David Dishon, chief financial officer with Ferguson Marine, told the Scottish Parliament’s net zero, energy and transport committee that under the terms of the contract the vessel had to be ensured for “the full build price”.
It has led to serious questions over why neither the ferry operator CalMac or CMAL did not seek to get the same insurance cover as Ferguson Marine in the wake of a series of problems with the building of the ferries.
Scottish Conservative MSP Edward Mountain, who is convener of Holyrood’s transport committee said that it was an “insurance fiasco” and that the CalMac cover proves the extent to which the taxpayer has been “ripped off”.
Costs continue to soar over new ferries Glen Sannox and Glen Rosa being built at the Inverclyde yard, which were due online in the first half of 2018, with one initially to serve Arran and the other to serve the Skye triangle routes to North Uist and Harris, but are at least six years late, with total costs expected to be quadruple the original £97m contract. It has been confirmed that both are now to serve Arran.
In the midst of the delays and soaring costs, Ferguson Marine under the control of tycoon Jim McColl fell into administration and was nationalised at the end of 2019 with state-owned ferry and port-owning agency Caledonian Maritime Assets Ltd and the yard’s management blaming each other.
MSP Edward Mountain
Mr Mountain said: “This insurance price shows that – if you went out today to build the Glen Sannox – it would cost £55 million.
“Instead, the people of Scotland paid [at least] £150 million.
“It exposes the true ineptitude of the Scottish Government’s procurement policy.
“They’ve paid [at least] £150 million for something that would today cost about a third of that.
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“It also seems incredible that Ferguson Marine was insuring the Glen Sannox for three times the amount that they and the insurance company knew it was worth. Who was kidding who?
“It’s essential ministers get to the bottom of this insurance fiasco.”
Transport Scotland’s business case for the troubled ferries project was just £72m while it emerged that Audit Scotland estimates that the extra mainly capital cost to complete both vessels has more than doubled since nationalisation in December 2019.
The public spending auditor’s estimate for the public cost of the ferries since nationalisation as of September, last year, was £240m and focuses on direct capital spending but does not include full Scottish Government expenditure on running costs such as salaries. That’s on top of the £128.25m already ploughed in by the Scottish Government when Ferguson Marine was under the control of tycoon and businessman Jim McColl.
Businessman Jim McColl (Image: Herald Design)
Their latest Audit Scotland estimates also do not take into account the further up to £51m that Ferguson Marine say has been needed for the ferries since September.
When the Scottish Government took control of the firm, which operates the last remaining shipyard on the lower Clyde, the auditors said the extra capital costs were estimated at between £110.3m to £114.3m.
When the contract was agreed in October 2015, both ferries were due to cost a total of just £97m – and were to be paid for by the Scottish Government-owned ferries and ports owner Caledonian Maritime Assets Limited by repaying a ministers’ loan over 25 years through using revenue it generates from the fees it gets from the lease of vessels like operator CalMac’s ferry fleet and harbour access fees.
But it is understood that part of the Scottish Government’s special deal to allow then independence-supporting tycoon Mr McColl’s Ferguson Marine to win the contract in the wake of CMAL’s concerns over a lack of financial guarantees, meant that loan was wiped out and it will not have to be paid back as would be the norm.
The £83.25m of public money that was drawn down to pay for the construction of the vessels was “eliminated” after Ferguson Marine under Mr McColl fell into financial trouble at the end of 2019.
Ministers had previously pumped in £45m in taxpayer-backed loans into Mr McColl’s firm which was mostly lost when it fell into administration.
The collapse of the Mr McColl-led Ferguson Marine, came amid soaring costs and delays, with the firm and CMAL blaming one another. This paved the way for the Scottish Government-pursued nationalisation to ensure the ferries were delivered – five years after the tycoon first rescued the yard when it went bust.
(Image: NQ)
A CalMac spokeswoman said: “CMAL, as owners of MV Glen Sannox, sought several independent insurance evaluations for the vessel before CalMac’s insurers carried out their own assessment. This amount is in line with the cost of insuring other vessels of a similar size and tonnage.”
A Scottish Government spokesman said: “Arrangements for appropriately insuring vessels while in operation is a matter for CalMac as operator, based on the market value and other considerations. Ferguson Marine will have had to consider different parameters for insuring MV Glen Sannox while under construction. We look forward to deployment of the vessel on the Arran route in January 2025.
“The Scottish Government’s decision to take Ferguson Marine into public ownership saved the last commercial shipyard on the Clyde and more than 300 jobs. Our priorities have always been the completion of the two ferries, securing a sustainable future for the yard and its workers, and supporting our island communities that rely on this type of vessel.”