Burned

by Sam McBride

  But that wasn’t the only problem for Foster at that point. In the submission, which asked her to sign the ‘blank cheque’, Foster was given more misleading information. In a prominent table, the submission set out the proposed tariffs for Stormont’s scheme and the equivalent situation in GB. From that it was obvious that GB had tiering – but tiering was absent from DETI’s proposals. In a small-print footnote on that page, Hepper explained that tiering was used to ensure that a boiler was not ‘over-used just to receive an incentive’. But she copied the consultants’ erroneous claim that ‘tiering is not included in the NI scheme because in each instance the subsidy rate is lower than the incremental fuel cost’.

  The scale of the scheme would have been obvious to the minister. She was told that the plan was to keep the scheme open until 2020 but that the last payments would not be made until 2040. Foster was being asked to commit her successors to potentially huge spending on this policy – and spending out of which they would find it exceptionally difficult to wriggle because she was told that tariffs were being ‘grandfathered’. That legal term signified that they were locked in and effectively exempt from a future government rethink where they could be slashed. She was given some comfort that there would be ‘scheduled reviews built-in … to allow DETI to ensure that the scheme remains fit for purpose and value for money for the duration.’ However, the officials’ errors were not picked up by the minister or her adviser – and the apparent view of the ‘box-ticking’ nature of the process does not suggest that she deeply pondered the extent to which the officials’ claims about value for money could possibly be right. That now undermines one of her later boasts. In October 2016 – just over a month before cash for ash would become a vast public scandal and imperil her career – Foster wrote an article for the Slugger O’Toole political blog. It began: ‘Detail is important. For someone from a legal background like myself this is a given.’ The article, which also claimed that the DUP had helped to secure a ‘durable’ system of devolution, now seems like Foster’s point of peak hubris. Despite knowing how she had operated as a Stormont minister, she wrote: ‘Our ascent to the natural party of government doesn’t mean overseeing the paper shuffling’.

  Foster would later attempt to blame her civil servants for the entirety of the RHI disaster and not accept that she had made any errors which could have been seen at the time.

  But whatever Foster’s failings, it is clear that she was failed by her officials. Hepper’s March 2012 submission, seeking approval for the scheme to proceed, told Foster that ‘under RHI only “useful heat” is deemed eligible; this is defined as heat that would otherwise be met by fossil fuels’. The submission – on the cover of which Foster wrote by hand ‘content’ – added: ‘This excludes deliberately wasting or dumping heat with the sole purpose of claiming incentive payments.’

  Missing the ‘blank cheque’ wasn’t the only occasion on which Crawford failed to spot bear pits for his minister. Despite the handpicked spad being paid around £80,000 in the expectation that he would be digging through detail to protect his minister, Crawford admitted that he had not read either of the two CEPA reports for which DETI had paid £100,000 and which formed the basis of the scheme. The spad denied even having been sent the second report – CEPA’s addendum. If that is the case, he did not insist on seeing it. Foster said she believed that Crawford was reading at least the executive summary of reports, such as CEPA’s, but seemed reluctant to criticise the man who had been at her side for most of her ministerial career. When Crawford was asked if he had let the minister down by not reading the reports, he said:

  Look, I let; I believe I let; I’m very sorry that I didn’t read it in detail to flag this up … I do not think that there was an expectation there that I should be analysing technical reports and bringing things to her attention which are at odds of [sic] the submission that she is signing. However, look – it is a regret of mine that I didn’t identify this and flag it up.

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  But although it might seem that Crawford was neglecting to scrutinise the scheme, there is other evidence of him taking an interest in RHI in this early period. The full picture of how Foster’s spad – who is perhaps the single most significant figure in the entire RHI story – acted in this period is complex. To understand Crawford’s significance to this story, it is necessary to understand the immense power wielded by spads within the devolved Executive. Personal appointees of their ministers, spads were handpicked outside employment law and given generous salaries far above those of MLAs and sometimes higher even than those of ministers.

  Some spads were exceptionally capable and some of them were widely respected for their abilities to oil the wheels of power, sitting between ministers and mandarins. But the Stormont system saw spads become more and more powerful, while lacking the constraints of accountability to which ministers – at least on paper – were subject. And Stormont was awash with them. The Office of the First Minister and deputy First Minister alone had eight spads: four for the DUP and four for Sinn Féin. That department fought a long and determined rear-guard action in an attempt not to reveal how much its eight spads were paid (up to £92,000, it later admitted). Salaries for many of the spad roles had more than doubled since devolved government returned to Northern Ireland after the 1998 Good Friday Agreement, and by 2015 a total of 19 spads were costing taxpayers almost £2 million a year. There was a sense at Stormont that spads were attractive to ministers because they could act in ways which carried the implied authority of the minister while allowing the minister plausible deniability if their actions became politically problematic.

  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 signi
ficant 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 McCutheon – 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 public at the inquiry. In May 2011, as it seemed that DETI was determined to press ahead with legislation, which it had been told was profoundly deficient, Ofgem lawyer Marcus Porter emailed a colleague to express alarm at what was unfolding. He concluded by observing that ‘taking the easy course now may well lead to problems later’.

  Porter, a former flight lieutenant in the RAF’s legal branch who in that role undertook courts martial, was so alarmed at what DETI was doing that on several occasions he recorded in writing to Ofgem colleagues that the body should consider refusing to take on the administration of the scheme until DETI agreed to address the deficiencies.

  In June 2012, a further Ofgem legal review of the regulations reminded DETI of the GB cost controls. That same month a crucial teleconference took place involving six Ofgem staff and two DETI officials – Hutchinson and McCutcheon. Ofgem emphasised again the problem of DETI pressing ahead with implementing a scheme known to have multiple deficiencies. But minutes of the meeting show that DETI said it was their intention to do so and then alter it the following summer. Ofgem’s minutes recorded:

  Ofgem’s advice was to wait until the GB regulations are amended as the amendments will serve to negate any risk that the regulations currently pose. However, DETI were clear that they have a commitment with their minister to bring the regulations into force by the end of September … It was also felt that to do otherwise would also put financial arrangements in jeopardy.

  Porter, the experienced Ofgem lawyer who was on the call, later told the inquiry that the concerns he raised at that meeting ‘seemingly made no impression on DETI’. He was dismayed.

  The officials, who were already behind schedule on getting the scheme launched, appear to have believed that they could not delay any further. Hepper said that the timetable for launching RHI had been set by Foster. Foster accepted that she had told the officials to get the scheme launched ‘as soon as possible’ but said the ‘as possible’ was crucial in that context and added: ‘I certainly don’t have any recollection of saying “This has to happen by September.”’

  The impression of officials feeling under ministerial pressure to move rapidly is reinforced by an email sent just minutes after the June 2012 meeting by senior Ofgem manager Luis Castro. Castro, who had been present, said to a colleague that DETI officials had told them that ‘NI ministers want the scheme to go ahead as soon as possible … and will not wait for amended GB regs’. Ofgem manager Keith Avis, who chaired the teleconference, was ‘nervous’ about the minutes of the meeting containing criticism of the GB regulations, something which would be implicitly critical of DECC, a major client of Ofgem. But Porter felt strongly that the minutes should reflect what had been said. Two days later, after being shown draft minutes, which did not fully convey what had gone on, he emailed Avis to ask for the minutes to be changed. After Avis expressed reluctance to do so, Porter said: ‘I think it important that there is an official record that
, at our first “meeting” with DETI we hammered home the fact that we had significant concerns regarding the course they are proposing to adopt.’

  The following day Castro emailed to back up what Porter was saying: ‘I think that what is important is that we capture the fact that our clear recommendation to DETI was to wait until regs are amended due to the risk the current ones pose.’ Hutchinson – the only DETI official on the conference call who gave evidence to the inquiry – did not dispute that Porter had made clear the risks of pressing ahead. However, he suggested that once it was made clear that DETI intended to do so the Ofgem figures accepted that and moved on to discuss other issues. It was a hugely significant moment. Months earlier, DECC had decided that tiering on the GB scheme was insufficient to protect public money, and moved to urgently implement an interim cost-control measure ahead of a longer-term sophisticated system to prevent an overspend. DETI, meanwhile, was moving in the opposite direction – stripping out the limited cost control of tiering and making no concrete plans to implement the changes happening in London.

  The absence of tiered tariffs concerned many of those who viewed DETI’s proposals. Ofgem’s Oliver Moore noted internally in July 2012 that the increased biomass tariffs had jumped out at him, as well as the fact that there was no tiering. He highlighted that tiering had proved a good way of reducing the incentive to waste heat, adding pointedly that ‘taking it out increases the likelihood of abuse and heat wastage’. But, determined to get RHI launched soon, DETI’s mind was made up.