Transport Scotland criticised over serious governance failures

11/06/2009

Transport Scotland seriously mishandled the conflict of interest of a senior member of staff, according to a report published today by the Public Audit Committee.

The report, the First Scotrail passenger rail franchise, follows an inquiry by the committee into the management of the franchise, the performance of First Scotrail and the circumstances surrounding the resignation of former Transport Scotland Director of Finance and Corporate Services Guy Houston in November 2008. Mr Houston left the organisation amid allegations of a conflict of interest relating to shares he held in FirstGroup, the parent company of First Scotrail.

In its findings, the committee also described as “discourteous and obstructive” the difficulties it experienced while gathering evidence about the franchise extension from witnesses.

Committee Convener Hugh Henry said: “We consider it discourteous and obstructive that some of the evidence gathered during the course of this inquiry was made available only after repeated requests. The committee also regrets that some information had to be corrected following further probing.

"The committee is concerned that the behaviour of those holding information of interest to this committee, if repeated elsewhere, has implications for all committees of the Parliament. The committee requests that the Presiding Officer gives consideration to how parliamentary committees can discharge their functions when there is a lack of co-operation and transparency on the part of others.”

Describing Transport Scotland’s handling of Mr Houston’s shareholding in FirstGroup, Mr Henry said: “There were serious failures within Transport Scotland over the handling of Guy Houston’s interests despite the unequivocal guidance set out in the civil service handbook that interests should immediately be declared. Management at Transport Scotland must bear responsibility for this. We welcome the review by the Scottish Government of recruitment procedures and the guidance on the declaration and registration of interests.”

In its findings the committee also:

  • found that the arrangements to manage the potential conflict of interest between Mr Houston’s role and his shareholding were untimely and insufficient and led to concern regarding Transport Scotland’s decision-making
  • found that “wholly inaccurate” information was given about the meetings Mr Houston attended while in post at Transport Scotland and that, despite evidence from the Permanent Secretary that Mr Houston was only present at meetings subsequent to the decision to extend the franchise, this was not the case
  • found that Mr Houston was present at key meetings in March 2008 at which the rail franchise extension was discussed. The committee noted Mr Houston’s assertion that he did not trade in shares between his involvement in the meetings and his departure from Transport Scotland, although it also noted that he did use some shares to cover the tax liability on exercise of a share option and also transferred the remaining shares to his wife while still in post
  • found that Mr Houston’s decision to transfer the shares gave the impression that he had “disposed of his shares in an attempt to remove a perception that there was a conflict of interest”
  • asked that Sir John Elvidge reports back to the committee with a copy of revised guidelines on the recruitment and management of senior civil servants' interests.

Further information
The report from the Public Audit Committee followed the publication of a report from the Auditor General for Scotland – The First Scotrail passenger rail franchise.

The committee welcomed the finding by Audit Scotland that Transport Scotland is managing the franchise effectively. It also noted that FirstGroup will receive £2.5 billon in government subsidy over the ten-year term of the franchise and welcomed the guaranteed £73.1 million investment that Transport Scotland achieved through its negotiation of the extension of the franchise.

However, the committee was unable to say whether this represented the best possible return because the option to open the franchise to competition did not exist when the extension was being considered.

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