Philip Hammond scraps VAT for police and fire service in Scotland, but Nicola Sturgeon calls budget offer ‘smoke and mirrors’

Philip Hammond - Image credit: PA

Nicola Sturgeon has suggested that the UK Government’s budget offer for Scotland is just “smoke and mirrors” after Philip Hammond announced plans to scrap VAT for the police and fire service in Scotland as well as an increase to the Scottish budget.

In today’s budget statement, the Chancellor announced that Police Scotland and the Scottish Fire and Rescue Service will no longer be liable to pay VAT from April 2018.

This will bring them into line with other forces in the UK.

However, VAT paid from the creation of the national single forces in 2013 until now – around £140m – will not be refunded.

The UK Government has always had the discretion to grant an exemption to the Scottish forces, and yesterday the SNP said it had made 139 calls for an exemption to the “unfair VAT levy” on the Scottish forces.

But the UK government has maintained the SNP is responsible as it knew the consequences of creating the single forces.

Announcing the change in today’s budget statement, Hammond said: "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.

"So we will legislate to allow VAT refunds from April 2018".

The Chancellor also announced a £2bn increase in the Scottish Government budget.

This will be split over three years between 2018 and 2021 and will include a mixture of revenue and capital funding.

Hammond confirmed that city deals for the Tay cities region and Stirling were progressing, and that the UK Government would begin negotiations for a new deal in the ‘Borderlands’.

Also of benefit to Scotland, the Chancellor announced the creation of a transferable tax history for the oil and gas industry, which will enable companies to pass on their tax history to new buyers when they sell their oil and gas fields.

Commenting on the announcements on Nicola Sturgeon said the announcements on oil and gas and VAT were “very welcome if overdue”, although the refusal to backdate the VAT was “disappointing”, but she said early indications of the money offered to Scotland were of “smoke and mirrors”.

Sturgeon said Scotland would still be facing a real terms revenue budget cut of £239m and that a £350m increase to NHS spending in England would only mean a £8m increase for Scotland.

On the subject of the announced £2bn increase to the Scottish budget, Sturgeon said £1.1bn would be in the form of financial transactions that can only be used for limited purposes and must be repaid.

She finished a series if tweets saying: “lots more to mull over - but early indications are of more smoke and mirrors than substance.