that it will respect Scotland and treat it with equality. However, when it comes to charging our police and fire services VAT, it has yet to deliver. I genuinely hope that as MSPs together we can change the UK Government’s mind. It should and must change its mind and it should and must change its rules, and change them very fast.