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Burned. Sam McBride
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By June 2011, the horse-trading between DETI officials and CEPA about what the report would recommend had delayed the delivery of the final document. But, with the Assembly about to rise for the summer, pressure was on to start the process of setting up RHI. The department wanted to launch a public consultation – a necessary first step before bringing legislation to the Assembly – before the summer holidays. That would see the consultation completed by the autumn and allow DETI to press ahead with launching the scheme quickly.
But in its haste to do so, some officials began to cut corners. Although the final report had not been received, Hepper was sufficiently confident about what it would say that she sent a submission to Foster. In the submission, which purported to summarise the key CEPA findings, Hepper told Foster that ‘the NI RHI option is the preferred approach and offers the highest potential renewable heat output at the best value.’ For a single 20-word sentence, that was astonishingly inaccurate and misleading.
Firstly, CEPA had not said that a Northern Ireland RHI was the preferred approach – on the contrary, the consultants preferred a challenge fund. Secondly, the RHI did not provide the highest potential renewable heat output. Stormont had set a target that 10% of all heat should come from renewable sources by 2020. CEPA’s initial calculation was that if the government did nothing, almost 5% of heat would come from renewables by that date anyway. It believed that that an RHI scheme would deliver 7.5% but the challenge fund would secure 8.75%. Thirdly, the RHI was far from the best value – in fact, it was the costliest option. With the consultants believing that they had been steered in a certain direction by Hepper and her team, were the civil servants now attempting to do the same to their minister?
Hepper later attempted to explain the sentence as meaning that a Northern Ireland RHI was the best option when compared to the alternative of simply replicating the GB RHI. But if that was her intent, her choice of language was grossly inadequate and misleading. The natural meaning of the words represented a far more sweeping statement – and that is how Foster said she read them. But Hepper’s submission to Foster was not just inaccurate – it was unusual in that it did not give the minister a recommendation. The various options were set out without a clear preference from the team of civil servants, who had been working on the policy for more than a year. A few days later, Hepper met Foster and Crawford in person to discuss the submission. It was at or immediately after this meeting, on 14 June, that the minister would decide to press ahead with the more expensive RHI scheme.
Hepper later told the inquiry that there had been ‘a fulsome discussion around the detail of the figure-work and the two different options’. Foster disputed that that was likely to have been the case – but said that she had no clear recollection of the discussion. Foster’s limited recall of events would prove to be a recurrent feature of her evidence to the inquiry. Foster said that going against her officials’ advice ‘would not have been my natural course’, and so she is likely to have gone along with at least a verbal steer from Hepper, even though the official’s submission had not made a recommendation. However, what transpired in that meeting will forever remain elusive because no records were kept of what was said. That would be particularly suspicious were it not for the fact that under the DUP and Sinn Féin Stormont had developed a widespread practice of deliberately not recording many meetings – and sometimes even important multi-million-pound decisions.
The man who was then the most senior civil servant in Foster’s department, David Sterling, told the inquiry that officials had consciously not recorded many internal discussions which ought to have been minuted because the DUP and Sinn Féin were ‘sensitive to criticism’. Sterling said that as a result of the desire for the public not to hear about what was going on it had become ‘common’ not to keep records because ‘it is safer sometimes not to have a record that might, for example, be released under Freedom of Information, which shows that things that might have been considered unpopular were being considered’.
In acquiescing in politicians’ desire for secrecy, civil servants broke their own rules which were clear that significant internal or external meetings must be minuted. In response to Sterling’s comments, both the DUP and Sinn Féin insisted that they had never asked for records not to be kept, something Sterling accepted. That suggested that canny officials did not need to be ordered to break their own rules but instead willingly did so after picking up on the desires of ministers and their advisers.
By the time the final CEPA report arrived on 28 June, the costs of RHI had risen further. Hepper admitted that the minister had not been told that the costs had changed after she made her decision, either evidence of sloppiness or an implied understanding from the officials that a leap in costs was not the sort of issue which would cause themselves or the minister to re-think – perhaps because of the belief, spoken or unspoken, that as much Treasury money should be secured for Northern Ireland. But two other critical errors had been made, one of which would wrongly lead at least one senior DUP figure to later work to keep RHI open when it was out of control, based on an erroneous belief that London was paying the full bill.
CHAPTER 4
TWO FATAL ERRORS
When Fiona Hepper’s June 2011 submission went to Arlene Foster, it contained three letters which would have meant nothing to most people – but to some within Stormont it made their eyes light up. The letters were AME, and to some politicians and civil servants they signalled that the funding was effectively ‘free money’.
As with all ministerial submissions, the document followed an established format whereby Hepper and her team filled in answers to a series of questions, one of which was on the nature of the funding. In that section, Hepper simply said it was ‘AME’ – the acronym for Annually Managed Expenditure, which mandarins and politicians pronounced ‘Amy’.
What Hepper had sent to Foster was a significantly inaccurate simplification of the true nature of how the scheme was to be paid for and one which years into the future would haunt Foster and her spad, Andrew Crawford. Two months earlier one of Hepper’s subordinates, Alison Clydesdale, had established that this was far from the full story and there was a major risk to the department if it spent beyond what the Treasury had allocated. Clydesdale had sought to clarify how the funding arrangements would work and had been told that the money would be coming directly to Stormont under AME arrangements. That is the form of spending used for government schemes where a budget is difficult or impossible to predict, such as for welfare claims.
Most devolved government spending is very different and involves the block grant – the annual lump sum the Treasury sends to Stormont – being divided up into multiple finite budgets, department by department, project by project. Each department is headed by a permanent secretary whose formal title of ‘accounting officer’ alludes to the significance of accounting for the department’s spending. It is a major crisis if a department spends beyond the budget democratically authorised for it by Parliament or the Assembly. But the amount required for demand-led expenditure, such as pensions, student loans or unemployment benefits, is difficult to predict, and there is a principle that the money should be paid if the individual meets the criteria set by Parliament. Therefore the funding is ‘managed’ and predictions are made as to the likely demand, but no budget is set.
Where RHI would break with long-established public sector accounting principles was that it would be described as AME – that is, demand-led and without a budget – but it would also have a budget. It would be on that rock of confusion – allied with the cynicism of some senior figures who saw the chance to squeeze more money out of the Treasury – that Stormont would perish.
In April 2011, Clydesdale spoke by phone to Jon Parker, the joint head of the Treasury’s energy branch. She followed that up with an email in which she asked him to set out in writing how the department could commit to 20-year payments based on funding, which was only for four years, as well as a request to set out the practicalities around how the money would come to DETI. Parker made clear that any commitments entered