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Burned. Sam McBride
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In an interview for this book, Alan Clarke, who was the longest-serving chief executive of the Northern Ireland Tourist Board, said that he always viewed Crawford and Foster as inseparable. Clarke, whose role saw him ultimately reporting to Foster because the tourist board was under her department, said that Crawford ‘almost became quasi-permanent secretary [the most senior departmental official] of the department in terms of what you might say are difficult things: Irish language, difficult grant applications, whatever else’. He said that senior civil servants had made clear to him that ‘you cannot put a line between him and Arlene – they speak with one voice’.
Crawford told the inquiry that ‘from the very start of the RHI I was aware of budgetary implications’ and was asking questions about how the scheme was being funded and where the money was coming from. Significantly, the powerful young DUP adviser also told the inquiry that ‘I always likened the RHI scheme to the NIRO … That was always my view when the RHI was being set up and through the various iterations or the various papers coming forward: that there was a parallel in the two schemes moving forward’.
The NIRO (Northern Ireland Renewables Obligation) was being overseen by the same Stormont department and the way in which it was set up was lucrative for Northern Ireland. It was close to ‘free money’ in that the money for the scheme – much of which funded wind turbines – came from the public across the UK in the form of a charge on their energy bills. However, it was set up in a way that was doubly beneficial to Northern Ireland. Firstly, the amount, which the Northern Ireland public had added to their bills, was less than elsewhere in the UK. And secondly, the subsidy paid to developers was higher in Northern Ireland. That led to an explosion of wind farms across Northern Ireland – some of which had significant political connections – and pulled huge sums across the Irish Sea, far beyond the 3% share of the UK pot, which Northern Ireland would have received on a basic pro-rata share.
If Crawford’s understanding of RHI was, as he said, always viewed through the prism of the NIRO, and if he was being constantly told that RHI was being fully paid for by the Treasury, which he was, then it is easy to see how he would have come to the view that Stormont could spend as much as it wanted on RHI without consequences. In effect, RHI could be a backdoor addition to the block grant, particularly benefiting the rural community in which the DUP had a significant support base and especially agriculture, with which Crawford had long-standing high-level ties.
Foster told the inquiry that with NIRO some people viewed it as a good thing that Northern Ireland was getting more than its proportionate share of the UK budget. She said: ‘We were aware that NIRO was being funded and there wasn’t any difficulty if Northern Ireland went over its share as it were. And in fact for some people it would be seen as a good thing because we were taking more out of the pot as it were and bringing it into the Northern Ireland economy.’ Then, referring to how RHI was set up, she went on:
But if I had known there was a DEL consequence [Stormont might have to pay some of the bill], I would have been alerting the Executive to that … I think if I had known that it was AME with a DEL consequence, then I’d have had more of an alarm bell ringing as to degression [a cost control] and things like that.
However, when pressed about the implications of that logic, she insisted that although Stormont wanted to get as much Treasury money as possible into Northern Ireland it would never have deliberately chosen an expensive scheme, which was poor value for money in order to do so.
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Having engaged two firms of consultants and a specialist lawyer to make up for the lack of expertise within DETI as it tried to design its scheme, Hepper turned to a fourth outside body for advice. But, as with the previous three sets of advisers, DETI would not be happy with some of the feedback and would simply ignore some of it.
There was no tendering in August 2011 before DETI decided that it would appoint the GB energy regulator Ofgem – a section of which ran schemes on behalf of Whitehall departments – to explore how RHI might operate. In what the civil service described as a ‘Direct Award Contract’, no one else was able to bid for the work. Hepper justified the request – which was approved by Foster – by arguing that the way in which Westminster legislation had been drafted meant that Ofgem had to administer the scheme because it was described in law as ‘the authority’ responsible for the GB scheme. Her submission to Foster described Ofgem as ‘experts in the design of the scheme’ and added: ‘In addition, Ofgem legal advisors and development staff will carry out one full review of the draft regulations, and will advise DETI on Ofgem’s ability to implement the regulations as drafted, what changes may be needed to enable us to implement them in practice, and what changes may be required to streamline or improve implementation.’ But, having told the minister that one of the terms for Ofgem getting the contract was that it was to undertake to give expert advice on how to best set up the scheme, DETI would go on to consciously ignore explicit warnings which it was paying Ofgem to give.
The scheme was to be set up under regulations, a form of secondary legislation, which would receive less scrutiny in the Assembly than primary legislation. After awarding the contract to Ofgem, the regulations – which the department had drafted after rejecting the work of Bissett – were sent to Ofgem’s lawyers for line-by-line scrutiny. The response came back to Hutchinson and Joanne McCutcheon – two key staff working under Hepper to design the scheme – on 7 November 2011 and it was brutal.
The 26-page memo, which was drawn up by an Ofgem lawyer, set out ‘a considerable number of concerns’ with the regulations and said ‘it is critical that these concerns are addressed by DETI’. Many of the problems had already been highlighted in relation to the GB legislation on which Stormont was basing its scheme, and DECC, the Whitehall department responsible, was working on amending it. Ofgem suggested that DETI could either wait until the GB scheme was amended and change its scheme, or it could choose to ‘be proactive in addressing the issues’. Ofgem highlighted problems with preventing heat being used just to make money from RHI and warned about the potential for installing multiple small boilers to milk the most lucrative subsidy rate, rather than a single large boiler, which may otherwise be more logical. It also raised the potential for ‘parasitic’ burning of wood – where a boiler existed solely to dry wood, which was then fed into the boiler which dried more wood to be fed to the boiler and so on – simply to claim subsidy. It warned about the difficulties of deciding how to deal with domestic houses being heated under a non-domestic RHI. The document also explained that the regulations were so loosely drafted that ‘perverse’ outcomes could be lawful. Every one of those areas would become problems for Stormont’s scheme. But DETI decided to press ahead with its scheme largely unchanged, with the explanation that it would later follow whatever happened in GB.
Ofgem did not give up, coming back again and again to warn DETI that there were serious problems with what it was doing. In June 2012 – five months before the scheme would be launched – Ofgem suggested to Hutchinson and McCutcheon that they should speak to Whitehall about the changes being made in the GB scheme. Ofgem even passed on details of a contact who could explain the situation. Years later, Hutchinson spent five days giving evidence to the public inquiry but McCutcheon, his immediate boss, was the only major figure directly involved in the scheme not to give evidence at all, for reasons not made