To Nationalise or Not, that is the Question

SHOULD the Scottish Government take Ferguson Marine Engineering into public ownership, to save it from financial collapse?  Recently, the SNP government came under trades union pressure to nationalise the historic St Rollox ‘Caley’ rail maintenance facility in Glasgow. In that case, Nicola Sturgeon declined though she is in favour of re-nationalising the ScotRail franchise at some point.  The SNP also took Prestwick airport into state hands in 2013, though the deal cost the taxpayer a meagre £1.
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Clearly the SNP is not opposed to a mixed economy with a significant public sector element.  However, the record cited above suggests that taking firms into public ownership is largely driven by circumstance – usually adverse circumstance.  Nothing wrong with that per se but we do seem to lack a strategic vision as to what nationalisation is for.  Therein lies the danger.
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In the UK and Scotland, public ownership has always been a tool to pick up the economic and social pieces after the private sector failed spectacularly.  The 1945 Labour government nationalised coal, the railways, and steel. But the main reason for state control over heavy industry was to rectify decades of deliberate under-investment by their rentier owners.  In other words, the taxpayer came to the rescue of private capital.
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The only strategic nationalisation in 1945 was the Bank of England. However, the Attlee government conspicuously failed to impose a political direction on the Bank, and left Lord Catto in charge as Governor.  Unusually, Catto, the son of a Peterhead shipwright, had a background not in the City but in the traditional Scottish trading links with Asia.  His appointment to the Bank was to ensure the UK could loot India of its gold reserves in order to pay for the war.
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There was a second wave of nationalisation under Harold Wilson and Edward Heath, who took aviation, Rolls Royce, computers, cars and shipbuilding into public control.  British industry lacked the economies of scale to compete with US and European multinationals, especially if the UK was to enter into the then EEC free market. So once again the state played the role of midwife to long-overdue industrial reorganisation.  Once this was accomplished, Mrs Thatcher was free to sell everything off for a song.
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Thatcher and her cronies (many of whom were state industry managers looking to make a buck or two) used the excuse that public sector ownership led to inefficiency.  In fact, it was the other way around. Nationalisation was designed to eliminate the underinvestment and bad management that had caused the original inability to compete in world markets. The only period when state firms racked huge financial losses was when the Heath government in the early 1970s ordered them to freeze prices as a (daft) way of halting inflation.
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FERGUSON: DOON THE WATTER OR UP THE SPOUT
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Back to the Ferguson yard. This has filed for administration after racking up losses on a fixed-price order to build two LNG-fuelled ferries for CalMac (which is also state owned).  Back in 2014, Ferguson was rescued from closure by local businessman Jim McColl of Clyde Blowers.  McColl was, of course, a supporter of independence. Unfortunately, the new ferries have been subject to cost overruns and delays, as a result of design changes. Ferguson has run out of cash to finish the project, 350 jobs are at risk, and CalMac desperately needs new ships.
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ScotGov could ante up more cash and get the order completed, and probably will. But that only makes sense if we fix the underlying problems. First, the way the contract was written is clearly duff. Either the Ferguson management agreed to a contract they could not fulfil, in which case whoever did due diligence for ScotGov and CalMac should be fired. Or else there were onerous design changes imposed by the buyer, in which case Ferguson should sue. If it can’t, whoever signed for Ferguson should get their jotters.
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I’m more interested in the long-term implications. Scotland is a maritime nation with half the UK’s seacoast. We have a huge offshore energy sector. Post-independence, we will need maritime defence – sadly ignored by Whitehall in favour of funding useless Trident submarines. For all this we need a ship-building capacity. Ergo, we need the facilities and skills provided by the Ferguson yard. Ergo 2, we need to nationalise Ferguson. Not because of the CalMac order, but because we need strategic capacity.
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Those long in the tooth like me, will remember the collapse of Clydeside shipbuilding in the 1960s and 1970s. This event was passed off as unavoidable because folk were now flying rather than taking the boat. Yet the Clyde ship-building industry collapsed in the very decades when global demand for giant tankers and container ships was skyrocketing. The problem for Scotland was not lack of demand but small yards, under-capitalisation and not switching construction to the deeper waters of the Forth of Clyde.
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We lost our original shipbuilding capacity through sheer incompetence by private capitalists. Let’s not make that mistake again. But there is a big caveat. A publicly owned shipbuilding company needs to be funded for the duration, not just to fulfil one order. It needs a ten or twenty-year plan. And it needs to target international orders, not just local ones. The test of being internationally competitive is what stops a public industry being inefficient of even corrupt.
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So, a first job for the new Scottish National Investment Bank?

Comments (22)

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  1. Wullie says:

    Far as I’m aware the Scottish railways can be run by the Dutch government & the Italian government but the Scottish government are not permitted a shot?

    1. `ken ferguson says:

      Both Wullie and George make good points.

      The wider reality is not just that public ownership has acted in the UK as an A@E for failed private enterprise but that in their current Neo Liberal form private firms have created today’s spiralling environmental crisis.

      With the short time we have to arrest climate change we simply can’t go on with this system.

      We need a planned just transition to a new non carbon economy and getting that will mean a central role for the working class who will provide the equipment to do it.

      Only such an approach can produce the urgently needed change and utilise the skills of workers at BiFab,The Caley and many others with skilled useful work, stable communities and an economy putting people and planet before profit.

      There will be an outcome to the climate crisis and it will need to be democratically planned or it will be a solution which ignores millions in favour of the millionaire minority

  2. David says:

    Some of us who are qually long in the tooth, remember the faults of nationalisation.
    Sturgeon has made a complete hash of this ,McColl is hardly local.
    Was he really a backer of Independence or merely a carpetbagger? Hmmm!!
    He should never been so close to Sturgeon, and allowed to bid. He should have made his excuses and left that relationship, and then bid.
    He’s old enough to know what a fixed price contract is , It fixed If he wants more money , then clarify what is out with the contract, and justify why it was never tendered for in the first place.
    This is a total crock of crap.
    The Minister was total correct in saying no to more money,
    McColl has been squeeling for a week now , It’s CalMac fault, (or a division of) and there is what was it 600-700 more jobs…..Eh that old chestnut?
    Nationalise it and have done with it
    Personally I’d tell McColl to sling his hook.
    Long term as a nationalised company , it can be profitable, and save the country money.
    My proviso is you keep MSP, MP and general doughnuts out of it.
    I reminded any who question this of PSA and EDF in France and Abellio in the Netherlands

    1. Charles L. Gallagher says:

      David et al, Sure it was a fixed price contract which I’d be very surprised if that did not include a ‘FULL TECHNICAL SPECIFICATION’, including hull, engines and internal fittings? But it seems the specification has been changed by CalMac, were these changes anticipated in the original contract? If not Ferguson’s are, in my opinion, entitled to ask for the increased costs to be covered, if not then deliver the ferries as specified. Changing design specs is not a new phenomenon, ask any shipyard worker who has worked on a MOD contract where the vessel/vessels delivered bare little resemblance to the original build drawings. So why don’t they all sit down and agree on what is to be built/completed and for what price and that any future changes called for are fully costed and added to the CONTRACT PRICE – AND HONOUR IT.

  3. Jo says:

    First point George…. Prestwick has cost the taxpayer a lot more than £1!

    It’s now up for sale. I cannot understand why Prestwick is treated as such a white elephant and why it isn’t preferable to Glasgow for so many airlines and ordinary people. I don’t get the obsession with Glasgow Airport at all. It’s a nightmare of a place, run by rip-off merchants. But, oh yes, let’s get a rail link costing zillians!

    I wanted to see Prestwick being recognised as the asset it is. £38 million has gone into it in the last six years. Now we have to hope someone will buy it to avoid the fate the SG originally was trying to save it from.

    On Ferguson’s, you’ve made the most relevant point. Who checked the small print where a fixed price ends up costing double? That’s outrageous and McColl is right on this point too…the buck stops with the SG. These ferries are urgently needed. Again, outrageous. They are looking like they’re not fit to run a toy post office.

    It frightens the life out of me, this pattern emerging concerning major undertakings these days whether in government or in major construction projects. Fancy job titles everywhere…but no one has a bloody clue what they’re doing!

    1. Wullie says:

      In the Caley’s case the German owners have flitted to Wolverton & taken the work with them. Same auld, same auld!

    2. David says:

      Prestwick was always , up against Glasgow and Glasgow always got their own way.Some of the current critism comes via Glasgow (based individuals)
      Prestwick should be treated as an asset, I believe the SG should keep it, muttering of that under EU rules it has to be sold on(or similar), well if we’re getting dragged out then, Why sell it?

  4. David says:

    ” But it seems the specification has been changed by CalMac, were these changes anticipated in the original contract? If not Ferguson’s are, in my opinion, entitled to ask for the increased costs to be covered, if not then deliver the ferries as specified. ”
    Fair comment,It’s the cost ,There has been mention of super duper high effiency engines being the cost, why weren’t they originally included?……If that is the cost then default to the original spec(and cost) it will take a long time to get through the 90 million, because the original spec engines have a known fuel consumption and that is a running cost, so what is the payback time for the extra 90 million

    The whole thing stinks like a Council building contract, with the same mentality, ie “We’ll just add it on at the end, and they’ll be daft enough to pay”

    In 35 year of contracting in a variety of contracts, a fixed price was a fixed price, If I missed some thing that was down to me
    In Ferguson’s case they are a big firm, with I suppose a large estimating department getting paid at the high end of the market, ……I conclude if they are so wrong then possibly they shouldn’t be doing the job
    What really annoys me is McColl’s attitude to the workers they are disposable to him, however nobody in a boiler suit “screwed it up” !!!

  5. J Galt says:

    To say the Railways were nationalised in 1948 to correct “deliberate under investment by rentier owners” shows you don’t know your subject.

    The “big four” had a reasonably good record on investment in the 1930s and would have done more had the government heeded their request for a level playing field with the largely unregulated road transport industry.

    For instance the LMS completely renewed their cross channel and Clyde steamer fleets in the depth of the depression and, as acknowledged by the shipbuilders this played a big part in their survival.

    The Southern carried out one of largest electrification programmes in the world in the 1930s.

    However this came to a crashing halt in September 1939 and for the next 6 years the railways were ruthlessly exploited under government direction with little or no maintenance never mind investment. When the railways presented the resulting bill the government had nothing to pay it with and resorted to nationalisation – this also kept the powerful railway unions happy.

    This glib ignorance of the facts does not give much confidence in the rest of the article.

    For intelligent and informed comment on the ferry scandal I would recommend the shipsofcalmac forum.

    1. David says:

      Is that aimed at me?

      1. J Galt says:

        It is a comment on the original article.

        1. David says:

          My apoligies for my mis reading

  6. Josef Ó Luain says:

    Great, Scottish, entrepreneurial talent that he’s touted to be, it’s difficult to see how McColl can just walk away from this fuck-up.

    1. Yeah he is culpable whatever way you look ah this

  7. Iain More says:

    Nationalise. Oh and Nationalise the Railways as well including the Network Rail part of the Scottish network.

  8. mince'n'tatties says:

    You have to wonder what the 700 poor sods at Dundee’s Michelin Tyre Plant make of this farrago. They of course are expendable with their use of hard to re-cycle Carbon Black and X-Linked rubber. Throw in high energy costs with Sturgeon’s need to keep Harvie happy and they were doomed from the get go.
    The SNP’s hypocrisy is breathtaking, as McKay nods his head sagely pretending his concerns for the area ; only exceeded by the excuse that the tooling up for market demanding new Tyre dimensions was beyond Michelin. Nod, nod, wink, wink.
    Meanwhile another heavy industry hits the Scotia graveyard.
    But not quite. Once again we see the jobs not disappear….just relocate.
    Sooner or later the penny will have to drop that Scotland needs industrial jobs, a bit more than it needs our small army of virtue signalling politicians.
    Industrial strategy my backside.
    Angry? You would never guess.

  9. MBC says:

    Scotland has 80% of the coastline of the UK – not half. I learned this factoid from a military man during the indyref, at a conference on defence post independence, given by the Royal Society of Edinburgh. He said that military planners take into consideration the inalterable facts of geography, that Scotland has 33% the land area of the UK and 80% the coastline.

  10. Kenny Smith says:

    This is a subject that has a personal aspect to me. Both Ferguson and CalMac carry blame for this mess and its a shame. Ferguson hired managers in good faith with good CV,s that turned out to be numpties. Also ignoring local labour in favour of cheap workers from Poland and Romania cost them, not only in repairs but in reputation. They did eventually start to employ local guys it was bad pay on rolling contracts ultimately that led to a fairly high turn over in staff. It suffered from the usual British industry attitudes towards people from the shop floor being listened to just like all the companies I ever worked for. As for CalMac, Ferguson never designed the vessels. The design was either drawn in Portugal or bought from a Portuguese patent how much input Ferguson had into that I can’t be sure but bottom line is that was the spec that Ferguson was given. They were the ones that wanted it ripped to bits, an almost top to bottom do over. That caused conflict. What upsets me more is the fact they did have other work and more to come with a view of maybe of sub contracting Mod work. As for the rail works, I knew people that worked there and I would have liked it to be saved by SNP gov but I understand they can’t step in everywhere and BiFab, Prestwick and now Ferguson does leave it stretched. I do get a bit bugged how the SNP get done over railway works and I can’t blame those guys who worked there feeling left behind and bitter but they are letting the company to wriggle off the hook after moving the work due for Scot rail to England. I hope Ferguson stays open im just not sure the general public will allow it if the costs keep spiralling

    1. MBC says:

      Thanks for this. You sound like you have inside knowledge. Are you saying CalMac bought a design from Portugal and Ferguson chose to modify it?

      1. Kenny Smith says:

        No what I heard was Cal Mac either purchased the drawings or design, how much input the management at Ferguson had into that I couldn’t say all I know was it wasn’t Ferguson that drew it specifically then once the build was under way Cal Mac realised it was no good so started ripping it up with some really big changes. Listen I could be wrong. I knew guys that worked in there and I’m in engineering so the more options I have for employment the better for me personally. I guess all I’m saying is I heard Ferguson taking a right doing over it but Cal Mac never covered themselves in glory either. When McColl 1st took over I put my CV in but when I heard what they were paying I backed off but he did try to bring the wages up. I hope for the sake of the lads that work there and the area/country they can work something out

        1. David says:

          It would be questionable if Calmac were “guided into buying” drawings and left with overpriced channelled solutions

          I don’t think you’re wrong

          I have noticed in previous occasions, a firm that is supposed to be large and well qualified, beneath the surface in fact a 8 person company, with subletting office space and self-employed contractors……..The illusion is not what it is cracked up to be
          Of course that is not the case here?

  11. Tarbert Lad says:

    It’s such a good advertisement for Scottish success – a government backed ferry company at loggerheads with a government owned shipyard. One ship launched, but with painted on windows where there should be glass, no systems, no power, unable to move herself, an empty shell. Two years late and counting, massively over budget, unresolved major issues. Scotland can’t even build ships for themselves…

    Why would anyone order a ship built on the Clyde?

    If this yard cannot keep its head above water in private hands, why would any government think it’s a good idea to own it.

    McColl thought he could buy an outline design on the cheap, and let the yard muddle through, circumventing the need to employ an in house design team, to resolve the system, spatial, transversal and maturity issues. He thought the shop floor could muddle on through. He blames design changes requested by CalMac, and surely there is more than a grain of truth there – once signed a fixed price contract, no changes should be allowed. Change process is usually where shipyards make their profit. But not buying a full design is the root cause of the problem.

    The solution? Either cut up what has been built to date, and get the Koreans to deliver a ship (probably within 18 months), or give the hulk to a yard who can sort the whole mess out for you, which will cost millions. Throwing good money after bad.

    The result? These are the last non defence ships to be built on the Clyde. The only ships that might be built on the Clyde in future will be defence contracts from Westminster. Once independent? Not even defence ships will be built in Scotland.

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