Auditor General: Scottish Government must be 'more transparent' on how public money is spent

A series of public spending disasters have highlighted the extent to which the Scottish Government needs to show far greater transparency at every stage of the public procurement process, the Auditor General for Scotland has said.

In a wide-ranging interview with Holyrood, Auditor General Stephen Boyle said the botched awarding of contracts to build two lifeline ferries for the Clyde and Hebrides routes was just one example of where the government not only made a series of spending mistakes but also failed to make information about those mistakes publicly available.

He noted that instances where the public has been unable to scrutinise the detail of deals include the government’s bailout of fabrication business BiFab and its backing of loans to controversial businessman Sanjeev Gupta. He added that it is vital for the Scottish Parliament to “err on the side of transparency” in all future projects.

“BiFab, Prestwick and Lochaber are examples of the Scottish Government taking a more direct interest in investing in private companies as opposed to the other enterprise agencies and we’ve been calling on the government to have more of a framework for how it does this,” he said.

“It needs to be transparent on what the risk strategy was, what the exit strategy is. No one thought they set out to own a shipyard or have a significant stake in a fabrication yard. How they manage that [is important] – we’re talking about tens of millions of public money.

“It’s not unusual [for governments to invest in businesses] and there are obvious reasons behind why companies come to the government directly rather than enterprise agencies – they’ll come to the government when they’ve exhausted all other avenues.

“Going back to the financial crisis, the UK Government and others around the world did invest in private companies. Ultimately that’s a call for government, but the investment [in BiFab] is unlikely to deliver value for money and it’s for government to make clear why it chose company X and not company Y. There were other companies it chose not to invest in like Michelin tyres [in Dundee].

“There’s a place for them to make commercial decisions but it’s about having that transparency. We think the framework will help.”

Earlier this year Audit Scotland issued a damning report into the way the government handled first the award of two ferry contracts to Ferguson Marine Engineering and then the subsequent management of those contracts.

In that, it noted that “multiple failings” had led to “delays and cost overruns which continue to obstruct delivery of island ferries”.

The government has since come under fire for its association with Gupta, whose businesses had close links to Greensill Capital – the failed investment firm former Prime Minister David Cameron lobbied on behalf of – and who is currently under investigation by the Serious Fraud Office.

The Holyrood administration supplied a £586m loan guarantee to allow his company GFG Alliance to buy a Lochaber-based aluminium smelter in 2016, stating at the time that the deal would guarantee jobs in the area. The value of the guarantee was only revealed after a lengthy Freedom of Information battle from the Financial Times.

When the British Business Bank, which is owned by the UK Government, withdrew guarantees on £400m of loans provided by Greensill to businesses controlled by Gupta in July, Scottish Liberal Democrat economy spokesperson Willie Rennie demanded that the Scottish Government set out how it intends to protect Scottish public finances and the taxpayer from exposure to Gupta.

The Scottish Government has stood by its relationship with Gupta, noting that GFG “remains committed to investment in the long-term future of the site".

Responding to the Auditor General's comments, Lib Dem economy spokesman Willie Rennie said: “Stephen Boyle has delivered a dose of cold water and common sense.

“The Scottish Government frequently gets itself in too deep with projects that it cannot handle and business partners that it comes to regret. They need to be more careful about who they do business with.

“Islanders waiting on ferries and workers in Fife and Lochaber have come to understand that the government is much better at big promises than it is at competent execution.

“Scotland needs a comprehensive economic strategy that sets out how the government will determine with projects represent value for money.”

The full interview appears in Holyrood’s Annual Review 2021/22, which is published today.