Chamber and committees

I think that it would be fair to say—I do not know whether it would always be expressed as explicitly as this—that, certainly in the months leading up to the decision around public ownership, there would of course have been concern that that was a possibility. Some months previously, FMEL had had a redundancy programme at the yard, and there were clearly very significant financial and cash-flow problems there, so of course that would have been a concern.

Just as FMEL signed up to the terms of the contract for the vessels, so did CMAL, so it was always—understandably—restricted in what it could do by the terms of the contract. CMAL’s view is that simply paying a lot more to FMEL at that time, in line with the claim that FMEL had made, would not have been within the terms of the contract, because there were not unforeseen problems. The contract had terms for modifications within it, but FMEL was not seeking to use those. If CMAL had acceded to those claims, it would have opened itself up to legal challenge from unsuccessful bidders. CMAL was at all times seeking—rightly—to operate within the terms of the contract.

As you know, the Scottish Government asked an independent Queen’s counsel to look at the claim, and that is what led to the conclusion that there was no legal basis for CMAL to make the additional payment that FMEL was requesting. CMAL’s view was that, if FMEL felt that that claim was justified, it should take it through the court process. I say again that FMEL always had that option and it chose not to do that.

The Government was looking at ways in which we could help to get the vessels completed, and to protect the yard and employment there if it was appropriate and possible to do so, over and above the contract terms. That is where the loans came in, and the options that were looked at in project Kildonan: how do we get the vessels completed but also protect the longer-term economic interests? Of course, keeping the yard open was pretty essential to getting the vessels completed. Those were the considerations that led to the decisions that the Government took.

Well, in answer to the last part of your question, I think I have referenced that the latest cost assessment by the current management of Ferguson’s is being scrutinised by the Government. I am not able to give you the outcome of that process, because it is not concluded yet. The current Scottish Government-endorsed estimate from March 2022, in terms of completing the vessels, is known. If there are any increases on that as a result of the latest assessment, that will be properly notified to Parliament in the normal way, but that process is under way and is not complete. I will undertake to go away and come back to you with the costs around things such as Tim Hair’s salary. Obviously, we want not only to complete the vessels—although that is the immediate priority—but the shipyard to have a good, sustainable and successful future. I make no apology for the Government continuing to behave and act in a way that supports that objective.

I think that the political scrutiny of the issue is absolutely 100 per cent justified. It is the understatement of the decade for me to say that the contract has not gone as the Government would have expected or hoped, so I do not complain about the scrutiny and the pressure, or the fact that I am sitting here now having these discussions. That is entirely legitimate and understood.

However, I repeat what I said earlier. Whoever deserves to be under that scrutiny and to take responsibility, or a share of it, for what has happened, that is not the workforce. As Kevin Hobbs told the committee, there is no question about the quality of the work. I have been into Ferguson’s shipyard on many occasions. Obviously, the workforce will change, and people will come and go, but there will be a core workforce that has been there for a long time.

Those workers are skilled shipbuilders and do a fantastic job; they do not deserve and should not get any of the criticism that is, rightly, directed at others—including, on some aspects of this, the Scottish Government. Assuming that they get the right support and the right project management, and that everybody else does their job in the way that we would want and expect, I have every confidence in their ability to build those vessels—and, hopefully, many vessels, long into the future—at that shipyard.

If you read, as I have now done, the submission of 20 August to Keith Brown, seeking approval for the preferred bidder—and if memory serves me correctly—you will see that it was always intended that it would be publicly announced. The suggestion in that submission is that it would be the transport minister who did it. At some point after that, in the course of the process—which goes on literally every day in Government—of looking at the announcements that were coming up, judgments would have been made about whether the profile, subject matter and importance of the announcement meant that it should be a minister making the announcement or that it should be a First Ministerial announcement. That would have emerged as a result of the consideration that is what special advisers and communications officials do. They would have come to me to say, “There is a proposal that you should make this announcement,” and I would have said, “Yes, I will do that.”

I am happy to go and look at what came out of that meeting. From what I remember, I would have then asked officials to do certain things.

The Cabinet takes decisions on policy, budgets and budget cover for certain things. Ministers are tasked to get on with the jobs within their portfolios. They report back to Cabinet and update it, and Cabinet colleagues can ask questions, but that does not always take the form of papers that ask Cabinet to substitute for the minister and to make decisions.

Indeed.

Mr Beattie, which paragraph is that? I have the Audit Scotland report here.

I think that that refers more to the second loan than to the first loan.

We were certainly aware that the relationship was becoming progressively more strained and difficult. Ministers—principally the portfolio ministers of the time—would have been involved periodically in discussions and updates.

That said, a lot of effort was made—on both sides, I think, and I know particularly by CMAL—to keep the relationship where it needed to be for us to see progress on the vessels. If you go through CMAL’s various updates to the programme steering group, for example, and the updates that came through the expert that the Scottish Government commissioned, you will see that they contain many references to there being improvements at times, things working better and there being more confidence. Overall, however, and broadly speaking, that relationship was in a downward spiral.

It is not hard to understand the frustration that CMAL felt at having signed a contract of that nature, with responsibility for design and build passing to the shipbuilder, as is standard practice, yet all those issues were being raised that had not been raised at the time. I understand its frustration. Similarly, Jim McColl and FMEL clearly had concerns, which they voiced.

Ministers were aware of that and—again, I think that this is all reflected in the documents that have been published—there was definitely a view on the part of the Government that we wanted to encourage mediation. There was a period in which mediation was agreed to by both parties, but it did not happen. The chosen mediator was not available in the timescales that were necessary.

The contract allowed for mediation, expert determination and then court proceedings as the dispute resolution steps. CMAL’s view, I think rightly, was that expert determination was not appropriate here. Apart from anything else, that was because of the scale of the claim that FMEL was making outside the contract, which ultimately became £66 million. The right way to resolve it was therefore for FMEL to go through the court process, which—as was its right—it never chose to do.

Ministers were seeking to keep the relationship where it needed to be, to improve it and, where we could, to use our best offices to resolve the issues between the parties. In the published documents, you will see evidence of the Government seeking to do that all along in relation to the contract issues between FMEL and CMAL.

Beyond that, as is evidenced in the loan agreements, the consideration of the proposal that Jim McColl put prior to public ownership and then at public ownership—at all stages—we were also seeking to discharge the wider responsibilities of trying to keep the yard open and operational and protecting employment, as well as getting the vessels finished.