Shipyard takeover presents Scotland with a massive opportunity

The small print of the nationalisation says Scottish ministers will oversee the yard in concert with administrators, but the taxpayer will buy the operation outright if no private bidder turns up after four weeks.

This move has provoked criticism from the usual suspects. Donald Cameron, a Tory list MSP for the Highlands and Islands, sagaciously intoned that “no-one seems to have any idea of the cost of nationalisation or what effect state ownership of the yard will have on its ability to win new business”.

Well, Donald, if the yard closes then Ferguson will have zero chance of winning new business. Strangely, I can’t find any adverse comments from Mr Cameron on the Westminster Tory Government offering a bung of £300m to the Turkish Armed Forces Pension Fund to buy British Steel’s troubled Scunthorpe plant.

READ MORE: SNP Government nationalise Ferguson shipyard to save jobs

Most reasonable folk will think it sensible to buy time for Ferguson to sort itself out. We’ve been here before. The SNP Government took Prestwick Airport into state hands in 2013, though the deal cost the taxpayer a meagre £1. The previous owner – an Aussie investment fund – had tried to sell it as a going concern and failed. Since then, the Scottish taxpayer has chipped in another £50m to keep Prestwick going. In June, ScotGov announced that it was putting the airport back up for sale. Any successful bidder is expected “to commit to maintaining and developing aviation operations and employment”. That proviso is to stop property developers buying the airport and turning it into a housing development.

I supported the nationalisation of Prestwick and still do. I had worked closely with the management and the aerospace firms located around the airport, in a project to resurrect the local international air show as a way of raising the profile of what is one of Scotland’s most significant high-tech engineering hubs.

Global aerospace companies such as Spirit, GE Caledonian, BAE and Woodward have turned Prestwick into a major international centre for aviation maintenance and repair. This needs celebrating and nourishing.

However, without such a long-term plan, I worried that nationalising Prestwick Airport was a defensive rather than a strategic move. I have the same qualms about Ferguson. Recently, the SNP Government came under trades union pressure – perfectly understandable pressure – to nationalise the historic St Rollox “Caley” rail maintenance facility in Glasgow. But in that case, the Government declined. An obvious question arises: why choose to rescue one company and not another? The benchmark can’t be political expediency. We definitely need some strategic guidelines.

Perennially, in Scotland and the UK as well, public ownership has been used as a tool to pick up the pieces after the private sector failed. For instance, the 1945 Labour government nationalised coal, the railways, and steel. It did so to rectify decades of deliberate under-investment by their rentier owners.

The results were mixed. For starters, the compensation paid was too high – meaning taxpayers’ cash went to former owners rather than into fresh investment. Again, management of the new public companies was too centralised. Scottish facilities suddenly found themselves controlled from London.

READ MORE: Here's a brief history of the Ferguson shipyard controversy

In the 1970s, there was a second wave of nationalisation under Harold Wilson and Edward Heath. This focused on modern technology: aviation, Rolls-Royce, computers and cars. At the time, British industry lacked the economies of scale to compete with US and European multinationals, especially if the UK was to enter into the common market. To act as midwife to this reorganisation, the then Labour government created the National Enterprise Board and the Scottish Development Agency. The idea was that both would be funded from the proceeds of the new North Sea oil industry.

This policy had a clear strategic vision, but it failed for a variety of reasons. In particular, Edward Heath ordered state industries to freeze prices in a vain attempt to combat inflation – an inflation caused by imported oil prices going up after the Yom Kippur War. But if you freeze prices while your energy and wage costs are rising, you make losses. These manufactured losses were later used to erroneously brand state industry as inefficient – thus to justify later Thatcherite privatisation in the 1980s, when the “family silver” was sold off for a song. Mrs T also diverted the North Sea oil revenues meant for industrial investment into tax cuts, which added to deindustrialisation by fuelling consumption of goods made elsewhere.

In other countries, public companies have been commercial and technological successes. The German federal and regional governments have always held major public holdings in telecommunications, banking, aerospace and motor manufacturing. China has emerged in recent decades as the world’s second-largest economy through a unique partnership of state enterprise and private ownership, with public banks providing most of the investment capital.

The old Thatcherite mantra was that civil servants can’t pick commercial winners. Which is true. But then, neither can private entrepreneurs second guess future trends. Which is why the big high-tech firms in America burn cash for years without making a profit. It’s a bet on the future.

Tesla electric cars, for instance, is still wracking up quarterly losses of around half a billion dollars and has an accumulated debt of around $10 billion. But US private investors are prepared to back Elon Musk, Tesla’s owner, because he has disrupted the global car market.

Which brings us back to the Ferguson yard. Certainly, there are questions to be asked about the way the original CalMac contract was written. But in the scheme of things, that’s small potatoes. Saving Ferguson has to be about more than delivering two ferries. There is much more at stake.

Ferguson is also building the world’s first hydrogen-powered ferry, which will eventually operate in Orkney. Hydrogen is the fuel

of the future. First, because it has a higher embodied energy content

than anything else. Second because, when you burn it, all you get is water. With great respect to the wonderful Greta Thunberg, we can’t revert to sail for maritime commerce, we need hydrogen-powered ships. And we need to build them in Scotland.

For any geeks, I know hydrogen power has issues. It will require huge economies of scale to produce liquid hydrogen fuel cheaply. And storage costs may always be a problem. But it’s worth a punt. Let’s move beyond defensive nationalisations. Let’s use the Ferguson yard as a platform to create a new generation of hydrogen-powered ships for domestic use and export. Let’s do a Tesla and fund this project for the next decade and not worry about short-term losses.

Next year will see the launch of the publicly owned Scottish National Investment Bank. That is exactly the financial vehicle needed to provide initial loan capital. True, there are international rules limiting state aid. But I’m not talking about aid, I’m talking about patient investment structured through a national plan for economic recovery. All aboard the ferry.