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Burned. Sam McBride
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The civil servants in DETI’s energy division, who worked with CEPA on the report, denied to the inquiry that there had been any attempt to substantially change it. Energy division boss Fiona Hepper said indignantly: ‘We were certainly not pushing them in one direction or another. That is not what we were paying for.’ Peter Hutchinson, the mid-ranking official beneath her who was the main point of contact with CEPA, was less emphatic, but said that he did not remember attempts to get CEPA to support an RHI scheme. ‘Not that I can recall,’ he told the inquiry. ‘We went back to them and said “those recommendations [in a draft report] don’t stack up” … I don’t recall having a, you know, that kind of negotiation or anything like that. I don’t think that’s right.’ But despite the civil servants’ denials, CEPA’s evidence was compelling because it reflected badly on the company. The idea that a major global economic consultancy was something of a gun for hire, willing to alter key recommendations of its reports to suit a paying client, was an argument that undermined the firm’s credibility – and that of both Morrow and Cockburn. It was difficult to see what motive they could have had for concocting it.
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CEPA’s draft report had arrived with DETI at the end of May 2011, prompting a series of DETI comments and questions to the consultants, one of which said that CEPA needed to ‘be very clear why RHI is [the] preferred option over [a] challenge fund.’ In a telling response, CEPA replied on 15 June to say: ‘Our recommendation is based on the assumption that DETI wants to do an RHI. The challenge fund option is for comparison purposes to show what could be achievable.’ That comment suggested that DETI’s mind was all but made up and the challenge fund was simply being put into the report so that – on paper at least – there could be some comparator.
There was further evidence that the department seemed to have made up its mind before the consultants had reported or the minister had formally taken a decision. In a document sent to Whitehall to justify what Stormont was doing, Peter Hutchinson in DETI’s energy division set out that a decision had been reached that ‘the most appropriate method … has been assessed with consideration given to several options … the Northern Ireland RHI option is consistent to the GB position and provides long-term, stable support for those wishing to invest.’ The document is dated 19 May 2010, but Hepper told the inquiry that she believed it was from 2011. Even if it was May 2011, it was still a month before Foster had as minister decided that there should be an RHI as opposed to some other solution.
But, as baffling as it might initially seem that the department appeared determined to go with the far more expensive option, there was method in the apparent madness. Firstly, the renewable heat money coming from the Treasury could only be spent on the subsidy itself – not on the administration necessary to get the money to claimants. The cost of running the scheme would come out of DETI’s own budget. CEPA believed that the challenge fund would be expensive to run – with administration costing perhaps 10% of the total funding. At that point, Stormont was facing belt-tightening and it would not have been easy to argue for the money to take on staff.
Some in DETI were still smarting from the unhappy experience of another green energy grant scheme just a few years earlier. The scheme, Reconnect, had seen 1,295 biomass boilers installed against an expectation of only 375 – with the costs of administering the scheme ending up being 14% of the total funds handed out. DETI thought that administering an RHI scheme would cost £1.5 million but the challenge fund would involve £5 million of administrative costs. That was partly because they could ‘piggyback’ on the existing GB RHI scheme by using its administrator, Ofgem, and the IT systems it had already designed for Whitehall.
Shane Murphy, who was DETI’s senior principal economist, later told the public inquiry that he was clear that the officials designing RHI favoured it over the far cheaper alternative largely because it would save DETI a relatively small sum – even though they knew that overall the RHI would cost taxpayers far more. Murphy said that he had quizzed colleagues about the decision at the time. He said that it essentially did not matter that the challenge fund might be far better value in the long run because public sector budgets tend to be short term, and if the money was not available to DETI at that point there was nothing that it could do. He admitted that such reasoning would however look ‘pretty strange’ to the public. But there was no evidence that the civil servants had even tried to secure the money, nor that they had informed their minister of what was a fundamentally political decision.
Speaking frankly, Murphy said that civil servants ‘relatively regularly’ make decisions that would seem nonsensical to the person in the street. But Murphy – one of the few to internally challenge as the scheme was being designed – said that civil servants operated on the basis of a belief that there is a much bigger picture; even though the rules may seem absurd to them, they trust that there is a grand plan they cannot see, and that the rules by which they operate have been put in place for good reason. The manner in which he spoke about the civil service operation was akin to how a religious person may explain why God allows bad things to happen in the world – essentially faith fills the gap between what seems to be wrong and a wider belief that it must be right.
But there was arguably another reason to disregard the challenge fund: the very fact that it was cheaper. If Stormont set up a grant scheme, it could fund it using £25 million from the Treasury to cover the first four years. But there was no guarantee that Northern Ireland would get any money beyond that point. By contrast, an RHI scheme meant that Northern Ireland would receive £25 million and an ongoing high level of funding for the next 20 years – even if there wasn’t a single boiler installed beyond that point. By choosing an RHI, Stormont was committing the Treasury to keep pumping money into Northern Ireland for two decades after the last boiler went in. That was politically attractive to both the DUP and Sinn Féin. Although the parties were diametrically opposed on many issues, they wholeheartedly agreed on a form of economic nationalism. As Irish republicans, it was obvious that Sinn Féin – a party grown out of a terrorist organisation, which only a few years earlier had explicitly waged economic, as well as human, war on the UK – would seek to get every possible penny out of London.
But in that mission they found willing allies in the DUP. Under Ian Paisley, and then Peter Robinson and Arlene Foster, the DUP’s unionism was infused with Ulster nationalism. The party prided itself on extracting what it could from London – or anywhere else – for its constituents, and was not afraid to boast about it. At election time, the party would trumpet that Northern Ireland had the lowest household rates in the UK – and then would press for more Treasury money. Although popular with voters, who financially benefited from that hard bargaining, the DUP’s stance sometimes led to criticism from other unionists that its populist approach could be damaging to the Union in the long term, with resentment building up in other parts of the UK.
Cockburn told the inquiry that even at the very early stage at which his firm had been involved, on several occasions DETI was asking if it could increase subsidies, leading the consultants to think that the main concern was around the payments being too low – not too generous. He said that DETI ‘were asking are there grounds to increase the tariff … they were going in one way’.
CEPA consultant, Iain Morrow, the main author of the report, later told the inquiry that although it was clear that RHI was a more expensive option, the cost was not the only criteria, with ‘political acceptability’ being another issue.
When, under enormous pressure and after the collapse of Stormont, Foster was asked at the public inquiry whether she had wanted to deliberately maximise the amount of Treasury money coming to Northern Ireland by choosing the most expensive scheme, she strongly denied that had