Chris Marshall: VAT ranks high among Police Scotland’s problems

Chief Constable Phil Gormley. Picture: John Devlin
Chief Constable Phil Gormley. Picture: John Devlin
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Faced with finding savings totalling £1.1 billion by 2026 as well as a potential £85 million funding gap, Police Scotland could use all the cash it can get its hands on at the moment.

That’s why Chief Constable Phil Gormley made headlines last week when he revealed his force has spent £76.5m on VAT since 2013.

Mr Gormley made the admission in an update letter to the Home Affairs Select Committee after being asked during an appearance last month by SNP MP Stuart McDonald.

The SNP has been attempting to make political capital out of the issue for some time, despite being repeatedly warned about VAT liability during the formation of Police Scotland.

According to the rules, police forces under local authority control are exempt from VAT but national bodies are not.

That means Police Scotland is the only police force in the UK unable to recover VAT from the Treasury.

So far, so straightforward.

But with Scotland’s cash-strapped police force now facing severe financial difficulties, the SNP has repeatedly sought to put pressure on the UK Government to change the rules – to little avail.

The issue dates back to 2012 when Kenny MacAskill was justice secretary.

Arguing the UK Government had one policy for Academy schools in England and another for Police Scotland, Mr MacAskill said the Treasury’s decision not to allow the force to recover VAT was “unacceptable, unjustifiable and manifestly unfair”.

There’s no denying it seems unfair that Police Scotland cannot recover VAT, while the Metropolitan Police – a much larger force – can.

But it is disingenuous for the SNP to make out now that the issue crept up and took the Scottish Government by surprise.

According to HM Revenue and Customs, the UK Government advised Scottish ministers in 2012 that changes to both the police and fire service would make them no longer eligible for VAT refunds.

Those journalists who cover the Scottish Parliament’s justice committee have grown tired of SNP MSPs repeatedly going off topic to ask questions on VAT.

Nevertheless, the issue matters.

And it matters because of the perilous state of Police Scotland’s finances.

Set up in 2013 with a mission to save £1.1bn by 2026, the force has an annual budget of around £1bn.

Late last year, Audit Scotland warned police accounts would face a potential funding gap of £85m by 2018-19.

Police Scotland also faces a bill potentially running into the millions for improving the quality of its building estate.

Details published by The Scotsman yesterday show dozens of buildings inherited from legacy police forces have been rated either “poor” or “bad”.

The buildings include the divisional 
headquarters in both Aberdeen and Dundee, as well as the national police college at Tulliallan in Fife.

Despite falling crime rates, Police Scotland is facing new challenges in terms of cybercrime and a huge rise in child sexual exploitation.

The force now faces a perfect storm of dwindling resources and increasingly complex demands on its time.

Eventually something will have to give.

But at present it seems unlikely to be the force’s VAT bill.