VAT transfer could be delayed suggests First Minister

The assignation of £6bn of VAT revenues to the Scottish budget could be postponed, the Scottish Government has announced, due to concerns over the accuracy of the mechanisms proposed to assess Scotland’s share of UK VAT receipts.

The announcement, made by Finance Secretary Derek MacKay at a meeting of the Scottish Parliament’s Finance and Constitution Committee, was later backed by First Minister, Nicola Sturgeon, who warned of the “enormous risk” the Scottish economy could face if the partial assignation process went ahead in the face of Brexit uncertainties and “volatility” in the economy.

Any distribution of VAT receipts to Scotland would be reflected in adjustments to Scotland’s block grant funding from Westminster, and the First Minister stated that her concerns were about the methodologies being used to calculate Scotland’s share with no comparative out-turn data being produced to guide the decision, which will be based on estimates.

Sturgeon said: “There is no new power here for the Scottish Parliament. This is not about taking on a power or postponing a power, it is about a way of calculating the Scottish budget that has enormous risk attached to it, and about asking if it is sensible to allow that to be done on the proposed methodology at a time when there is so much volatility in some of the factors that drive this.”

Earlier, Derek Mackay had warned that the level of risk to economy in the proposed process meant that the Scottish Government “was not in a position to sign this off”.

Opposition parties in Holyrood have attacked the SNP following the announcement, with both Scottish Labour and the Scottish Conservatives using the decision to mock claims by the SNP that an independent Scotland could be established within an 18 month timescale.  

Scottish Conservative shadow finance secretary Murdo Fraser said: “This move exposes the fact that Nicola Sturgeon is running a return-to-sender government.

“It’s bad enough that she handed back social security powers earlier this year, then suddenly decided she wanted nothing to do with control over air departure tax this week.

“Now we learn the SNP government doesn’t even have the wherewithal to cope with the VAT assignment it so furiously demanded previously.

“This is a government which said it could have an entire separate country up-and-running within just 18 months. Yet, when powers begin to arrive at Holyrood, instead of embracing them and making them work for Scotland, the nationalists hand them straight back.”

Scottish Labour Finance spokesperson James Kelly said: “This is quite a climb-down from Derek MacKay and also makes a mockery of claims the SNP could have set up a separate state within 18 months. 

“While the SNP government again hands Scotland’s powers back to the Tories, Labour would use them to invest in Scotland’s people, communities and public services.”

The partial assignation of VAT had first been proposed in 2014 as part of proposals for greater devolution by the Smith Commission.