Scottish Justice Secretary Kenny MacAskill has said a UK Treasury decision not to allow reformed Scottish police and fire services to recover VAT was "manifestly unfair".
The SJS has said he will still push ahead with plans for single police and fire services instead of regional bodies despite the UK government judging that single services would not be eligible for VAT refunds, worth more than £30m a year.
Mr MacAskill has complained that the policy went against a recent ruling from Westminster in relation to Academy schools in England whereby local authorities can recover the VAT they pay for supplies, which relate to their non-business activities.
A letter from Mr MacAskill said he had not received any formal reasons for the UK Treasury decision not to allow the new Scottish Police Authority to reclaim VAT but he understood it was because it would be "funded by central government".
He said: "This decision by the Treasury is unacceptable, unjustifiable and manifestly unfair. This charge on Scottish public sector reform is not levied on similar reforms in the rest of the UK."
"It also ignores the fact that the new Police Authority will continue to be able to receive funding from Scottish local authorities to pay the costs of agreed local priorities.
"This provides a direct link with local taxation, which we consider meets the Treasury's policy on VAT recovery."
The Police and Fire Reform Bill reaches Stage 3 in the Scottish Parliament this week and the new single services are scheduled to begin in April 2013.
The Treasury insists that the Scottish government knew all along that their model for service reform would lead to the loss of VAT exemption and leading union Unison claim the ending of the exemption will cost the two services up to £35m a year.
A union spokesman said: "[With this ruling] it appears that Scotland's public services are going to have to pay a high price for allowing greater ministerial control of our police and fire services."
Posted 25/06/2012 by firstname.lastname@example.org