‘Conflict of interest’ in ScotRail franchise

28 November 2008

Financial reports seldom raise the temperature – but an Audit Scotland report on the First ScotRail passenger rail franchise is causing a storm. Transport Scotland's finance director Guy Houston has resigned today after suggestions of conflicts of interest because he owns shares in one of the bidding companies. Train drivers union ASLEF is calling for • a halt to the ScotRail franchise extension before a full enquiry has been undertaken by the Scottish Parliament • an emergency statement about the situation to be made to the Scottish Parliament by Stewart Stevenson MSP, the Minister for Transport.


‘This is vital so that politicians and the public know exactly how their rail services are allocated,’ says ASLEF general secretary Keith Norman. ‘Even the suggestion of malpractice brings the whole franchising system into disrepute. The obvious way to avoid conflicting interests is to take franchises back into public hands when they expire.’


The Audit Report which is made to Scotland’s ruling body points out that Mr. Houston’s ownership of shares in FirstGroup was in conflict with his duties. Paragraph 71 reads,


‘Transport Scotland's register of interest indicates that the director of Finance and Corporate Services holds shares and share options in FirstGroup. Transport Scotland’s annual accounts also declare this interest. The director of Finance and Corporate Services was present at key meetings in March at which the rail franchise extension was discussed.


‘Good practice generally requires that members with an interest should declare it in advance and take no part in any relevant agenda item. The minutes of the March meetings do not record if the director of Finance and Corporate Services declared an interest or removed himself from discussions about the franchise extension. The register of interests and the management commentary in the accounts indicate that Transport Scotland has put in place practices to address the potential conflict.


‘Transport Scotland’s chief executive has stated that the director of Finance and Corporate Services has no vote on any decision-making relating to FirstGroup, and was not involved in the review process, including development of the option although the director of Finance and Corporate Services was aware that a review was ongoing and attended the meetings in March.’

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