Meeting of the Parliament

Meeting date: Thursday, March 16, 2023

Official Report 1125KB pdf

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Ferguson Marine

The next item of business is a statement by John Swinney to give an update on Ferguson Marine. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions.

14:24  

Today’s statement maintains the commitment that was given by the Cabinet Secretary for Finance and the Economy some time ago to update Parliament on progress in the building of the MV Glen Sannox—801—and hull 802 at Ferguson Marine and to do so openly and transparently. I am providing this update in place of the cabinet secretary.

First, I will address the Audit Scotland section 22 report that was published on Tuesday. I welcome the report and acknowledge the legitimate issues that it raises. My statement will provide much of the update that the Auditor General for Scotland has requested.

The report criticises the bonuses to senior staff at the yard in the financial year 2021-22 and the process by which they were arrived at. It rightly criticises the “poor governance” that was involved in the process. I agree with that criticism and assure Parliament that new arrangements have been put in place, at my request, to ensure that such an eventuality does not arise in the future.

The Scottish Government stands by its commitment to the shipbuilding communities in Inverclyde and to our island communities that will rely on the vessels that are currently being built at Ferguson Marine. I deeply regret that there have been delays to the delivery of the vessels and significantly higher costs than were predicted at the time of the tender award.

Given the concerns over costs, it is only right and proper that the Scottish Government conducts a robust assessment of the use of its public funds, and that the request that was received from the chief executive of Ferguson Marine on 28 September with updated costs to complete both vessels is also subject to an intense level of robust scrutiny. Those estimates indicated that £21 million of additional funding would be required in the current financial year to sustain work on the vessels.

Our full assessment and due diligence on the chief executive’s cost estimates is due to be completed in current weeks. On 15 December, I updated Parliament on the need for in-year funding of £15 million to Ferguson Marine to ensure that it can continue to progress the build of both vessels, subject to completion of that work.

Today, I confirm that I am satisfied that it is appropriate and necessary to allocate a further £6 million, as set out in the spring budget revision that was published on 2 February, which will take the additional total capital funding for Ferguson Marine in the 2022-23 financial year to the £21 million that was requested by the chief executive in September.

While the due diligence work has been on-going, Ferguson Marine has continued to progress with the build. The chief executive of Ferguson Marine has confirmed to me that the MV Glen Sannox successfully completed the dry-docking period at the start of this month and, after her return to Port Glasgow, the yard achieved a major milestone in running the first main engine. That dry-dock period has allowed the team at Ferguson’s to make a detailed assessment of progress to date and of what will be required to ensure a high degree of confidence in the robustness of the ship when it is entered into service later this year.

Following that assessment, the chief executive of Ferguson Marine has today written to the Net Zero, Energy and Transport Committee with an update on overall progress in preparing a dual-fuel vessel to be handed over. He has concluded that, as a result of persistent

“design gaps and build errors”,

progress on the 801 vessel has been slower than planned.

The chief executive has therefore revised the handover dates for both vessels, with the MV Glen Sannox now scheduled for autumn 2023, rather than the end of May 2023 as was previously estimated, with a contract backstop of no later than the end of December 2023. He has also indicated that 802 will be handed over in the autumn of 2024, in comparison with the previous timescale of the end of March 2024, with a contract backstop of no later than the end of December 2024.

It is a matter of great disappointment that a further revision to the timescale for delivery has been necessary. I welcome the chief executive’s assurances that Ferguson Marine will continue its best endeavours to deliver both vessels sooner than those dates. The chief executive has also set out plans for the MV Glen Sannox to have a sustained testing and sea-trials period to help ensure a smooth entry into service later this year.

I am conscious that delays to the delivery of any project can lead to an overall increase in costs. That is why the Scottish Government will work with both Ferguson Marine and our technical advisers, Caledonian Marine Assets Ltd, to assess any financial impact on the delivery of both vessels. I have therefore written to the chief executive to notify him that we will review his proposals and confirm our position on that in due course.

Ferguson Marine, while it acknowledges the potential for an increase in the total delivery cost due to the delay, states that it is looking to “offset” any potential increase through income generated from commercial work. One of our aims has always been to look beyond 801 and 802 and to ensure a sustainable future for commercial shipbuilding on the Clyde, which is one of the issues that the Auditor General raised in his report. We know that the Ferguson Marine team continues to pursue a range of opportunities in order to achieve that shared ambition.

I am pleased to report that the business has been successful in securing new commercial work and has recently entered into a contract with BAE Systems to support the delivery of its type 26 frigate programme. That has involved the secondment of some Ferguson Marine workers to BAE Govan since January this year. Ferguson Marine has been clear to us that those workers are not currently required on 801 and 802, and their secondment is not diverting resources away from completion of the ferries. Moreover, such diversification helps to support the knowledge transfer and upskilling of the workforce across the industry. That is an important factor to ensure that those skills support the shipyard to be competitive in aspiring to future contracts.

The Scottish ministers remain committed to do all that we can—as a shareholder and Government—to help achieve a prosperous future for the shipyard. In support of the BAE contract, I therefore confirm that the Scottish Government has agreed to provide a working capital loan of up to £25,000, with interest, to support cash flow during the contract period. That short-term measure is standard practice for working capital requests from a public body and is in line with the terms of the Scottish public finance manual. That work is a positive sign for Ferguson Marine, which I am sure that members will, rightly, support, as the business looks to build an order book for the future.

No further delay in the delivery of these vessels is welcome, and I fully share what I expect will be members’ disappointment at the announcement. However, the challenges and legacy issues that are faced by the team at Ferguson’s should not be underestimated and, after the appointment last February of the new chief executive, substantial progress has been made in facing those issues.

I understand and appreciate why it is so vital that new vessels are introduced into the ferry network, but we must ensure that any vessel that is introduced is able to provide our island communities with the confidence that it will perform in service and improve the network.

I have discussed that with the chief executive and made very clear my disappointment at the delay. He fully appreciates the critical need for the vessels to enter service as soon as possible to support our island communities—a belief that all members share. We stand firm in our commitment that the vessels will be completed.

I put on record my appreciation of the workforce at Ferguson Marine and I am sure that Parliament will join me in supporting the continued efforts of the workforce, who are determined to ensure the successful delivery of these two lifeline ferries.

As I have set out, Parliament will be updated further when the financial due diligence work is completed in the coming weeks. The work is critical to strengthen our ferry network, which has been further enhanced by the procurement of four further vessels for the fleet.

The Government recognises its duty to ensure sustainable ferry services for our island communities, and we are determined to fulfil that duty.

The cabinet secretary will now take questions on the issues that have been raised in his statement. I intend to allow around 20 minutes for questions, after which we will need to move on to the next item of business.

If they have not already done so, members who wish to ask a question should press their request-to-speak buttons.

I thank the Deputy First Minister for advance sight of his statement.

Let us cut to the chase. The Glen Sannox and hull 802 could each be delayed by up to seven months, and we still do not know what the final cost will be. More delays, more costs and islanders left in the lurch—it is a disgrace.

I have been sent a Caledonian MacBrayne-headed document, which is dated 1 December last year, about the liquefied natural gas commissioning delay for the Glen Sannox. The document says that, if the LNG work is done at Troon, where the ferry is due to operate from, there will not be an Arran ferry for up to four weeks. In that document, CalMac says that it does not want the Glen Sannox until it is fully ready. First, is that the real reason for the delays that were announced today? Secondly, the Deputy First Minister says that he will address the financial impact of delays, so how much extra is the Government prepared to plough into those ferries?

In response to the first of the two questions that Mr Simpson put to me, I advise him that the details that I have set out today are the assessment by the chief executive of the build programme of hull 801. That is the rationale for the details that I have set out to Parliament. There is no reason other than the build programme that the chief executive has set out, and that is what I have reported to Parliament today.

Mr Simpson raises a fair point, which I acknowledged in my statement, that, when there is a delay to the timescale, there might well be a delay to the finance. However, I assure Mr Simpson that what I and my officials have been doing, and what will continue to be done, is essential scrutiny of the merits of the financial case that is being put to us for any additional resources. That scrutiny has been applied, which is why I have got to a position today where I am satisfied that the original proposition of £21 million of further cost in this financial year merits being paid. I was not in that position when I addressed Parliament in December, but I am now.

I assure Mr Simpson that we are acting with all possible endeavour to ensure that the costs are contained and that the estimates that I have put on the record today are the best estimates from the information that we have available to us. However, we are challenging and scrutinising the detail of those estimates.

Even more delays and even more millions—who will be surprised? This is a scandal manufactured by Scottish National Party ministers, and they all have their fingerprints on it—Humza Yousaf, John Swinney, Kate Forbes and Nicola Sturgeon, to name a few.

After all that has gone wrong, it beggars belief that senior management handed themselves bonuses without anyone in the Scottish Government noticing. The previous turnaround director received £2 million—he was let off scot free. This gravy train needs to end. It is not the Government’s money; it is taxpayers’ money. What is the Deputy First Minister going to do to get that money back?

It is a scandal with continuing consequences for island communities. Even SNP MSPs do not seem to trust the SNP any more. Will the Deputy First Minister now order an independent inquiry into this whole shameful debacle?

Finally, if the concerns of the GMB union had been listened to earlier, perhaps we would not be in this mess. Instead of hiding behind the workforce, what will the Government do now to listen to the workforce on the need for investment in facilities at the yard to ensure that there is a future beyond the Ministry of Defence work, beyond these two vessels and beyond the mess that the SNP has created?

In all of this, the intention of ministers has been to support the retention and development of shipbuilding on the Clyde. Back when Ferguson’s went into administration, in 2014, I led the Government’s efforts to secure a rescue of Ferguson’s. The purpose of that was to preserve the very employment that Mr Bibby talks about—of some of the finest people I have met in my life: the workforce of Ferguson’s. I know a number of them personally, going way back in my parliamentary career. They are good and decent people who know their skill.

I make no apology for trying to protect employment on the Clyde in relation to shipbuilding, because I know how important it is for everybody and for who we are as a country. However, there are difficulties and challenges in the execution of the contract, and I make no bones about that. I have set out—[Interruption.] I think that Mr Bibby, from a sedentary position, is asking me to apologise for that. I have apologised for it before and I apologise for it again. It is a matter of deep regret to me.

On the question of the bonuses, I think that the bonuses are reprehensible. The Government did not know about them. The Government found out about them as a consequence of the audit work. We were never consulted about them and we should have been consulted about them. I find them reprehensible, and we are assessing what actions we can take in that respect.

On the question of an independent inquiry, there has been a lot of scrutiny of the Ferguson’s issues. Parliamentary committees have looked at that—Mr Leonard chairs the Public Audit Committee, which is looking at many of those questions. I think that it would be premature for me to say anything, and, as Mr Bibby knows, I am not going to be on the front bench for much longer, so I will not commit to any further inquiries.

On the final point, in relation to the voice of the workforce, I have listened carefully over many years to the voice of the workforce. The Government is doing exactly what the workforce wanted, which is investing in that yard. We have been doing that, although we get criticised for it. The investment has been put in. [Interruption.] I do not think there is much support for investment in the yard from the Conservative side of the chamber, from what I can hear being shouted at me in the background, but I assure Mr Bibby of the Government’s commitment to invest in the yard for the future.

There is an awful lot of interest in this issue. I will try to bring in as many members as I can, but the questions will need to be brief, as will the responses. It will not be helped if people are shouting from a sedentary position, which is just going to delay the process. I encourage members to treat one other with courtesy and respect.

I think that the section 22 report further justifies my call for Tim Hair to leave the yard in 2021.

The issue of the future security of the work is uppermost in my mind but also in the minds of the workforce and the Inverclyde community. When will the Scottish Government bring forth the small vessel replacement programme? Have the legal implications been resolved to allow a direct award to the yard?

The issue of a direct award is one on which the Government has to proceed with great care in terms of all the issues that we are rehearsing here. We will have to make sure that we get the arrangements for that correct, if it is possible to do so.

On the small vessel replacement programme, the Government is committed to on-going investment in the ferry network. We have the two vessels that have been procured, and we have four further vessels that will enhance the network. We are looking for other opportunities to enhance tonnage. However, the small vessel replacement programme, to which Ferguson’s has contributed significantly through the construction of—if my memory serves me correctly—three vessels, already demonstrates the strength of the yard in that respect.

I am sure that people as far away as the Isle of Arran could hear SNP back benchers applaud Mr Swinney on his statement, which is more devastating news for islanders, who are simply scunnered at the endless delays to their lifeline services. The current vessel that serves the Arran route is nearly 30 years old. It has been in dry dock for three months, and there are still problems with its major overhaul. What is the Government doing right now to ensure that our islands are connected? He says that he will deliver for the islands, but where are the ferries?

In relation to the situation on Arran, the Minister for Transport and I are very conscious of the disruption that has been experienced because of the maintenance programme on the MV Caledonian Isles. We hope that that issue will be resolved very shortly, to enable the two-vessel service between Ardrossan and Brodick to return. We have, of course, enhanced the volume of sailings on the Lochranza route, in addition to the MV Isle of Arran continuing the single-vessel sailings on its route.

Mr Greene asked me where the ferry investment programme is at. In my response to Mr Bibby, I just set out the fact that we have commissioned two vessels, which, I accept, have taken longer than they should have taken. We have also procured four further vessels, which will be coming into the network over the course of the next three years. The earliest of those will come in 2024. Therefore, there are new vessels coming in to supplement the additional investment that we made in vessels such as the MV Loch Seaforth and the MV Loch Frisa and the other investments that the Government has made.

Considering the level of funding that is being invested in the completion of the vessels, it is important that where funding is being spent and what outcomes it is delivering can be clearly demonstrated. Will the Deputy First Minister advise what measures are being taken to ensure transparency in how Scottish Government funding is being spent at the yard going forward?

That material is the subject of regular dialogue. For example, I speak with the chief executive of Ferguson’s on a monthly basis and my officials do so on a very regular basis that is more frequent than weekly. There is also formal reporting on a quarterly basis to the Net Zero, Energy and Transport Committee and to the Permanent Secretary and me on a monthly basis. There is a regular flow of information that monitors the specific expenditure that is under way to ensure that the legitimate issues that Mr Beattie puts to me can be properly addressed.

We must not lose sight of the fact that islanders urgently need a steady pipeline of new ferries, but we should be building those vessels in Scotland. We welcome the commitment that the cabinet secretary has made to investing in developing shipbuilding on the Clyde, but will he respond specifically to calls for investment in facilities at Ferguson Marine? Is he willing to provide to Parliament any advice that he obtains on whether a direct award could be made?

I am very happy to engage on those questions. I think that we have a shared interest in this particular point. What I cannot commit to is what the nature of the advice on the direct award might be, because there might be commercial sensitivity around some of the issues involved in that. I give Katy Clark the commitment that, whatever the Government can share openly with Parliament about this process, it will share. I recognise our shared endeavour. We both have an interest in protecting shipbuilding on the Clyde.

ScotWind presents a substantial opportunity for shipbuilding in Scotland. Can the Deputy First Minister advise what steps are being taken to ensure that the yard is in a position to compete for contracts arising from ScotWind?

Obviously, we want the yard to be able to operate in a commercial environment, and a range of opportunities are available. We have talked about the concept of the small vessel programme. Jackie Dunbar puts to me the propositions in relation to ScotWind. I had a meeting on Tuesday with the leader of Shetland Islands Council and the Minister for Transport to discuss the interisland ferries, and I had a meeting earlier this year with the leader of Orkney Islands Council in the Deputy Presiding Officer’s constituency to look at the issue of interisland ferries there and their renewal.

Many of the issues that we are wrestling with about the age of the network are also relevant in both the Orkney and the Shetland contexts. There is actually a substantial abundance of shipbuilding opportunity, which I think makes particularly valid Katy Clarke’s point and Neil Bibby’s point about ensuring that we have yards that are able to undertake that work in Scotland. The Government is committed to that objective.

John Swinney is a master at defending the indefensible, but even he cannot defend this set of circumstances. He has no idea about the final cost, no idea about the final delivery dates and, apparently, he had no idea that those bonuses were being paid, even though his Government owns the yard. Therefore, what guarantee can he give that this will be the last statement of its kind about the ferries?

If I am the master of defence, Willie Rennie is the master of overstatement. I have just set out to Parliament the timescale for the delivery of the vessels, so it is not appropriate for Mr Rennie to say that I do not have an answer because I have just given an answer to Parliament. I have also just given an answer about money. I have done it openly and transparently on the floor of Parliament. I am not sure how much more transparent I can be about that.

In relation to the question of the bonuses, the Government became aware of the bonuses out of the audit process. The Government was not made aware of the bonuses; I have made it abundantly clear how much I deprecate the bonuses—the Government has obviously set out that position.

In relation to future developments, I hope that there is no need for any further statements to be made about timescale, but of one thing I am absolutely certain: I will not be delivering them.

The completion of the ferries is vital to the island communities that rely on them. It is in the public interest that Parliament remains abreast of progress at the yard, so can the Deputy First Minister provide any further details about how Parliament will continue to be updated in that regard?

Probably the best mechanism for that is the quarterly reports that are made available by the chief executive of Ferguson Marine to the Net Zero, Energy and Transport Committee, which provide full information. Obviously, committees of Parliament and members of Parliament are entitled to make inquiries through the usual routes of parliamentary questions and other devices to find out further information, if appropriate.

The Deputy First Minister will recognise, as I do, that island communities feel deeply let down by the on-going failures in the delivery of the contract for lifeline ferries. Given his statement and the audit report, can he explain how the Scottish Government will give the necessary certainty to the communities that are relying on the additional vessels in production?

I appreciate the difficulties that we have with the two vessels. We have four other vessels that are in construction or procurement at the present moment—two will be used on the Islay routes and a further two will be used on the Skye triangle to improve services there. That will give us six new large vessels in the network in the space of about the next three years, and that will give us the opportunity to redeploy vessels and, ideally, to be able to retain additional tonnage, which will provide resilience should any weaknesses in the network present themselves from time to time.

I appreciate the unsatisfactory nature of the situation that we find ourselves in now, but I hope that Ariane Burgess and her constituents take some reassurance from the fact that the Government’s investment programme will result in increased capacity and tonnage and more reliability in the years to come.

The Deputy First Minister has expressed concern, regret and deep disappointment, but the one thing that is missing is an apology. After years of cancellations and breakdowns, and years of lost livelihoods and of anxiety for islanders about simply being able to travel to and from their homes, will he now take the opportunity to say sorry to all those in our island communities who have been impacted by his Government’s complete and reckless neglect of our ferry service?

I am surprised to hear that from Donald Cameron. I thought that one obligation upon members of Parliament was to listen to what people actually say. Mr Bibby might be my witness here, because I apologised in my answer to him. I am not sure whether Donald Cameron was late getting here—in which case he should apologise to the Presiding Officer—or whether he was not listening.

I apologise again for the inconvenience, distress and difficulty that has been caused. However, I also put on record that, at the same time that all that has been happening, the Government’s investment in ferries has increased very significantly indeed. [Interruption.]

Do not start shouting at me. Do not start: listen to me for a minute. Listen to this. This Government has increased sailings. A few years ago, there was no Mallaig to Lochboisdale service—the Government put the money in place for that. We put a new boat, the MV Loch Seaforth, on to the Stornoway to Ullapool route and put extra capacity on to the Mull route with the MV Loch Frisa. At the same time, investment—[Interruption.] If Mr Lumsden would stop shouting for a minute and listen to my answer, Parliament might be a slightly better place.

There are difficulties and there is inconvenience and distress, but there has also been a heck of a lot of investment.

I repeat my call for questions and responses to be listened to so that we can fit in more questions.

Does the Deputy First Minister agree that in any construction project, whether for ferries, bridges, roads or even rail infrastructure, it is crucial to apply recognised quality and management standards, particularly at the outset, so that clear design specifications are established in advance of agreeing estimated project costs? Does he agree that that should all be agreed before construction is allowed to begin and that those basic principles, if followed, along with a rigorous capability assessment of the bidders, will offer the best assurance that all future construction projects will have a reasonable chance of coming in on time and on budget?

There is a lot of merit in what Mr Coffey has put to me. I would add one additional element to that, which is the necessary pragmatism to look at the emerging evidence during the implementation of a programme and to adapt and revise that programme, should the circumstances and evidence merit that.

A lot of what Mr Coffey has put on the record is valuable project management expertise, but there is also a need for pragmatism to respond to the evidence that is presented.

Ferguson Marine has no funding beyond the completion of hulls 801 and 802. According to the benchmarking report set out by First Marine International, the Scottish Government has not invested capital to improve the yard. It has also not established a fund for builders refund guarantees, which would be necessary to win export orders. Unless the Scottish Government awards the small vessel replacement programme to Ferguson Marine, the yard will fail.

Will the Deputy First Minister agree to implement actions in line with all those points, as the basis for a new commercial shipbuilding strategy for Scotland?

There is a lot in what Mr Sweeney says and I hope that he will take some comfort from my answers to Katy Clark and Neil Bibby. I am committed to a long-term agenda for Ferguson Marine and to taking the necessary steps to ensure that that can be realised. A number of the elements that Mr Sweeney put to me are detailed and complex propositions that must be very carefully worked through, but I give him an assurance that the Government is committed to such a process.

I want to clarify the word “handover”. The cabinet secretary said that the vessels will be handed over in autumn 2023 and autumn 2024. Does that mean that they will be handed over fully commissioned with enough crew time, enough crew appraisal and approval from class to go straight into service on those dates? Will they go straight into service in the autumn this year and the next year, or does it mean a further four-month delay?

I do not know whether I can be specific on the point that Mr Mountain puts to me. I understand that it is a serious point, but I am not sure that I can give him quite the precision of answer that he seeks about what the stage of crewing will be. However, what is envisaged with the Glen Sannox is that, over the summer, before the handover date, extensive sea trials of the vessel will be under way as part of the preparation for the handover.

I do not know whether I am technically equipped to give Mr Mountain a specific answer on that, but I will question that point and write to him in due course to make sure that I can give the clarity that his question merits.

I apologise to those members who I was unable to call. We have overrun slightly and we now need to move on to the next item of business. There will be a brief pause before we do so.