Revealed: Ministers lose £60m of public funds in bailout of Ferguson Marine

The money owed was the result of public funds pumped into the ailing Inverclyde shipyard company in the form of loans before it became insolvent owing nearly £80m.

New financial papers have revealed that ministers have received just £6.5m in return for their debt. A further £7.5m of debt was used to buy the business and take it into state control.

It comes after ministers turned their back on a £25m insurance bond provided by an American insurance firm HCCI which would have helped ensure that ferries at the centre of Scotland's shipbuilding fiasco were built, in a bid to allow a controversial nationalisation.

READ MORE: Ex-Ferguson Marine chief says nationalisation 'rescue' of ferry fiasco firm is nothing of the sort

The move meant that HCCI, whose £25m debt meant they had a legal hold over the shipyard assets of FMEL, would not be able to take control - paving the way for a state takeover.

The bond was put in place to ensure that should FMEL enter into administration and be unable to deliver the ferries, CMAL would receive £25m to help enable their completion.

But it meant HCCI was the highest ranked of the secured creditors of FMEL- and in front of the Scottish Government - meaning they were first in line before ministers to get their debt paid.

The agreement between ministers and HCCI has meant that the insurance company received every penny of its claim on FMEL - money that would normally have gone towards building the two long overdue lifeline island ferries whose failure to be delivered by the shipyard has led to costs more than doubling from an original £97m contract.

Tycoon Jim McColl-led FMEL collapsed following a dispute with Caledonian Maritime Assets Ltd (CMAL), the taxpayer-funded company which owns and procures ferries, over the construction of the vessels. The owner blamed repeated design changes for the issues in building the vessels for operator CalMac, which is also publicly-owned.

Mr McColl said that the blame over the costs to the taxpayer of his company's collapsed laid at the door of the Scottish Government and CMAL the taxpayer-funded company which owns and procures ferries.

Mr McColl's Clyde Blowers Capital engineering group which rescued the Port Glasgow shipyard in 2014 has also lost £3m from the collapse.

Revelations about the expense to the taxpayer have come after it emerged that the turnaround director of the Scottish Government-owned shipyard has been paid over £1.5m for 454 days work between August, 2019 and July, 2021.

Tim Hair, a Gloucestershire-based businessman and the former chief of engineering firm Chamberlain, was handed the deal by ex-finance secretary Derek Mackay two years ago.

Ministers believed they were acting in the public interest in taking control of Ferguson Marine, as it said it saved the yard from closure, rescued more than 300 jobs and ensured that the two vessels under construction will be completed.

The Herald on Sunday has previously revealed that ministers had ensured there was a "right to buy" before giving FMEL a £30m loan in June 2018, knowing it was creating a path to state ownership. While then finance secretary Derek Mackay was telling the public the loan was “to further diversify their business", internal documents show the real reason was that FMEL was in financial trouble and at risk of falling into administration.

READ MORE: Ministers' Ferguson Marine ferry fiasco fixer is paid £1.3m over nearly two years

Memos reveal that the £30m due to be paid back in ten years came with it a "right to buy" if the company fell into insolvency.

A right to buy clause also kicked in if Mr McColl, who sits on the First Minister’s council of economic advisers, did not invest £8.5m within two years.

A secret deal was hatched between HCCI and the Scottish Government as FMEL executives lodged complaints just before the firm went under, saying ministers were not serious about keeping it afloat and were keeping them out of vital discussions.

Documents show that even two weeks before FMEL went into administration, executives thought ministers were still trying to pursue what they called 'the solvent solution' involving keeping it entact as a private business - while behind the scenes ministers had created a pathway to nationalisation.

After falling into administration former FMEL managers subsequently accused the Scottish Government of having no serious intention of leaving it in private ownership while being warned nationalisation would be subject to EU state aid laws.

They accused ministers of forcing it into insolvency by rejecting a plan that would avoid any state aid claim,and prevent the costs of building two key lifeline ferries.

"They told us that the loans were the only way they could get round state aid, but not to worry as it is short term, there will be some mediation or settlement with CMAL, and we could pay back the money," said Mr McColl who said the company did not need saving.

"The government are hiding the actual mess that there is here and it needs to be properly investigated."

READ MORE: Revealed: Ministers' secret path to the controversial state takeover of Ferguson Marine

He says the company was forced into administration by the refusal of CMAL to discuss the significant overruns in costs resulting from variations to the ships' contract required by them and the refusal of the Scottish government to enable an Independent Expert Determination process to resolve the dispute.

"This is all down to CMAL and the government and nobody is taking that head on."

Joe Reade, chairman of the Mull & Iona Ferry Committee, which has been fighting for improved services said there were questions over the set-up over how ferries are run in Scotland with all aspects from procurement, operations and ownership being controlled by the Scottish Government.

"The mechanism, the structure is completely uncommercial and doesn't encourage good behaviour," he said.

"If nobody has a profit motive, then you get bad decisions."

Transport Scotland video set out the early hopes for the disastrous ferry project

The Competition and Markets Authority has previously expressed its concern about the "potential risks" of state control over the way ferries are operated, run and paid for.

Dr Alf Baird, an expert transport adviser to the Scottish Government, has also warned of the ferry service "cocooning" inside three levels of Scottish Government-controlled bureaucracy - Transport Scotland as funders, ferry operators CalMac and CMAL It has further been revealed that Teneo, who have acted as administrators of FMEL, have dropped a claim of £48.3m first made by the former owners of the yard against CMAL over the contractual dispute over the rising costs.

If would have meant more cash to pay those owed money from FMEL's financial collapse, which including the £5.95m owed to 168 unsecured creditors.

It is understood that ministers took an unpublished "independent legal view" of the claim and found that it could not intervene in the commercial dispute.

READ MORE: Sturgeon should be held to account over ferry fiasco, say ex-Ferguson Marine executives

Teneo said it had obtained an "independent counsel's opinion" on the claim "confirming that there was no realistic opportunity to pursue the claim for the benefit of creditors".

Mr McColl has lodged a complaint about the decision, saying a professional claims consultant had gone over the claim line by line and decided it was valid.

"It is all well recorded but the government refused," he said. "This is a highly detailed claim and under normal practice is that you appoint independent claims consultant to review it.

"It was a serious claim that was well developed and in my view was the biggest asset that the company had.

"Because it was money due from CMAL and effectively from the government, if it had been properly pursued. But it was buried.

"This is a mess that the government have been trying to bury and hide and I do take the exception to them blaming previous management because these were top people in the industry and very competent. To rubbish them is shameless."

A Scottish Government spokesman said: “The Scottish Government stands firm on its commitment to the vessels, the workforce and the yard. The delivery of the vessels is critical to supporting the lifeline ferry network by adding two new badly needed vessels to the CalMac fleet.”