VAT refunds to public authorities

Part of Finance (No. 2) Bill – in a Public Bill Committee am 2:15 pm ar 16 Ionawr 2018.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury 2:15, 16 Ionawr 2018

I rise to speak to new clause 1, tabled by the hon. Member for Glasgow Central. The Opposition welcome the Government’s decision to allow the Scottish Fire and Rescue Service and the Scottish Police Authority to claim retrospective VAT funds. The measures in the clause follow the Scottish Government’s decision in 2012 to establish a nationwide fire and rescue service for Scotland. The Treasury Minister at the time, now the Justice Secretary, wrote:

“Based on the information currently available it seems that, following the Scottish government's planned reforms, neither the new police authority nor the fire and rescue service will be eligible for VAT refunds under Section 33 of the VAT Act 1994.”

That Government decision meant that the Scottish police and fire services lost out on VAT refunds worth more than £30 million, of which Scottish police forces lost out on about £26 million. As a former chair of a fire and rescue service, long before the cuts to those services, I have to say that this amount of money would have been a strain even in those days. It is even more stressful now, so I can understand the anxieties and concerns of the Scottish Government.

To some extent, one could argue that it is a sign of recklessness that, in a time of austerity, the Government would effectively leave Scottish firefighters and police officers to fend for themselves. The Opposition therefore welcome the Government’s decision to reconsider their position, and to allow the Scottish police forces and fire services to retroactively reclaim the VAT—particularly given that the Minister’s reasoning at the time for denying Scottish police and fire services access to the funds was insubstantial at best. At times, it seemed to me and to other onlookers potentially malicious. I think that was the perception that people had at the time.

The then chief constable of Scotland, Sir Stephen House, when he testified to the Justice Committee of the Scottish Parliament last year, said that he was bewildered by the fact that the Scottish police force was the only police force charged VAT, as none of the 43 police forces pay VAT, and neither does the Police Service of Northern Ireland or the National Crime Agency, both of which are centralised agencies.

The Government’s decision to allow the Scottish police and fire services to claim retrospectively should not be controversial, even if it has taken a little time to get here. The Government have acted a number of times in the past to ensure that public authorities do not pay VAT, which is laudable. A number of Governments have done that, in fact. In 2001, the last Labour Government introduced a scheme to allow eligible museums and galleries to claim back VAT paid on most goods and services purchased, in order to grant free rights of admission to their collections. In 2011, the coalition Government introduced provisions as part of the Finance Act 2011 to ensure that academies, which supply free education but are not under local authority control—the phrase “under local authority control” is a misnomer if ever there was one, but it is important to use the language that people use, so we all know what we are talking about—were allowed to recover their VAT costs in the same way as local authorities. Similarly, in the March 2015 Budget, the coalition Government announced that from 1 April 2015, hospice charities, search and rescue charities and blood bike charities would be entitled to recover VAT incurred on their business activities, so there is a fairly well-trodden path regarding this issue.

Although we welcome the Government’s change of heart, allowing the Scottish fire and police forces to reclaim VAT retroactively is a drop in the ocean compared with the levels of gross underfunding and cuts to police and fire services across the country, including services in Scotland. New figures obtained by the Fire Brigades Union show that almost one in five frontline fire service posts—some 11,000 jobs—have been lost since 2010, which is a post-war record of job losses in that crucial service. That is all the more reason why this money should come back to those services. Since 2010, almost 8,000 full-time firefighter jobs have been loss. Fire safety inspections have fallen by 28% since the Government came to power, which is all the more reason why this retrospective or retroactive decision should be put into effect. The general secretary of the Fire Brigades Union said that

“Continued cuts to frontline firefighters and emergency fire control operators…are a serious threat to public safety.”

That is worrying.

The VAT refunds, although welcome, will not stop the deeper cuts to the fire service that are currently taking place, resulting in significantly fewer firefighters across the whole country. It is increasingly clear that VAT refunds will not prevent cuts in the service. As far as I can gather, the Prime Minister oversaw that when she was the Home Secretary. This may be the hand of the Prime Minister seeking some sort of retribution—on herself, perhaps—or rather, putting paid to past decisions.

To sum up, we welcome the proposals, but it would be helpful if the Minister could offer some examples where the grant could be claimed and what the criteria would be for things such as rescue charities hoping to access the grant as well. It is regrettable the Government have chosen to spend the last four years playing politics with the Scottish police and fire services. I hope the measure will ensure that VAT on every penny the police and fire services in Scotland spend will be refunded and that the Minister, at the same time, will ask his Government colleagues to look at the state of police and fire services right across the country.