Chamber and committees

Continuing that aspect, I note that one of the factors that exacerbated the staged payments issues was the relationship between CMAL and FMEL, which seems to have deteriorated at an early point to the extent that, we understand, CMAL could not get access to the yard.

Although there was discussion about the possibility of a dispute resolution mechanism, it never happened. CMAL received legal advice that it must continue making the staged payments despite the fact that it had no sight of what was happening. That was obviously escalated up the line from CMAL. To what extent were you aware that it was discussed with ministers? Did you have any sight of those issues? What did ministers say about resolving the dispute, which involved a major issue?

The Auditor General’s report says:

“By May 2019, the relationship between CMAL and FMEL had broken down completely.”

The report goes on to say that FMEL had said that it was going to have

“significant redundancies and CMAL notified Scottish ministers of its intention to cancel the contract for vessel 801 and make a call on the surety bond”.

Was that ever done? Did CMAL ever do that?

Correct.

When Mr McColl appeared in front of the committee, he made the comment that the way that the milestone payments were made was in accordance with normal shipbuilding practice. We do not have the expert opinion here to guide us as to whether that is the case, but it seems extraordinary that things can be done out of sequence and still qualify for payment when the bits between them have not been done.

Continuing on the question of good faith, most probably, I am looking at the Rural Economy and Connectivity Committee’s report of 9 December 2020, which makes it very clear that, in connection with the staged payments that had been made,

“there is strong evidence that the contractor deliberately proceeded to construct specific sections of the vessel either out of sequence or not according to the proper specification purely as a means of triggering milestone payments on the contract.”

That is a strong statement. The Auditor General has also highlighted those payments.

Subsequently, as I understand it, CMAL took legal advice, which was that it had to make the payments. Was there any discussion between ministers, you and the Cabinet about that issue?

First Minister, I would like to start with a couple of questions about money. I refer you to pages 35 and 36 of the Auditor General’s report, and specifically to paragraph 72. This is in relation to the £45 million that the Scottish Government loaned to FMEL. There were some problems with CBC carrying out its side of the bargain. It paid only part of the investment that it said that it would make into FMEL, and there was some disagreement with the Scottish Government over the structure of loans. Can you give more background on that?

It is paragraph 72.

I am looking at the Auditor General’s report, and specifically at paragraphs 81 to 83. The sequence of events that led to FMEL entering administration in August 2019 seems almost like a progression of that dispute, to the extent that

“the Scottish Government concluded ... there was no legal basis for CMAL to pay more than the fixed price for the contract.”

That seems to imply that that was the trigger for FMEL entering administration. When the Scottish Government took that decision, was there any thought that that might result in FMEL going into administration?

We have heard a fair bit about the cost of doing business and issues around labour shortages. On the other side of the coin are the consumers—the people buying the products. The Scottish and UK Governments have made a number of policy pronouncements—although I am not sure that we can rely on the current situation as far as UK policy pronouncements are concerned. It is likely that there will be changes there. How concerned are you about the longer-term outlook for consumer spending and demand for goods? I would like Paul Sheerin to start, given that he was remarkably cheery about the health of the order books.

We have heard a relatively optimistic view there, but when we come down to it, the fact is that the average man on the street is facing rising food costs, exponential increases in the cost of energy and shrinking disposable income. That is bound to have an impact throughout the economy. Ian, how concerned are you about consumer demand?