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Burned. Sam McBride
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Owen commissioned an internal analysis of how RHI operated. One graph showed that if boilers were run for about 55% of the year, ‘the whole thing turns into a money-making machine’ – even if there was no use for the heat. In the event, it was clear that most of those using RHI had a use for the heat and would have had to otherwise pay for it themselves, so it was even more lucrative for them than for those who may have been just generating heat to receive the payments. And in some cases boilers were running for far longer than 55%, with nearly round-the-clock usage. CEPA had based all of its calculations on the assumption that boilers would run for an average of just 17% of the time.
In another candid internal email, Owen – who was not involved in the scheme’s design – marvelled at the ‘super profits’ available to those running boilers for long periods. In one email, he concluded by saying: ‘So the folks who heated empty barns were evil villains indeed, but they needed a poor tariff design to abet them … Sure, we’re not on the hook for fraud. But – assuming I’m right – our tariff design … encouraged it.’
There was another problem with the proposed tariffs – the huge gulf between the various bands encouraged any savvy businessman to install multiple 99 kW boilers, which would earn 5.9p for every unit of heat produced. But if he installed a 100 kW boiler – or any other boiler up to 1,000 kW – the rate did not fall slightly, but collapsed to a paltry 1.5p.
Some legitimate scheme participants would later feel aggrieved that there were accused of ‘exploitation’ for doing what was lawful and what they believed the designers of the scheme must have realised when they set the tariff bands as they did. It is to the credit of some businesses – including several Sainsbury’s supermarkets in Northern Ireland – that they installed a single large boiler and received a relatively modest payment by contrast to what was on offer.
There was a particular contradiction in setting up a Northern Ireland RHI, which was more lucrative than its GB counterpart. The whole justification for Stormont departing from what was happening in the rest of the UK was that the GB scheme was too generous for Northern Ireland. In GB, the tariffs were based on the assumption that they were incentivising people to move from gas. But in Northern Ireland, where piped natural gas was still only being established, the assumption was that people would be moving from oil. With oil more expensive than gas, it required less incentive to switch to renewables. And yet, having said that Northern Ireland required less incentive than GB, what DETI ultimately did was create a scheme which was more generous.
But there is an intriguing footnote to this. In December 2016, as the political scandal raged, Mark Anderson, an academic expert in biomass, wrote an article for the Slugger O’Toole political blog. Anderson, who was a close friend of Crawford’s, appeared to hint at that argument around oil being almost a cover story for why Northern Ireland was setting up its own scheme. Writing at a point where it was not publicly known that he was linked to Crawford, he set out the argument about Northern Ireland having a greater dependence on oil heating. However, he went on: ‘The real reason to provide a different structure was that the GB scheme was significantly under-subscribed. The economic consultants, CEPA and AEA Technology, from the beginning, proposed a non-tiered tariff to achieve the required interest in the incentive.’ Was that purely supposition on Anderson’s part or did he have some inside insight into what had really gone on in 2012?
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As DETI moved ahead to launch RHI, the scheme was being set up in a way which would see it shovel taxpayers’ money to those lucky enough – or well-connected enough – to get in at the right time.
Two huge errors had been made. One – the misdescription of the funding – was unquestionably an error. There was no conceivable reason for the civil servants to describe the funding as pure Treasury cash other than due to sloppiness or a culture whereby they thought that such small but fundamental clarifications were unimportant.
But while the second disastrous decision – to strip out the limited cost controls present in the GB scheme – may also have been accidental, it is possible that it was not a mistake and was a conscious reaction to the first error. If there was a belief that consequence-free spending was possible, and if the political philosophy was to maximise the Treasury funding for Northern Ireland, it would be quite logical to remove any impediments to making the scheme as expensive as possible.
Foster accepted at the inquiry that ‘the last thing a Northern Ireland Executive wants to do … is to hand money back to the Treasury’ and said that ‘there would have been pressure to spend that money’. She said that the ‘pressure would have been on to find a scheme to spend that money … there would be an awareness that if money is coming in … then we have to make sure we find a way of spending it’. But she denied that the logic of that position was that the more expensive the scheme the better.
No piece of paper has ever turned up to show that there was a deliberate decision to exploit the funding and all of those who were involved have said that it was a genuine mistake. But Foster, Crawford and the civil servants are here hoist by their own petard of not recording many of their key meetings and decisions.
It is true that when a government records what it is doing, it can lead to embarrassing leaks. But a written record is also a protection for those in power – if a decision is not recorded as having been taken, then there is a strong argument that there was no such decision. By not having such a culture of recording what was going on, those in DETI at the time were later shorn of the protection that it would offer. The mere absence of a record is not in itself proof that something did not happen. And, aside from a general culture of oral government, if the motivation here was to consciously and wrongly exploit the Treasury, there is a specific reason why that thinking would not have been recorded.
But despite the fact that the scheme was now heading towards its launch with fatal shortcomings, all was not yet lost. A forceful warning was just around the corner, one which would mean that Foster’s department was going into the disaster with its eyes open. That message would heighten the suspicions of those who would later look back and wonder if someone had consciously chosen to create a scheme which would enrich claimants – and at least one major multinational corporation.
CHAPTER 5
LICENCE TO BILL
On 13 April 2012, Arlene Foster did something which defied rational explanation: she signed what was close to a blank cheque. Of course, ministers do not literally sign cheques, blank or otherwise, and government payments are handled by officials far beneath them. But the document to which Foster put her name consented to the idea that setting up an RHI scheme was value for money without knowing how much it would cost. Even if she had no other direct role in the RHI scandal, Foster’s signature that day undermined her boast of being someone who was forensic with detail and by implication could be trusted to handle the complex business of government.
Known as a regulatory impact assessment, the document was part of the democratic checks and balances within the world of government. The bureaucratic title belied its intent: this was a piece of paper meant to be a protection for the minister – and, by extension, the public – ensuring that their express consent was required before an expensive policy could get to an advanced stage. Fiona Hepper sent the document to Foster and Crawford alongside a submission recommending that she sign it. By doing so, Hepper said, she was signing to