Chamber and committees

We have opened the books. The Deputy First Minister has made two statements setting out the savings that we are required to make to balance our books because of inflation.

The safety of any hospital is paramount, and I know that the Cabinet Secretary for Health and Social Care is engaged fully on those issues.

I will make two points: first, when a whistleblower raises concern, that concern must be treated with the utmost seriousness and thoroughly investigated. Secondly, the chief operating officer of NHS Scotland has met NHS Forth Valley’s chief executive to discuss the concerns that were raised.

The Scottish Government is supporting Forth Valley to develop a robust and cohesive action plan for improvement, and a national planning and performance oversight group met earlier this month to discuss the next steps. I know that the health secretary will continue to keep members updated.

Therefore, clearly, he will have views, and I might have more sympathy with some of those views than with others.

Throughout that whole period, the Scottish Government was largely looking at how we could help deal with the cash flow financial issues because, without that, we could not make progress on the vessels, and we rigorously looked at all options. The Scottish Government gave the budgetary cover for CMAL to change the milestone payments and accelerate the final payment. We looked at and delivered loan provision for CMAL. Later, after the second loan, I certainly had concerns about Jim McColl’s adherence to some of the agreements that we had reached. We also looked at the different option that CBC put to us.

I would go further than that. Certainly, at the point at which we got to nationalisation, had we not nationalised, in my view, the yard would have closed, and the vessels would never have been completed. Every decision that a Government takes on any issue involves a balance of risk. Clearly, in the period before we took public ownership in December 2019, there was a whole process of exploring and considering all the issues around nationalisation and alternatives to it but, by the time that we got to that point, it was not just the preferred option; it was the only viable option that was available.

Sure, but, to be clear, that would have meant that—undoubtedly, in my view—the yard would have closed, and there would have been no route to completing the vessels. However difficult and unsatisfactory the route to completing the vessels has proved to be, at that point, there would have been no route to completing the vessels, and those employed at the yard would have been without that employment.

Our—and my—fundamental responsibility is to ensure that we deliver the contract, that the vessels are completed and that we properly learn the lessons that need to be learned. I am very serious about that responsibility.

We considered the issue of the second loan. Obviously, all Government investment in private companies, whatever form that takes, has to satisfy state aid procurement rules and the national ethics and integrity policy rules, and there will often be a judgment that the Government can invest more only if the company is investing, in order to satisfy those various tests. There was an issue at the outset or in the early stages of consideration around the £30 million loan that, if the Government was able to do more, it would require Clyde Blowers to also invest more. I certainly recollect being clear that that position had to be made clear to Clyde Blowers.

If I fast forward to after we had made the decision on the second loan and reached the agreement with Clyde Blowers, to be frank, soon after that—I was involved at that time—I became concerned that it felt as if the ink was not even dry on the agreement and Clyde Blowers was not fulfilling the requirement on it as part of the agreement. In summary, that was to invest its own equity as well as drawing down the Scottish Government loan.

Towards the end of 2018, that was a significant concern. In my mind, it raised issues of a lack of good faith in the process, and at that point I gave officials an instruction that there should be no further drawdown by Clyde Blowers of that loan until we had resolved the issue of what I think was a breach of the loan conditions. There was then a process of doing that. There was a resolution of that issue and the loan was then drawn down, but behind that lay a concern, which I certainly had at that point, that we had entered an agreement in good faith but that that good faith was not necessarily being honoured at that point.

There is another point that may be worth making, which I will come on to in a second.

Like you and the committee, I am not an expert on shipbuilding contracts—although I know more about them than I might ever have wanted to, unfortunately, because of the situation—but my understanding is that the approach to the milestone payments, the negotiation about the particular structure and the process of triggering those payments are not unique to the contract. They are standard in shipbuilding contracts. If I am wrong on any aspect of that, others can give you a more expert opinion, but that is my understanding.

There might be a legitimate argument that that should change. As I have said, in a Scottish context, given our experience with the vessels in question, we should look at whether it should change. However, if that took the Scottish approach to contracts for shipbuilding, which is a global industry, out of the standard, I guess that there would be issues with that that would have to be considered as well.

The other point that it is important to make is about what happened as the milestones were reached. Going back to 8 October 2015, one of the mitigations that was put in place against the lack of a full builders refund guarantee was that CMAL took ownership of the vessel and the assets at each stage of the construction process. Therefore, as CMAL made payments, it took ownership of assets that were equivalent to those payments. As I understand it, that is how it works in such contracts, but it was the case that CMAL was getting value for those payments.

We all have responsibility and lessons to learn but, to be frank, I do not think that I have heard the people who owned FMEL talk about the lessons that they should be learning about this point. Clearly, the project management—the process of putting the vessels together—was not happening in the way that it should have done.

I will review matters. For example, as I have said, I have gone over the submission of 8 October, and the decision—many times, actually. I have tried to put myself in the shoes of the minister and to think whether, based on all the information, I would have taken the same decision. Based on all that information, I think that the decision—based on what was known—was, at the time, a reasonable decision to have taken. Based on what we know now, we of course wish that we had taken a different decision.

One of the things that I will reflect on, as I do regularly, is the expectation of and requirement on the organisation of the Scottish Government about when things should be brought to my attention.

To be fair to Derek Mackay, let me be clear that, had that submission of 8 October been brought to my attention, and based on everything that was in it, I am not saying that I would have reached a different decision. I do not think that I would have done. However, with hindsight, perhaps it should have been brought to my attention.

I will reflect on all those things. Again, I have looked at this many times—and again, it is all with the benefit of hindsight, but that is important, sometimes: should we have taken more quickly some of the decisions that ultimately led to nationalisation?

I will always look very critically, with hindsight, at the process of decision making and try to learn from it—not just in this case, but in every case.

I think that you have heard CMAL respond to that. It took procurement advice and it would not say that that was out of the ordinary as regards the procurement process. However, it is important that such issues are now properly and fully investigated by the Auditor General rather than by my coming to summary conclusions without allowing that process to be undertaken.