Net Zero, Energy and Transport Committee

Meeting date: Tuesday, May 24, 2022

Official Report 677KB pdf

---

Subordinate Legislation

---

Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2022 [Draft]

The next item is to take evidence on the draft Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2022. I welcome the Minister for Transport, Jenny Gilruth, who is joining us for consideration of this Scottish statutory instrument, and I thank her for taking time out to join the committee. The minister is joined by Kevin Gibson, who is a solicitor in the Scottish Government, and Bill Reeve, who is rail director at Transport Scotland. I thank them for being in front of the committee.

The order was laid under the affirmative procedure, which means that Parliament must approve it before it comes into force. Following this evidence session, the committee will be invited to consider a motion to approve the order under the next item.

Minister, I understand that you would like to make a short opening statement. If that is the case, I will hand over to you.

Good morning. As committee members will be aware, ScotRail came under Scottish Government control on 1 April this year, and the Government-owned holding company Scottish Rail Holdings Ltd is overseeing and managing on behalf of the Scottish ministers the delivery of services by its wholly owned subsidiary, ScotRail Trains Ltd. Scottish Rail Holdings is a private limited company that was established under the Companies Act 2006 as an executive non-departmental public body. Scottish Rail Holdings and its subsidiary, ScotRail Trains Ltd, were established by Transport Scotland on behalf of ministers to further the discharge of their duties under section 30 of the Railways Act 1993, with effect from 1 April this year. The Scottish ministers are the sole shareholder of Scottish Rail Holdings.

As a matter of policy, Scottish Rail Holdings, as an executive non-departmental public body, would be expected to have an accountable officer as part of good governance. SRH is not part of the Scottish Administration under the Scotland Act 1998, which means that, for the purposes of the Public Finance and Accountability (Scotland) Act 2000, the permanent secretary as principal accountable officer is not automatically able to appoint an accountable officer to SRH through a purely administrative exercise. To enable that to happen, we have to make an order under section 483 of the Companies Act 2006, requiring SRH accounts to be audited by the Auditor General for Scotland. That engages the relevant provisions of part 2 of the 2000 act, including the power to designate an accountable officer for SRH under section 15 of that act.

ScotRail Trains Ltd will have its accounts treated as part of the Scottish Rail Holdings group accounts, as it is a subsidiary company under section 479A of the Companies Act 2006.

As I outlined during an evidence session to the committee in March, we were, at that time, finalising the chief executive of SRH being designated as the accountable officer. I also confirmed that we were putting in place an interim arrangement whereby the Transport Scotland AO would remain as AO for SRH until an order under section 483 of the Companies Act 2006 was approved by Parliament. That was done to ensure that SRH was able to operate from 1 April. The section 483 order was laid before Parliament on 29 April and the contingency arrangement, which I have just outlined, will remain in place until the order is approved.

Audit Scotland was consulted during the preparation of the order. It has responded to confirm that the Auditor General is willing to assume the auditing role, and it has assisted with best timings for introduction of the order.

I seek the support of the committee in relation to the order, which is a necessary part of the governance process for SRH to fulfil its functions as an NDPB.

As you have said, the instrument relates to the nationalisation of ScotRail and, when you appeared before the committee less than two months ago, you told us that the main reason for nationalisation was to increase accountability and ensure that

“ministers are held to account”—[Official Report, Net Zero, Energy and Transport Committee, 15 March 2022; c 26.].

Given that that is the main reason for the nationalisation of ScotRail, do you accept responsibility for the significant service cuts in Scotland?

The current service cuts in Scotland relate to an industrial dispute between the Associated Society of Locomotive Engineers and Firemen—ASLEF, the train drivers union—and ScotRail, the employer. As you might know, convener, ASLEF train drivers are refusing to work on their rest days at the moment. As a result, ScotRail took the decision to reduce the number of services, because it does not have enough train drivers to fulfil the previous timetable. Therefore, yesterday, a reduction in the timetable was introduced. However, that is not what the order relates to.

My question is not directly relevant to the order, but it relates to the nationalisation of ScotRail, and the order relates to that. The Scottish ministers now own ScotRail 100 per cent, via a holding company, as you have said. Why are Scottish ministers not getting directly involved in the process to ensure that we do not see massive cuts to rail services in Scotland?

There are two points to make. That is not an accurate description of what has been happening in recent days. On Friday, I spent a considerable part of the day with ScotRail and, yesterday, along with Bill Reeve, I met representatives of ScotRail to discuss some of the challenges of the current situation. However, it is not the case that the Scottish ministers are in the room negotiating with ASLEF; as the employer, ScotRail is in the room. I understand that ASLEF and ScotRail are meeting today to move the talks forward.

It is essential that we restore the previous timetable. However, you will appreciate that ScotRail cannot fulfil the previous timetable, because it does not have enough drivers to do so. ScotRail, like many train operators across the United Kingdom, depends on drivers working on their rest days. Drivers working on their rest days is a historic thing that exists in the rail industry; it has not come into existence since nationalisation. It relies, primarily, on the good will of drivers.

I understand and respect that ASLEF is in dispute with ScotRail. It balloted its members on the pay offer, but this is a separate issue to do with drivers choosing not to work on their rest days. If drivers want to spend time with their families or take part in leisure pursuits, that is, of course, in their gift. However, it means that ScotRail cannot run as many trains as was the case under the previous timetable. That is why ScotRail took the difficult decision to reduce train allocation, hence the reduction in the current timetable.

As minister, I am committed to working with our trade union partners, with whom, as you know from the previous evidence session that I attended, I have spent a lot of time talking about nationalisation, what it means for them and whether they want to be part of the vision. I sincerely hope that they do—they campaigned for a long time for public ownership of Scotland’s trains.

However, we need to get to a resolution of the dispute and we need to get to a better place with train drivers in terms of their availability to work and our ability to, ultimately, restore the timetable. I am working closely with ScotRail to see where we might be able to bring about the restoration of a number of services over the coming weeks and months.

I have a final question before I bring in other members. These rail cuts are costing Scotland’s economy £80 million a day, which I am sure you will be concerned about. Do you have an idea of how long this dispute might last or a provisional timetable for when you would like it to be settled?

I would like it to be settled today, convener. However, as you will be aware, ASLEF is in dispute with ScotRail, the employer, at this time. We need to get to a resolution and I am committed to working with both parties to ensure that we get to a restoration of the previous timetable. However, that depends on both sides coming to a compromise in order to reach a settlement that will meet the needs of all passengers.

I want to clarify something that I think you said, minister. As a point of genuine clarification, when you say that ScotRail is “the employer”, is it ScotRail Trains Ltd that is the employing entity?

Yes.

Under this order, is it correct that the function of Audit Scotland means that it will audit Scottish Rail Holdings and ScotRail Trains Ltd as a part of that audit? That is, Audit Scotland has power over ScotRail Trains Ltd as well.

Yes, that is correct.

Grand.

I have only one substantive question. I sat on the Public Audit and Post-legislative Scrutiny Committee for a long time in the previous session. I think that it published a report at the end of the session that said that it was getting section 22 reports that were fairly blunt and challenging for the organisations that had been reviewed but that, those reports having been laid, very little was done. When, as seems inevitable, Audit Scotland lays a section 22 report on the nationalisation of ScotRail, will you help the committee to understand what you as a Scottish Government, and you as the minister, will do with that report and what action you will take in response to it?

I might bring in Kevin Gibson on the specifics of the legalities that are involved in that. However, it would of course be for the Scottish ministers to consider and scrutinise the publication of any material from the Auditor General to ensure that we have trains that are running at best value for money and meeting passengers’ demands. It will be incumbent on ministers to scrutinise the detail of that accountability through the reporting process, as happens across a number of different organisations in Government. I do not think that there is any difference in the way in which ScotRail Trains Ltd and Scottish Rail Holdings will be held to account via that process, if that answers the question.

I will bring in Kevin Gibson on the specifics of how it operates elsewhere.

I do not have a great deal to add to that. The reports are given to ministers and ministers are then obliged to lay them before Parliament. That is how the legislation operates.

Good morning to the minister and her officials. Thank you for your opening remarks, minister.

People who welcome the nationalisation of Scotland’s rail services want to see improved accountability and clearer lines of responsibility. On a point of clarification, although I welcome your intention to have good relationships with the trade unions, I noticed that the National Union of Rail, Maritime and Transport Workers—the RMT—accused you in the press of lying, which was obviously not a good allegation to hear. It also said that “the buck stops” with you, minister. On that point of accountability, which is what we are here to look at today, how can the public be reassured that it will not be a case of officials and managers taking responsibility when things are going badly and ministers taking credit when things are going well? How can we be sure that the lines of responsibility are clear? How do we very quickly get to a place where trade unions, which I know you respect, have confidence in you and are not accusing you of lying, which was an unfortunate headline to see at this early stage of the project?

09:45  

In recent days, as you might understand, I have read some press reports and I have participated in numerous media appearances on this matter. I must say that, when we talk about having a respectful tone between Government and trade unions, I do not find the use of that word to be particularly respectful. I do not think that it is accurate, either. As you know, at the start of my appointment, I spent a great deal of time with our trade union partners to try to bring them into the conversation about the future of Scotland’s trains. The unions must be part of that to make it a success. We are not in private ownership any more—this is public ownership—and the Government is, of course, accountable to all of Scotland, not just ScotRail trains or Scottish Rail Holdings.

With regard to my accountability, I am the Minister for Transport, so I accept responsibility. However, we have an industrial dispute, and it would not be appropriate—it does not happen in any other part of Government—for ministers to be in the room taking part in those negotiations. ScotRail is the employer. I am committed to working with ScotRail to ensure that the process works and that we get a quick resolution. That is what passengers want to see. I have got to say that, as somebody who takes the Edinburgh to Fife line pretty much every day to come to Parliament, I want to see that as well. Therefore, these are challenging times.

It is important to say that this is not happening only in Scotland. There are other parts of the Great Britain rail network that are impacted by driver shortages at the moment as a result of industrial disputes. Of course, later today, we will hear the result of the ballot of Network Rail staff by the RMT, which affects a number of train operators. Therefore, I recognise that there are challenging times ahead for the rail network—not just in Scotland but everywhere in the UK.

The UK Government can take a view on how it wants to engage with the trade unions. I heard some of that reported in the press over the weekend. I am committed to working with our trade union partners in a respectful dialogue with an understanding that ministers cannot be in the room. Equally, I will work with ScotRail to ensure that we get a resolution that leads us to restore services as soon as possible, which takes me back to the convener’s point. We must restore services to allow passengers to get to their places of work or go to late-night concerts, wherever they might be in the country.

I recognise that, right now, passengers are scunnered—I said that yesterday. The services that passengers are experiencing are not good enough, and we need to restore services. However, it is also true to say that we will not get to a restoration of services until we get a resolution between ScotRail and ASLEF, the train drivers union. I am committed to ensuring that we get to that place as quickly as possible to give passengers the reassurance that they need to ensure that nationalisation is working.

Thank you, minister. I am sure that we all agree that we need to see that dialogue happening—

We need a respectful tone in that dialogue as well.

We want the dialogue to be respectful. We want services to be restored. You made a distinction between the Scottish Government’s approach and what happens elsewhere in the United Kingdom. The Scottish Government is very committed to fair work, and I know that you have a good relationship with the trade unions on that matter. You mentioned rest days. The public want services restored for everyone’s convenience, but we need those services to be safe. Therefore, what is the position on rest days? You said that it is a historic practice that happens elsewhere. However, in your mind, is it good practice for workers to feel under pressure to work on rest days?

No. I agree with the sentiment of Ms Lennon’s question. No worker should feel under pressure to work on their rest days. However, I go back to my initial point to the convener: rest-day working is not something that suddenly occurred as of 1 April 2022. It has existed for a number of years, and it is how trains right across Great Britain, not just in Scotland, operate. The service depends on drivers volunteering to work on their rest days. On whether it should be phased out, it is a historic practice and I am perfectly committed to working with the trade unions to have those discussions in future, as we move forward. However, that practice has historically been part of how train drivers work and operate. Bill Reeve will correct me if I am wrong, but I think that drivers are compensated for working on their rest days.

Yes, they are. It might also be worth adding that the level of rest-day working that has been required of drivers recently has been complicated by absences due to Covid-related sickness and the fact that, although 134 drivers are currently in training with ScotRail, their training programme has been delayed by restrictions. It takes about a year to train a driver, and their training programme has been delayed by restrictions caused by Covid. A train cab is a confined space, so, as you can imagine, there have been periods when putting a trainee alongside an experienced driver has just not been possible. Therefore, there is a lot of work needed to recover that situation, but the past year or so has not helped matters.

I imagine that we do not have much more time for this agenda item, but I wonder what advice was given to ministers on those issues, ahead of 1 April 2022. Did anyone foresee what would happen—that services would be reduced by one third a month after the move into public ownership?

No. I do not think that anyone foresaw that that would happen a month after public ownership. As I outlined to you, the convener and the committee in March, I spent a lot of my time during February and March meeting trade union representatives and listening to them to ensure that they were part of our vision going forward. I am still committed to working with them on a number of areas. For example, we have heard from the trade unions that they have concerns about the safety of their staff on our trains. There are also concerns about women’s safety on our trains and concerns about the vision for Scotland’s trains. I want the trade unions to be part of that and to feel as though they are part of it. I am quite clear that they did not feel as though they were part of it under the Abellio franchise.

To answer your point, Ms Lennon, we need to get to a resolution. I do not think that we could have foreseen the situation on 1 April. There might have been rumblings, but I worked very hard to build relationships with our trade unions, so I am quite disappointed by some of the most recent press reports that we are hearing. Ultimately, however, we need to get a resolution between ScotRail, the employer, and ASLEF, the train drivers union, to allow for the restoration of services. I am committed to working with both parties on that to ensure that we get to that point.

There are no more questions. The next item is formal consideration of motion S6M-04466, calling for the committee to recommend approval of the order. I invite the minister to move the motion.

Motion moved,

That the Net Zero, Energy and Transport Committee recommends that the Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2022 [draft] be approved.—[Jenny Gilruth]

Motion agreed to.

The committee will now report on the outcome of the order in due course. I invite the committee to delegate the authority to me as convener to approve a draft of the report for publication.

Members indicated agreement.