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My other question is about commercial assets, so I will stop there for now and ask about that later.

You think that it is appropriate and impartial. That is your view?

Yes, but those trade-offs are often quite substantial and will come at the expense of the delivery of other worthy public services. For example, capital investments have been frozen, and there have been shifts from the rural affairs, transport and housing budgets to other portfolios where we simply cannot say no to a funding increase. Benefits have to be paid, but we can pause progress on a road project or a hospital renewal. I appreciate that those decisions are made by ministers, but what advice is given to them by the civil service on which portfolios have to be cut to fund increased expenditure in other portfolios?

Okay—I have quite a lot of ground to cover, so I will move on.

Permanent secretary, we hear frequently from ministers, in a comment or a statement—it is a matter of record in the Official Report—that the Scottish Government needs more borrowing powers. My understanding is that the Scottish Government already has a significant amount of borrowing power. Its outstanding borrowing balance is to the tune of £1.7 billion for capital borrowing and £0.5 billion for resource borrowing, which means that over £2 billion is already on the books. Of course, that amount attracts quite a large amount of interest. I understand that there has already been over £320 million of interest on those two figures combined. In the year 2023-24, borrowing repayments of £217 million were made, which is up from £160 million in the year before.

I am trying to understand where we are at with borrowing, because those sound like pretty hefty figures. Are the levels of borrowing in Scotland sustainable? Are we borrowing enough to fund capital projects, or are we borrowing too much?

Good morning, Auditor General and guests. Thank you for your opening statement.

Your report paints quite a stark picture of the long-term viability of the yard. You mention in points 1 and 2 of your key messages that there are significant risks and uncertainty around the yard’s long-term financial sustainability—a point that you have just reiterated. Could you elaborate on why you have come to that conclusion?

Mr Boyd, one of the things that it would be very helpful for us to understand is whether the draft budget line of £47.9 million includes or excludes any of the additional £14.2 million that was announced separately for investment. That might be a question for ministers rather than for you, but I presume that you looked at that in the whole anyway.

Indeed, and those are questions that we can ask through due process.

You talked a little about the business plan and some of the assumptions that it makes about securing other work. Obviously, none of us wants to prejudice those decisions in any way, but we know that there is that potential, which was very much part of the plan, and investment is relevant to that.

Was there was any evidence of any other business outside of the small vessel replacement programme? Did you, in any of your auditing, come across any presentations or disclosures from the business team at the yard about other business that it was seeking? Was it commercially sensitive and so the team was unable to disclose it? Obviously, as it is a publicly owned and publicly funded business, one would hope that there would be an element of transparency there. Is it the case that all the eggs are simply in the one basket of the small vessel replacement programme? If that were not to go ahead, where would that leave the yard?

The five-year business plan is predicated on the award of the small vessel replacement programme, so a significant risk would be posed to the plan and, de facto, the long-term future of the yard if that award was not granted to Ferguson Marine. If it goes elsewhere, there is very little outside of that to underpin the running costs and keep the yard going at its current rate with the amount of people who work there. Are all the eggs—not all of them, but most of them—in that basket, and does that pose a risk?

That is helpful. Can we drill into some of the numbers that sit behind the conclusions that have been drawn? It is probably worth saying for the record that no one is comfortable with talking about the yard in this context. However, we are reflecting on what is in the section 22 report, so we have to talk about it.

When the report was issued, it was your understanding that, at the time, there was no financial underpinning from Government for the year 2025-26. However, since then, a draft budget has been produced, in which a budget line is allocated to FMPG. Can you perhaps talk me through what your understanding is?

Let us assume that the number in the draft budget is the final one. It might change, of course, but for the purposes of today’s meeting, let us work with what we have in the public domain. Is it your understanding that that is money that has been allocated for the next financial year by the Government to keep the yard on its feet and to fund operational costs? Is it for staffing costs? Does it include any investment or upgrade allocation? Alternatively, in your understanding as an auditor, is that money simply for finishing the job of completing the second vessel that the yard is still responsible for? From reading the papers, it is a bit unclear how we follow that money.

I will go back to that issue separately, but, before we do so, let us look at page 8 of your section 22 report, where you make some assumptions. I am trying to get my head around the fact that, for the year 2025-26, there will be a number of variables.

How much money will be required to keep the doors open, to keep the staff there and to keep the yard functioning as a going concern for that financial year? That will come at a cost, and there will be a number associated with that—presumably, there will also be a cost to finish the Glen Rosa, either separate to or included in that number. Additional moneys could be required, for example, for capital investment to upgrade infrastructure in the yard—technology, machinery and so on—to secure future business. From reading the papers, it is not clear to me whether what is in the draft budget for 2025-26 will cover all that. That is where I am looking for risk. Perhaps that is a question that you do not know the answer to.