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Auditor General: 'There’s a gap between political ambition and how things are delivered'

Auditor General: 'There’s a gap between political ambition and how things are delivered'

The headline on the release accompanying a March report from Audit Scotland was unequivocal. “Multiple failings,” it blasted, “have led to delays and cost overruns which continue to obstruct delivery of island ferries”. The report related to the way contracts to build ‘lifeline’ ferries for the Clyde and Hebrides routes were awarded to Ferguson Marine Engineering and how the Scottish Government bungled pretty much everything that followed.

The debacle had, Auditor General Stephen Boyle said at the time, “exposed a multitude of failings”.

When we meet in Audit Scotland’s Edinburgh West Port office at the end of July, Boyle is equally forthright, noting not just that the colloquially known ferries fiasco represents a significant failure of government but that – crucially for him – the very people who should benefit when public money is spent are continuing to suffer. 

“Our role is to assess whether public money has been spent well and make recommendations for improvement,” he says. “We produced that report and found there was a multitude of failings in the delivery of those contracts. From a people perspective, there are people who live, work and socialise on those islands who were disregarded. Taxpayers’ money has financed projects that are many times over budget and many years late.

“There are really polarised views on why those contracts weren’t delivered and there’s no consensus about what went wrong […] We’ve said there were multiple failings in terms of the management of the contracts, the delivery of the contracts, the quality of what was delivered and transparency as well as the quality of the decision making.

"All those factors will have to be reflected on. There will be many large infrastructure projects to come that the public sector will take a lead on. There’s an opportunity, like you see in other industries, to see where matters have gone wrong and learn from these examples.”

Given that the Scottish Government has presided over several other high-profile contractual disasters in the past few years, it would be easy to assume that lessons will not be learned. In the days before Boyle and I meet, the British Business Bank announces that it is severing ties with businessman Sanjeev Gupta, a one-time darling of the Holyrood administration who has been mired in controversy since the 2021 collapse of Greensill Capital, the financial services business that former Prime Minister David Cameron lobbied for and which loaned vast sums of money to companies associated with Gupta.

First Minister Nicola Sturgeon hails Sanjeev Gupta's acquisition of a Lochaber smelting business in 2016

In July, the British Business Bank, which is government owned, withdrew guarantees on £400m of those loans following an investigation into Greensill’s lending practices. That prompted Willie Rennie of the Scottish LibDems to demand the Scottish Government reveal the extent of its dealings with Gupta, who is currently under investigation by the Serious Fraud Office. In 2016 his company GFG Alliance bought a Lochaber-based aluminium smelter with the help of a £586m Scottish Government loan guarantee, the value of which was only revealed after a two-year Freedom of Information battle from the Financial Times.

First Minister Nicola Sturgeon has sought to distance herself from Gupta, telling Rennie during a 2021 session of First Minister’s Questions that she had concerns about his “aggressive expansion drive”, but when Gupta bought the smelter she hailed the “historic day” and said the government guarantee would provide “a firm foundation for GFG’s ambitious expansion plans”.

A Scottish Government spokesperson reiterated last month that there are no concerns regarding Holyrood’s business arrangement with Gupta. Yet for Boyle, the deal is emblematic of how the current Holyrood administration does not always get it right when it comes to showing the public how it is using their money.

There’s an opportunity for the government to be more open and transparent in some of [its] decision making and the spending

“One of the comments made in the last couple of years [in relation to Covid] is that it’s been hard to track how public spending relates to funding arrangements,” he says. “Part of that is to do with the volume of spending and the volume of spending arrangements, but it predates Covid. We’ve reported that it’s not been straightforward to make the connection between what’s been reported and what’s been spent [by government].

"There’s an opportunity for the government to be more open and transparent in some of the decision making and the spending that took place in terms of some projects, in particular the loan guarantees. Governments have a right to enter into commercial transactions [but] there’s something of a balance to be struck because it’s public money we’re dealing with. Details [of contracts] should be set out along with the accounting standards and so forth. I’d always call for them to err on the side of transparency.”

The Scottish Government has entered into other high-profile – and controversial – commercial  arrangements with private businesses, effectively taking part-ownership of Fife-based fabrication business BiFab before it went bust and buying, but being unable to resell, the loss-making Prestwick Airport. Boyle reiterates that there is nothing that could or should preclude the government from striking such deals but he says it would be wise for it to adhere to a clear – and transparent – set of guidelines each time it chooses to do so.

“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 says.

“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.”

As an accountant, Boyle, who lived his entire life in Glasgow before moving with his wife and two children to East Lothian on joining Audit Scotland two years ago, clearly has a vested professional interest in balancing the books.

But while he is ultimately responsible for auditing more than 200 public bodies that are collectively financed by billions of pounds of taxpayers’ money every year, for him the Audit Scotland job is about far more than columns on a balance sheet. The word ‘public’ is, to him, the most important part of phrases such as ‘public sector’ or ‘public spending’ and, as he says in his Twitter bio, he is “committed to public services that make a difference to people’s lives”. Accountancy, he stresses, is not just about people in suits swanning around in large corporate offices.

“I trained as an accountant with PwC in Glasgow then joined Audit Scotland for my first stint of five years before working in housing and regeneration, primarily with the Wheatley Group, the parent of Glasgow Housing Association and Cube Housing Association,” he says.

“Cube owned the Wyndford housing estate in Maryhill. It was a tough gig to live on that estate. Wyndford was one of the original [council house] stock transfers, way before Glasgow Housing Association, and [the residents] got a really bad deal. There was a real lack of investment going into the properties but they had very high rents. Public money wasn’t well spent and that had a real knock-on impact on the people who lived there. I was head of finance for Cube and had to think about how to make people’s lives better in that environment.

“Housing associations aren’t public bodies, but they still receive huge amounts of public money. There’s a desire to see public money spent to best effect. Sometimes in this role you can’t avoid being remote from the realities of public spending but working in those roles I really saw the impact, for good or bad, of public spending. Housing associations have a real purpose beyond bricks and mortar and a real appetite to improve people’s lives. I want to see that applied across all public spending in a different environment.”

Considering Audit Scotland’s findings on ferries and fabrication businesses, it would be easy to assume the job of Auditor General is a thankless one. Yet Boyle stresses that there are plenty of success stories in the Scottish public sector too, noting that understandably it is the reports in which he and his colleagues are critical of government that generate the most attention.

The Queensferry Crossing is an example of a public project that Boyle says was handled well by government

“We produce reports on a range of different topics and set out areas that are connected to large amounts of public spending,” he says. “Inevitably the reports where we are hard hitting or critical generate the most interest. It’s also true that we produce reports that don’t always get the same level of attention – typically that’s where we’re more positive. We had three at the end of June, on social security and Covid-related spending, that were generally positive. They were not without challenges but were quite a stark contrast to some of the other reports.

“The use and procurement of PPE is a pretty positive story in Scotland. From a relatively low base, Scotland geared up quickly to bring in PPE and hasn’t had the same challenges that we’ve seen reported elsewhere in the UK with substandard PPE and exorbitant prices. Also, the pace of Covid-related payments to businesses was a positive story. We’ve not seen the level of fraud that has been reported in other parts of the UK.

“Social security is also a huge project in Scotland in terms of delivering devolved benefits. In terms of the pace, it was interrupted by Covid, but the government is delivering something that sets it apart from the DWP [the UK Government’s Department for Work and Pensions]. They are managing the risks of the delivery of that programme. The pandemic was a factor that delayed progress and they’ve got some of the milestones yet to deliver in terms of completion so we haven’t reached a value for money judgement on that yet.”

Even large infrastructure projects can go well, with Boyle citing the Queensferry Crossing as an example of a publicly funded scheme that went pretty much according to plan.

“The Queensferry Crossing was delivered on time and marginally under budget,” he notes. “There were significant contingencies on that, but good contingency planning is an important part of management. When things go well they don’t get the profile but the public are quite right to expect things to go well all the time. When things don’t go well you have to apply that learning.”

There may well be a lot of learning to be applied in the years ahead, with Boyle noting that the fiscal environment is as tough as it has ever been at the moment and likely to get tougher. 

“Some of the reality of this is still unfolding, but energy prices and what that means for individuals and their families will be extremely challenging,” he says.

“In terms of Scottish public spending, looking at the choices the government will have to make – some is set out in the recent spending review – it will involve some difficult decisions for the government and the status quo. Based on what’s set out, while some areas like the NHS will be protected, there will be some parts of the public sector in Scotland that will have to make some very difficult choices on how they deliver services.

There’s an implementation gap between political ambition and how things are actually delivered

"Innovation is important. We produced a report at the end of last year, 10 years after the Christie Commission [which looked at the delivery of public services in Scotland], that found there has been a missed opportunity for the public sector in Scotland to do things differently.

"There’s an implementation gap between political ambition and how things are actually delivered. The financial crisis, the recovery from that, Brexit and then Covid have played a part. There are brilliant examples of innovation within pockets, but we haven’t seen huge progress or widespread innovation.”

With a second independence referendum looming for 2023 it seems clear that, should the vote go the SNP’s way, the subsequent disruption would likewise have an adverse impact on public spending. Though he notes that “public services are under strain in Scotland” and that “a challenging fiscal environment might become more challenging if there are fundamental changes to Barnett consequentials”, he stresses that neither he nor Audit Scotland has a view on independence – at least not one that he is willing to share publicly.

“We’re entirely neutral on Scottish independence,” he says. “We have to be seen to be neutral and reliable in the quality of our work.” 

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