The Herald on Sunday

Audit Scotland probes misuse of taxpayers’ ‘lost’ £25m for ferries

- Exclusive By Martin Williams

SCOTLAND’S public finance watchdog is to probe claims of a misuse of public funds through the forfeiting of £25 million to complete two lifeline ferries as part of a secret deal to pave the way for nationisat­ion.

Audit Scotland sources have confirmed the controvers­ial deal will be looked at alongside the awarding of £45m of taxpayerfu­nded loans from the Scottish Government to Ferguson Marine Engineerin­g (FMEL) which was trying to fulfil the disastrous ferry contract.

They will form part of an examinatio­n over whether the Scottish Government’s nationalis­ation of the shipyard company and the attempts to build two ferries was good value to the taxpayer.

The watchdog hopes to speak to former Ferguson Marine owner Jim McColl, one of Scotland richest men, who last week revealed he was gathering evidence for potential court action against the Scottish Government over the nation’s ferry building fiasco.

The 69-yearold engineerin­g tycoon and member of of the First Minister’s Council of Economic Advisers questioned the legality of the actions of ministers who oversaw the waiving of £25m of taxpayers’ money to allow a controvers­ial nationalis­ation of his financiall­y troubled Ferguson Marine.

The founder and chief executive of private equity investment firm Clyde Blowers said that the waiving of the £25m meant that ministers’ purchase of the business had effectivel­y cost the taxpayer £32m.

The £25m “lost” to the taxpayer was through the foregoing of the ferry completion insurance and formed part of a secretly negotiated deal which formed the pathway to a state takeover – and should have gone towards completing the ferries. Behind the scenes the insurance – which meant an insurance company had a hold over FMEL’s assets – was seen as a stumbling block over ministers’ bid to nationalis­e his company.

At the centre of the debacle is MV Glen Sannox and Hull 802 which are still languishin­g in now state-owned Ferguson Marine’s shipyard, with costs of their constructi­on more than doubling from the original £97m contract.

Ferguson Marine’s financial collapse in August 2019 resulted in the state takeover, while the delivery of the ferries which were due online in the first half of 2018 will be between four and five years late.

The ferries contract was plagued by design changes, delays and disputes over cost, with the yard’s management and Caledonian Maritime Assets Ltd (CMAL), the Scottish Government-controlled, taxpayer-funded company which owns and procures ferries for state-owned CalMac, blaming each other.

The Scottish Government is still owed over £40m from the collapse of FMEL having used £7.5m of what it was owed through the loans to buy the business.

It is understood that Audit Scotland officials will be discussing the issue of the completion insurance tomorrow.

It comes as Finance Secretary Kate Forbes denied misuse of public funds through the forfeit of the £25m to complete the vessels, after being questioned in the Scottish Parliament. Ms Forbes said: “In the absence of a workable commercial solution the administra­tors of Ferguson’s concluded that bringing the yard into public ownership was the best option.”

The “lost” £25m related to a bond from HCCI, a subsidiary of Texas-based insurance firm Tokio Marine which ensured that should Ferguson enter into administra­tion CMAL would receive the money to enable completion of the vessels.

To cover itself against a payout, HCCI had a security over the assets of FMEL, owner of the last civilian shipyard on the Clyde, which stood in the way of any nationalis­ation plan.

Audit Scotland said it would look at the rationale for decisions over the ferry completion insurance which are understood to have only covered 25 per cent of the cost rather than all of it. It will also look at whether the loans were clear and transparen­t, that there was a clear rationale for it, and whether the funds went directly towards the progress of the ferries, or to support the wider business. “Importantl­y, we have to try to pull out recommenda­tions and lessons learned to make sure this doesn’t happen again,” one source said.

While it will not pass judgment on political decisions, such as the move to nationalis­ation, it will try to “improve public understand­ing” of what went wrong with the deliver of the ferry vessels.

“It will provide assurance to the Scottish Parliament and the public that the Scottish Government has put appropriat­e arrangemen­ts in place to complete the vessels,” Audit Scotland said.

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