Ministers’ salary rules are scuppered by the Ferguson Marine bonuses scandal

The Herald on Sunday is able to reveal that the Scottish Government’s wages policy, which has maintained a suspension of performance-related bonuses since Ferguson Marine was nationalized in 2019, has not applied to the shipbuilder, which is under fire over persistent delays and cost overruns on two lifeline ferries.

But it applied to the ministers’ own ferry procurers and owners Caledonian Maritime Assets Limited, who are on a long list of public bodies to fall under the wage rules. Ferguson Marine remains off the list.

Ministers decided they do not have to adhere to the policy, which was confirmed in an operating framework agreed with the shipbuilders.

READ MORE: Ferguson Marine: Calls out over £500m ferry bill after public inquiry

This is despite an outcry over the over £2,000-a-day wage made up of fees and expenses paid by Tim Hair, the formerly Scottish Government-appointed turnaround director of Ferguson Marine, who resigned from his post in February last year became.

The Scottish Government defended the payments to Mr Hair (below) as “in the middle of the industry norm”.

Earlier this month it emerged that Ferguson Marine’s chief financial officer, who is embroiled in the dispute over £87,000 in bonus payments to managers made in 2020/21, was leaving the nationalized yard.

George Crookston – one of the beneficiaries of the bonus program – left his post in mid-February after being appointed in March 2020. He is also no longer a member of the Board of Directors, which serves as its governing body.

Mr Crookston received around £17,500 in stimulus payments under the controversial bonus scheme in 2021/22.

That was on top of a pay package consisting of around £122,500 salary and £6500 pension benefits.

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Deputy First Secretary John Swinney called the bonuses “reprehensible” after failing to complete long-delayed lifeline ferries.

The Scottish Government says it was unaware of the premiums, which were not subject to Ministers’ approval.

Concerns about the bonus payments were first raised by Scotland’s public spending watchdog, Audit Scotland.

Auditor General Stephen Boyle said it was “unacceptable” that the money had not been released by the Scottish Government.

The Herald on Sunday can reveal that a “framework document” drawn up by ministers with the nationalized Ferguson Marine (Port Glasgow) Ltd on powers and responsibilities confirmed that the company “should not be bound” by the public sector pay rules to comply with

The document, seen by the newspaper, says the agreement was reached by Scottish ministers “on the basis of evidence presented by officials” and in line with the view of the Scottish Government Remuneration Group – which is making proposals for the pay distribution of the Employee reviews and approves any new or revised compensation proposals for CEOs, chairmen and board members.

It said this was on condition that Ferguson Marine had “a regular dialogue” with ministers about salary proposals, with the expectation that these would be “broadly consistent” with the provisions of the salary policy.

READ MORE: ‘Indescribable Chaos’: CalMac boss defends ‘no mainland ferries’ amid crisis

“Significant deviations” are subject to approval, it said.

But the terms “broadly consistent” and “significant deviations” were not defined.

And outside auditors who looked at Ferguson Marine’s financial status said there was a “lack of clarity” and “lack of defined requirements” about the framework.

It is assumed that this framework agreement was not finally agreed until March 2022. Previously, according to the auditors, it was not sufficiently clear what the Scottish Government’s requirements and expectations were in relation to pay.

External auditors said any benefit that is paid “must be subject to appropriate governance and transparency in decision-making and subject to independent verification and challenge within Ferguson Marine and the Scottish Government”.

Highland and Island MSP Edward Mountain, the former chairman of the Rural Economy and Connectivity Committee whose inquiry branded the process of sourcing and building the two ferries a “disastrous failure”, said ministers should have ensured that the bonuses were banned.

He said: “Why didn’t the Scottish Government take steps to ban premiums when they nationalized the yard?

“This is another costly oversight and underscores that the Scottish Government has not learned a lesson about staggering payments to directors.

“Let us not forget that former Turnaround director Tim Hair received £2million in payments during his tenure but failed to turn the yard’s fortunes around and deliver the ships that ours Islands urgently need.

“The Scottish Government needs to clarify its priorities when it comes to this taxpayer owned shipyard. Failure should not be rewarded with big paychecks.”

Employment contracts for the senior management team, when Ferguson Marine became publicly owned at the end of 2019, included a clause that entitled employees to a performance-related bonus of up to 20% of their base salary per annum.

According to Audit Scotland, the payment was approved by a remuneration committee made up of Ferguson Marine board chairman Alistair Mackenzie, controversial turnaround director Tim Hair and two unidentified non-executive directors. It is understood Mr Crookston was not on the committee.

The Public Spending Inspectorate said the committee approved the payment on the basis of a paper prepared by Mr Hair.

Mr Hair, who had led the company since August 2019 and implemented a comprehensive transformation program, left the company in February last year after a short handover period.

Ferguson Marine had since appointed David Tydeman (below) as its new chief executive officer to lead the company to “sustainable growth”.

He said that the current Board and Compensation Committee “have accepted the Auditor General’s feedback on the incentives paid to senior executives for the fiscal year ended March 2022.

It turned out that due to “persistent design gaps and construction errors” there were further delays and cost increases associated with the completion of the two lifeline ferries.

Glen Sannox and Hull 802 were due to come online in the first half of 2018 when Ferguson Marine was under the control of tycoon Jim McColl, with one initially scheduled to serve Arran and the other the Skye Triangle routes to North Uist and Harris, but they are it’s at least five years too late. The latest estimates suggest the delivery cost has quadrupled compared to the original cost of £97million.

Glen Sannox is now scheduled for autumn 2023 rather than late May 2023 as previously estimated, with what Mr Swinney described as a “treaty backstop” no later than late December 2023.

The second ship, known only as the Hull 802, is not expected to put to sea until the fall of 2024, having already been pushed back to late March 2024. The end of December 2024 was specified as the conclusion of the contract.

A Scottish Government spokesman said: “It is a serious concern that Ferguson Marine Port Glasgow failed to inform or obtain the approval of the Scottish Government before bonus payments were made to senior staff. This should be done as part of good governance.

“However, the new leadership team is keen to consult with the Scottish Government on this issue in the future if the need arises. Significant progress has been made in the shipyard’s governance structure over the last 12 months by the Chief Executive and Chairman of the Board.

“The newly appointed CEO is restating the Compensation Committee and continues to improve overall governance at Ferguson Marine.”