Meeting of the Parliament

Meeting date: Tuesday, May 16, 2023

Official Report 1001KB pdf

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Ferguson Marine

The next item of business is a statement by Neil Gray on Ferguson Marine due diligence. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions.

14:35  

Today’s statement upholds the commitment given by the former 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 Port Glasgow, and to do so in an open and transparent way.

Today, I will update members on the future resourcing and delivery of vessels 801 and 802, but before I do so, I wish to remind Parliament of our three key objectives when we brought Ferguson Marine into public ownership: the completion of vessels 801 and 802 in order to provide sustainable, high-quality lifeline services to our island communities; to support a highly skilled and dedicated workforce; and to ensure a sustainable future for the yard given its importance to the local economy and the resilience of Scotland. Those objectives remain as valid today as they were then, and I continue to be impressed by the way in which the workforce in the yard has worked so hard and with such pride to deliver the vessels—often in difficult circumstances. I thank all of those working at Ferguson Marine for their tireless efforts and hard work.

In September 2022, the Parliament, through the Net Zero, Energy and Transport Committee, was advised by the chief executive officer of FMPG of his forecast relating to an increase in the cost of delivery of both vessels. His forecast at that time was that the total cost to complete both vessels would be £202.6 million, which included a £6.2 million contingency. That meant a forecast cost to complete for Glen Sannox of no more than £97.5 million, and for vessel 802 of £105.1 million.

Significant due diligence has been undertaken on the CEO’s revised estimated cost to complete each vessel in line with the requirements of the Scottish public finance manual, which follows on from the requirements of the Public Finance and Accountability (Scotland) Act 2000. That is right and proper, particularly given the current pressures on public expenditure and our budget as a whole.

The process of due diligence has focused on regularity, propriety and the value for money of continuing to complete the vessels. Given the complexity of the build programme and the importance of a full and thorough assessment to support any approval of public expenditure, the due diligence process has been supported throughout by independent external commercial advisers as well as internal expertise within the Scottish Government. While that process has been undertaken, we have ensured that Ferguson Marine has been able to continue to meet its obligations and to maintain progress on the build of each vessel.

As a consequence, the former Deputy First Minister, John Swinney, announced to Parliament two uplifts to the 2022-23 Ferguson Marine budget of £15 million in December 2022 and £6 million in March 2023. That took the total budget allocated to Ferguson Marine for 2022-23 to £61.1 million. That met the 2022-23 requirement for additional funding set out by the chief executive in September 2022, and it was right and proper that we did that while the due diligence work progressed. I should be clear that the increase in costs is extremely disappointing and I recognise that the building of these ferries has been hampered by delays and cost overruns.

As Mr Swinney set out in March of this year, that due diligence was then nearing a close; it has now been completed. As a consequence, I now provide Parliament, at the first opportunity, with an update on our decisions relating to future funding for Ferguson Marine. I am pleased that we have completed the assessment fully in line with the Public Finance and Accountability (Scotland) Act 2000, the Scottish public finance manual and the green book. Officials have advised me that as a consequence of that due diligence, the regulatory and propriety of completing vessels 801 and 802 under the existing contracts is met.

I can also confirm that with respect to vessel 801, the value-for-money case for completing that vessel is also met; the cheapest option open to ministers is to complete 801 at Ferguson’s. However, the case for vessel 802 is more challenging, and I have accepted the judgment of the Scottish Government accountable officer that the narrow value for money case has not been made.

Having said that, in making a decision on the way forward, I am guided by a wider set of considerations relating to the original policy objectives and the impact that any decision might have on people, communities and national resilience. It is also important that I consider the impact on Ferguson Marine. These matters cannot be taken into account in a pure value-for-money exercise, but it is clear that they are matters of the utmost importance.

From the very start, we have been clear that our island communities deserve to be supported by two new energy-efficient vessels with the capacity and reliability that is required to support vibrant island economies. Although I accept that the pure value-for-money assessment concludes that it could be cheaper to reprocure a new vessel, that work also shows that doing so would result in significant further delays.

A new vessel could not be deployed until May 2027 at the earliest—four years from now, and two and half years from the current delivery timescale. I do not consider that it is acceptable to ask our island communities to wait that further period.

Vessel 802 will provide lifeline connectivity to the mainland, ensure that people on Arran are supported for day-to-day needs around health, education and commercial activity and provide a resilient service to support the tourist industry, which contributes so much to the island’s economy.

Recent issues with the reliability of an ageing island fleet and the costs associated with hiring replacement vessels in order to maintain services have merely added to the compelling case for delivering additional capacity as quickly as possible. I am committed to supporting the workforce at Ferguson Marine and recognise the importance for jobs, skills and the opportunities for future generations that the yard provides.

More immediately, of course, the continuing delivery of vessel 802 through Ferguson Marine ensures that the local economy benefits from the company’s spend on salaries, subcontractors and taxes, which support the local labour market and businesses in the wider Inverclyde area and beyond. Those benefits would be lost if we did not proceed.

Finally, I remain committed to supporting a sustainable future for Ferguson’s. I believe that confirming our intention to deliver vessel 802 at the yard provides a platform on which future success can be built.

Put simply, if vessel 802 was not delivered at Ferguson’s, the very future of the yard and the hundreds of jobs that it supports would be in jeopardy. On the basis of the cost projections in our due diligence, I have therefore provided written authority to the accountable officer to secure the continued build of vessel 802 at Ferguson’s. In the light of that decision, I also confirm the preliminary budget set out by the then Deputy First Minister for Ferguson Marine for 2023-24 to support the continued completion of vessels 801 and 802, and I have advised the CEO of that position.

Our due diligence work has identified a number of inflationary and other significant pressures that could increase the cost to complete. As part of our on-going control and scrutiny, the chief executive will undertake a detailed review of remaining costs in the light of that due diligence and will update Parliament in due course.

I am also formally asking Ferguson Marine to do everything possible to improve productivity, maximise operational efficiency and ensure that there is a tight control on costs, as well as to focus on delivering the vessels as quickly as possible. I expect Ferguson Marine to provide detailed scrutiny of the forecast costs and expenditure incurred and provide monthly progress on that and the anticipated delivery dates.

In the meantime, I also reluctantly accept the revised delivery dates set out by the Ferguson’s CEO on 16 March of autumn 2023 for vessel 801 and late summer of next year for 802. I am also committed to securing a sustainable future for Ferguson’s. We have already made progress on the work that the CEO has done to secure some initial contracts with BAE Systems.

To support its progress on a route to a sustainable future and to ensure the highest levels of internal accountability and oversight, I have also separately confirmed an additional £120,000 for cybersecurity improvements, internal audit and civil engineering that the CEO of Ferguson Marine has set out as essential.

These two ferries, dual fuelled and energy efficient, will support the Clyde coast communities for future generations. They will increase capacity, make it easier for island businesses to send and receive freight and provide a boost for the tourism industry that is so vital to the islands and our country as a whole.

To reiterate, when we took Ferguson’s into public ownership in 2019, we did so to ensure the delivery of 801 and 802 and secure the future of the yard and its workforce. We did so because of the vital significance of the vessels to our island communities and of the yard and its workforce to the local, regional and national economy. The decisions that I have outlined today deliver on those commitments.

The cabinet secretary will now take questions on the issues raised in his statement. I intend to allow around 20 minutes for questions, after which we will move on to the next item of business. I would be grateful if members who wish to put questions could press their request-to-speak buttons now.

I say to the cabinet secretary that, so far, his Government has delivered absolutely nothing. I thank him for advance sight of his rather embarrassing statement.

The building of ferries 801 and 802 has been a shambles from start to finish. In fact, “shambles” is not a strong enough word: it has been a scandal. The vessels are six years late and three times over budget, with the cost now standing at £300 million-plus. In March, the Auditor General said that the final cost of vessels 801 and 802 remained unclear. After today’s statement, that remains the case.

What will the final bill—I stress the word “final”—be for vessel 801? In his statement, he told us that finishing vessel 802 at Ferguson’s would not represent “value for money”, although it might be quicker. How much cheaper would it be to buy a new ferry elsewhere, compared with finishing vessel 802 here?

I do not need to remind Graham Simpson that the decision that I have taken secures the future of Ferguson Marine and ensures that we will deliver vessels 801 and 802, which is exactly what we promised that we would do. That response is typical of the Conservatives, who know the cost of everything but the value of nothing. Of course I must consider the narrow value-for-money considerations here, but I have a duty to ensure—[Interruption.]

Members.

I have a duty to ensure that I also consider the wider implications of my decision making. That is why I am ensuring that we fulfil our commitment to our island communities to deliver the ferries as quickly as possible and that we continue to deliver for our shipbuilding communities, too. Without that decision, and without ministerial direction, that would not be possible.

I will not take any lectures on ministerial direction from the Conservatives. The decision guarantees the future of the yard and will ensure that we deliver ferries for our communities. Ministerial directions from the Conservatives at Westminster led to the failure of the garden bridge project, which is an embarrassment for the Conservative Party.

As regards the costs, ministers have been very clear—[Interruption.]

Members.

—over a long period of time, that every effort must be made by Ferguson’s to deliver the vessels in the most cost-effective way possible. There are always risks around the delivery of first-in-class vessels, and Ferguson’s continues to incur costs related to design decisions that were taken some time ago under previous ownership. I am also conscious of the impact that inflationary pressures in the wider economy have had on capital and operational costs.

Our due diligence has identified a number of inflationary and other significant pressures, such as design gaps and deficiencies that could increase the cost to complete. As part of our on-going control and scrutiny, the chief executive will undertake a detailed review of remaining costs in the light of that due diligence. Today, I have asked him to update Parliament in due course.

Given where we are with this sorry saga and the desperate need to get the ferries operational for our island communities, there is little option but to aim for the swift completion and delivery of vessels 801 and 802.

What was missing from the cabinet secretary’s statement was an apology to the islanders and to the workers at Ferguson’s, who have been so badly let down, and to the people of Scotland, for the outrageous mismanagement of public funds and public contracts. That is what we should have had from the cabinet secretary.

We have had five, six, seven or eight ministers who, at some point, have had responsibility for the delivery of the new ferries. Will the cabinet secretary be the one to take responsibility for seeing the project through to its completion? In the future, will he make a further statement setting out the long-term plan to ensure the sustainability of the yard at Port Glasgow?

I thank Alex Rowley for what I think was tacit acceptance that the decision had to be made to ensure that the yard has a future and that we deliver on vessels 801 and 802. He did not say that explicitly, but I hope that that is the case; otherwise, Labour members will not be able to look constituents in shipbuilding communities and island communities in the eye on the question of ensuring a viable future for them.

Labour used to understand the need for such an approach; a precedent is that ministerial authority was given in 2002 in relation to the Campbeltown to Ballycastle project, which was deemed to represent very poor value for money, given its probable cost and economic benefit. Nobody really knows what Labour stands for now, but I hope that Alex Rowley was tacitly accepting the need for my decision.

As for an apology, Mr Swinney has previously apologised, and I of course apologise today to our island communities for the unacceptable delays in the delivery of vessels 801 and 802. As an islander, I more than understand the need for a secure ferry network to serve the islands. However, I will not apologise for taking the decision to ensure that we deliver on 801 and 802 and give the yard and its workforce a future.

Workers’ representatives have acknowledged that the Scottish Government has saved the yard and the jobs of hundreds of workers at Ferguson Marine. To look forward, I understand that Ferguson’s has said that it will look to offset any cost increases through income that is generated from commercial work. Will the cabinet secretary provide an update on the yard’s progress in securing that additional important commercial work?

Ferguson Marine is actively pursuing a range of commercial opportunities and, as shareholder and as a Government, we will do everything that we can to help it to secure those opportunities.

As the former Deputy First Minister informed Parliament on 16 March, Ferguson Marine has been seconding workers to BAE Systems since January to support the delivery of its type 26 frigate programme; we have provided a working capital loan to Ferguson Marine to support that contract. Ferguson Marine has recently commenced a larger-scale phase of work for BAE to fabricate three steel units at Port Glasgow, which will support the type 26 programme. We welcome the securing of those projects, which shows that Ferguson Marine is back to being a serious contender for future work.

This morning, the Finance and Public Administration Committee questioned the Deputy First Minister and the permanent secretary about the complete lack of transparency of decision making on the spending of public money. Ferguson Marine is the prime example of that problem. The Auditor General holds exactly the same view. What action will the cabinet secretary take, within his role, to ensure that such a scandal never ever happens again?

On transparency, I am making a statement to Parliament at the first opportunity after the decision has been taken. I am offering myself for scrutiny to Liz Smith and other colleagues for the decision that I have taken, which is the right one to ensure that the yard has a future and that our island communities are served by good vessels as timeously as possible.

It is clear that there are lessons to learn from the unacceptable delays and unacceptable cost overruns. We have been up front about that, and we continue to work hard with Ferguson’s and other interests to ensure that such situations do not happen again. I will continue to offer myself to Parliament for scrutiny on the decisions that we take.

A lot has been spoken and written about Ferguson Marine in recent years. Opposition politicians criticised the awarding of the work on hulls 801 and 802 to the yard, in addition to making criticisms when work did not go to the yard.

I appreciate how difficult the decision was for the cabinet secretary, but my constituents who work in the yard will be pleased to know that their jobs are safeguarded. Does he agree with union representatives that how the issue has been discussed and the impact that that has had on the workforce’s reputation and morale has been less than helpful? Will he provide an update on how many jobs have been directly and indirectly safeguarded by today’s welcome decision?

I thank Stuart McMillan for his continued stout defence of our shipbuilding tradition on the Clyde in his constituency and for the engagement that he has had with the workforce.

He is absolutely right that the workforce is doing a very difficult job in difficult circumstances. I pay tribute to the workers and I am looking forward to having the opportunity to meet them as soon as possible, not least to respond to the GMB’s letter and the public discourse around the issue, which Mr McMillan has highlighted. We want to continue to support the yard and the workforce going forward, and, in tandem with Mr McMillan, I will continue to do so.

On the number of jobs at the yard, there are around 340 in place currently. Those jobs are one of the primary reasons why we intervened to save the yard in the first place.

The minister has mentioned the importance of improving efficiency at the yard. Alex Rowley and I were at Ferguson Marine yesterday, and both the GMB representatives and the chief executive stated the importance of investing in facilities at the yard to improve efficiencies and to help win future work.

Given that the Government owns the yard, what will the minister do to improve efficiency by investing in facilities there? People are rightly angry at management receiving bonuses for ferries that are late and over budget. Will such bonuses be paid on the minister’s watch? If so, for what?

I share Neil Bibby’s anger and that of John Swinney at bonuses having been paid. There are contractual obligations that made the payment of bonuses unavoidable, but the chair and the chief executive of the yard are looking at how those contracts can be renegotiated to ensure that that does not happen again.

I also concur with Neil Bibby’s comments on the need to support the workforce, and I welcome the fact that he and Mr Rowley had a meeting at the yard. I am looking to do the same thing. I want to get to the yard so that I can meet the workforce and understand workers’ concerns. I also want to meet the chief executive in person, too. For understandable reasons, including the decision that I needed to take, I had to ensure that any meetings happened after my decision.

On Neil Bibby’s point about investment, we will look to ensure that the yard continues to be as competitive as possible in securing future work. We are considering what further investment can be made, but, obviously, we must consider state aid and subsidy rules. We aim to ensure that there is a sustainable future for the yard, and we will be taking those decisions as quickly as we possibly can.

On their completion, the vessels will have a vital role to play in reducing the pressures that existing services are under. Will the cabinet secretary provide any further details as to how the vessels can best be deployed to reduce those pressures?

The confirmation that has been given today on the delivery of MV Glen Sannox and hull 802 sits alongside our commitments to accelerating investments in new major vessels. The four vessels that are under construction in Turkey are intended for deployment on the Islay routes and the Little Minch routes from Uig to Lochmaddy and Tarbert, creating the opportunity for significantly increased capacity and resilience for the communities that are served. It also allows consideration of all options to deploy hull 802 on alternative routes, including potentially alongside MV Glen Sannox to provide additional capacity to and from Arran during the peak season. All options will be discussed with island communities at the appropriate time.

Presiding Officer, does it not show utter contempt for this Parliament, the taxpayer, the workers and the islanders that the transport minister left in the middle of this statement? He did not even have the courtesy to listen to the questions that are being answered. But who cares? In for a penny, in for £1,000,000.

We have had eight years of this utter fiasco, in which the Government has soaked the taxpayer, betrayed the islanders and utterly humiliated the workers. We have had six ministers in that time but none of them, including the current First Minister, has lost their job over that fiasco. Will anyone ever face the music for this disaster?

I am literally standing here today being accountable for the decisions that are being taken. Is Willie Rennie seriously suggesting that, on the questions whether to progress with 801 and 802 and whether to maintain the future of the yard, he would take a different decision? Is that what he is saying to our islanders and shipbuilding communities? If it is, he will not be able to look them in the eye again.

What work is the Scottish Government doing to secure the yard’s long-term future by seeking to find a partner with the necessary expertise and experience in the sector for a joint venture or to buy the yard?

As I confirmed to the Economy and Fair Work Committee last week, we will seek to return Ferguson Marine to the private sector. That is consistent with our position since nationalising the business. Although we are open to an approach from any credible buyer, we will divest our ownership of Ferguson Marine only when the time is right and when there is the right offer, for the taxpayer and for the workforce, that meets the Scottish Government’s objectives.

I recognise the historic opportunity that programmes such as ScotWind represent, including in relation to the supply chain for support vessels. We know that such vessels are already on Ferguson Marine’s radar, and the business is building relationships with a view to taking advantage of the opportunities that lie ahead.

In his statement, the cabinet secretary recognised the anger and frustration felt by our island communities about the quality and reliability of ferry services. Further delays to replacement vessels will heighten that anger and frustration still further. Can he assure me that he will work closely with colleagues, including the Minister for Transport, to ensure that the way in which lifeline ferries are identified and introduced is never again subject to the kind of failure that we have seen in this instance?

I absolutely understand, acknowledge and appreciate the anger and frustration. I have already apologised for the unacceptable delays and the cost overruns that have been incurred. Continuing with the completion of both vessels will ensure that island communities receive new ferry services more quickly than they would through the reprocurement of either vessel. As I have made clear, I have impressed upon Ferguson Marine the importance of there being no further slippage in the delivery of either vessel.

I will continue to encourage Ferguson Marine to pursue all relevant market opportunities for the yard. An assessment of the new vessel options for routes across our network is being led by Caledonian Maritime Assets Ltd, Transport Scotland and the relevant operators. The two vessels that are under construction at the Turkish yard are progressing well—they remain on time and within budget. Recent milestones, including those relating to steel cutting and keel laying, are very welcome and bring us another step closer to adding new ferries to the fleet that serves the Clyde and Hebrides.

I politely say to the cabinet secretary that his hubris today will be met with palpable anger on islands such as Arran on the west coast of Scotland. Of course, we need new vessels—we all agree on that—and, of course, we need jobs on the west coast of Scotland. However, it is not controversial to say that we also need the vessels to be built at value for public money, given that the Government so often complains about a lack of money and that our islands are haemorrhaging cash through a lack of reliable and resilient ferry services right across the west coast of Scotland.

I have been in the Parliament long enough to have seen what has happened to Prestwick airport, with the Government’s problems in returning it to the private sector. How will the cabinet secretary ensure that history does not repeat itself?

Jamie Greene does not recognise that what he is saying is not too far away from the decision that I have taken. A narrow value-for-money assessment considered a narrow set of circumstances in relation to reprocuring 802 instead of continuing at Ferguson Marine. As minister, I had an obligation to consider the wider economic implications of that decision. I have done that, and I have assessed that it is better that our islands communities are served by those vessels as quickly as possible, which can happen only with the continuation of 802, and that our shipbuilding communities need the yard to have a future. I do not think that my position and Jamie Greene’s position are too far apart in relation to that being the right decision for the people of Scotland.

Can the cabinet secretary provide an update on the planning that is under way for crew familiarisation training to ensure that the vessels can go into service at the earliest possible opportunity upon their completion?

A normal process is being undertaken to ensure that the workforce is familiar with the new vessels. It is normal for training to be carried out so that that is the case.

The Scottish Government values the voice of the workers at Ferguson Marine. Throughout the period of public ownership of the yard, there has been regular contact with union representatives, and I am happy to commit to such contact continuing. I very much look forward to speaking to the workforce as soon as possible.

I do not need to add to the comments that have been made about the feelings of betrayal among islanders. Vessel 802 is not going to be value for money, but does the Government still intend to commission it with the ability to use liquefied natural gas fuel, which the yard thinks would be a mistake?

We are continuing to ensure that we have a dual fuel approach to the vessels and that they arrive as timeously as possible.

Edward Mountain speaks about betrayal. I would say that our island communities would have felt betrayal if I had taken a different decision, resulting in a further delay in the arrival of the vessels. I think that we have made the right decision for our island communities and for our shipbuilding communities, to ensure the on-going viability of the yard.