The £128.25m Question

Politics Notebook #8: Richard Leonard is trying to pry open the books of Ferguson Marine, the firm behind the ferries fiasco.

Image by Steve Buissinne from Pixabay.

Richard Leonard has the most difficult job at Holyrood.

As convener of the Public Audit Committee, it is his task to keep track of what the Scottish Government spends and what it spends it on. It’s a daunting feat since no government is particularly keen on scrutiny and this government even less so than most.

The role involves a fair bit of arm-twisting since ministers are more powerful than parliament and sometimes must be persuaded to cooperate. Fortunately for Leonard, he has some experience of dysfunctional organisations run by power-hungry fiefdom-builders who have buried more bodies than the Crypt-Keeper. He was the leader of the Scottish Labour Party.

For some time now, Leonard and his colleagues on the committee have been trying to get a forensic audit of the financial records of Ferguson Marine, the company awarded the contract to build two as yet undelivered ferries. In particular, they want to track what happened to £128.25m in payments and loans from Caledonian Maritime Assets Limited and the Scottish Government.

The Auditor General for Scotland could carry out a forensic analysis — but only if Scottish Ministers give him the legal authority. In September, Leonard wrote to Neil Gray, the SNP’s Cabinet Secretary for Wellbeing Economy, Fair Work and Energy, and urged him to give the Auditor General the go-ahead. Gray replied saying the Scottish Government was taking legal advice. The last the committee heard from him was October 30.

Leonard has now written to Gray again, saying:

While we recognise the importance of seeking robust legal advice, it has now been over three months since our initial correspondence to you on this matter. The committee is keen to establish the reasons for the delay, and to encourage a positive resolution to this matter as quickly as possible. The committee would be grateful for a response by 26 January 2024.

That might sound exceedingly polite but it is the parliamentary equivalent of ‘get a damn move on’.

So how did we get here?

The background

In August 2015, the Scottish Government unveiled Ferguson Marine Engineering Limited (FMEL) as the preferred bidder for a £97m contract to build two ferries for Caledonian Maritime Assets Limited (CMAL), the ferry and ports company which is wholly owned by Scottish Ministers.

The following month, FMEL said it was unable to give CMAL a full-refund guarantee, an industry-standard contractual obligation. CMAL wished to re-open bidding for the contract but Scottish Ministers approved FMEL and the deal was done that October.

There followed a catalogue of delays, technical hitches and financial problems, which saw the Scottish Government extend FMEL’s delivery deadlines and pay the company contractual fees plus two sizeable loans to keep the project afloat and the shipyard’s workers in jobs.

July 2017 saw the beginning of an 18-month stand-off between FMEL and CMAL over a further payment of £17.5m. Eventually, by summer 2019, and drawing on legal advice and independent analysis, the Scottish Government concluded that there was no legal basis for CMAL to hand over anything more than the £97m contract price.

FMEL went into administration in August 2019, by which point CMAL and Scottish Ministers had transferred £128.25m to the yard, £83.25m in contractual payments and £45m in loans. However, the vessels were still largely incomplete and Scottish Ministers took the yard into public ownership. Vessel 801, the MV Glen Sannox, which was due in May 2018, is yet to be completed. Vessel 802, the MV Glen Rosa, due in July 2018, has also not been finished.

How was all this money spent?

That is the $64,000 Question. Or, rather, the £128.25m Question.

The Auditor General for Scotland published a report into the contract in March 2022, after which Richard Leonard and his committee held a series of evidence sessions with the key players.

From this they produced their own report, which concluded that taxpayers had been ‘badly let down by many of those involved in the project’, that there had been ‘a significant lack of transparency and accountability’, and that ‘record and note keeping’ of meetings involving Scottish Ministers ‘was weak and fell well short of the standards of transparency and accountability we would expect’.

Among its recommendations, the committee ‘strongly encourage[d]’ Stephen Boyle, the Auditor General, to ‘undertake a forensic analysis’ of how the considerable sums of taxpayers’ money paid to FMEL had been spent.

Boyle agreed but pointed out that he might not have the legal authority to do so because Ferguson Marine is not a specified body for the purposes of Section 23 of the Public Finance and Accountability (Scotland) Act 2000. Subsequent legal advice confirmed Boyle’s suspicions but he observed that Scottish Ministers could issue a competent order specifying FMEL, which would allow him to go through the books with a fine-tooth comb.

Hence Leonard’s letter to Neil Gray in September and his latest correspondence.

What happens next?

Leonard and his colleagues have done yeoman’s work trying to get answers but they must rely on the cooperation of all parties involved in the project. That includes the Scottish Government. Obtaining legal advice about making FMEL subject to Section 23 is sensible: this whole debacle is an object lesson in rushing into decisions without due consideration. But three months for a legal opinion is stretching the bounds of credibility.

Given the delays and the considerable sums of taxpayers’ money expended on this project, it is imperative that there is maximum transparency. The public’s confidence in the Scottish Government’s ability to spend their money wisely and effectively is on the line. Scottish Ministers should have a presumption in favour of facilitating a forensic examination of FMEL’s accounts and any legal advice should be considered in light of the overwhelmingly public interest in openness and accountability in this matter.

The Public Audit Committee wants answers. The public wants answers. The Scottish Government must not stand in the way.

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