Back in 2014, just weeks before the independence referendum, the Scottish Government had a problem. The Ferguson shipyard in Port Glasgow, Scotland’s last large-scale commercial ship builder, was in financial difficulty.
The last thing the SNP needed at this critical time politically, when Scots were about to be asked to choose their constitutional future, was the loss of an iconic Scottish industry. So in stepped the then First Minister Alex Salmond, who brokered a deal with his economic advisor, and enthusiastic backer of the Yes Campaign, Jim McColl, the most successful Scottish businessman of his generation and also the country’s wealthiest man.
McColl agreed to take over Ferguson’s, investing substantial sums of his own money and those of his investors in modernising the yard, and was successful in winning a £97m contract with CMAL (the Scottish Government-owned company which holds the assets of Caledonian MacBrayne) for delivery of two new hybrid ferries. A potentially difficult situation turned into a media triumph for Salmond and the SNP - jobs being saved, and the future of Scottish ship building secured.
Fast forward five years, to last Friday, and another SNP politician in a photo opportunity at Ferguson’s: not Alex Salmond this time, or the current First Minister, but someone who might well have his eye on the job in the not too distant future, the Finance Secretary Derek Mackay. He appeared in Port Glasgow to announce the Scottish Government’s plans to nationalise the yard, to secure the future of the workforce.
But why, just five years after Ferguson’s was supposedly saved, are we having to witness yet another salvation from the SNP? What exactly has gone wrong at Ferguson’s, and why is the taxpayer now facing a bill of £100m or more?
There is a great deal about what happened at Ferguson’s over the past five years that is still unclear, but what we do know is the following. The two new hybrid ferries have not been completed, and are now running respectively one and two years late. Islanders on Arran, desperate for their new ferry, have been left in the lurch. We have no completion date for the vessels. The total cost of the new ferry contracts has already doubled, and the final cost may end up much higher. Derek MacKay admitted on Monday that he has no idea what the final bill will be. And the Scottish taxpayer is now having to foot the bill for the entire fiasco.
At the core of this problem is a dispute between Ferguson’s and CMAL, over the nature of the contracts to build the new ferries. Jim McColl and Ferguson’s blame the cost overruns on design changes by the client, CMAL. CMAL and the Scottish Government state that this was a fixed price contract, and any additional costs have to be borne by Ferguson’s.
It seems extraordinary that this dispute was not resolved before costs spiralled to the extent that they have done. To the frustration of McColl, Scottish Ministers refused to intervene and require CMAL management to sit down with Ferguson’s to try and find a resolution. Months ticked by, costs rose and rose, but Derek Mackay and his colleagues sat on their hands and did nothing to intervene. What they did do is loan Ferguson’s some £45Mm to help the yard with cash flow, taxpayers’ money which is now effectively having to be written off.
Eventually, last week, Derek Mackay stepped in, announcing that the yard was to be nationalised. Ultimately, this is not in the Scottish Government’s gift: an administrator has been appointed, who now has to go through a formal sale process. But it seems likely that the yard will now come into public ownership, which will secure jobs in the short term.
In the longer run, nationalisation may turn out to be not in the shipyard’s interests. Ferguson’s were involved in two of three consortia bidding for the new type 31E destroyers for the Royal Navy. They were also interested in bidding for five patrol vessels for the Bangladeshi Government. Insiders believe that nationalisation will make it difficult, if not impossible, for Ferguson’s to pursue their interest in these contracts.
Nor does the Scottish Government’s track record on nationalisation give anyone cause for comfort. Prestwick Airport has already cost the taxpayer £40m, with no sign of a buyer on the horizon. And we found out only last week that the Scottish Government’s £19m loan to BiFab is now worth just £6m.
There was a viable alternative to nationalisation: a plan put forward by the Ferguson management whereby the Scottish Government would take over the existing ferry contracts, but the rest of the yard would remain in private ownership, able to bid for MoD and other contracts in future. Derek Mackay rejected this proposal, claiming that the Scottish Government’s legal advice meant that it breached EU State Aid rules. Ferguson’s legal advice was to the contrary, and they produced a Senior Counsel’s opinion that backed them up. But, again, Mackay refused to engage.
So Ferguson’s will now go into public ownership, and new management will be appointed. It may well be that Derek Mackay and his team will prove more adept in owning the shipyard than the most successful Scottish businessman of his generation; that the ferries will be completed without additional cost to the taxpayer; and that under public ownership it will prove a greater success than either Prestwick Airport or BiFab. It may also be that a Gloucestershire Old Spot will sprout feathers and be seen gliding gently in the skies over the Clyde.
This all calls out for a full, and detailed, Parliamentary inquiry, so we can find out exactly what has gone wrong, and ensure that those responsible are held properly accountable for the vast sums in public money that have disappeared.
One person keen to see that inquiry take place is Jim McColl himself. As someone who has been a strong supporter of the SNP Government in the past, who has made an enormous contribution to the Scottish economy in recent years, he deserved to be treated much better than this. If this is the way the SNP treat their friends in the business community, one wonders how they will ever expect figures from industry to work closely with them again.
This whole sorry episode characterises a Government that is inept, incompetent and profligate with public cash; only interested in the next photo opportunity. And yet these are the people who expect us to trust them to lead Scotland down the route of becoming an independent nation.
Nothing in this whole sorry saga suggests that we should put any trust in them whatsoever.