Burned

by Sam McBride

  Looking back on what happened at the committee that day, McGlone said that he now felt that Wightman had been ‘misleading the committee – which is the scrutiny body for the public’. He drew attention to the fact that he had asked Wightman why there was such urgency about the issue. The civil servant knew better than anyone that the real answer was that the scheme was bleeding money. However, McGlone said that he interpreted Wightman’s answer to be that it was ‘just a wee bit of housekeeping work’ and an attempt to help the renewable energy industry by giving it clarity.

  He said: ‘No member of that committee could have gone out of that room after hearing Mr Wightman’s comments and said “there’s a problem with this”. We’re sent by the public to do a job and we try our best. But when you’re not provided with information and that is deliberately withheld from you, that’s not how any sort of democratic accountability should work.’

  But even on the day that the legislation was passed, 13 more boilers would enter the scheme. Based on how they were being used, those boilers alone would be in line for more than £3.1 million of taxpayers’ money.

  The following day, tiering and a cap were finally introduced. Over the previous ten weeks there had been 982 RHI applications, more than in the entire life of the scheme up to that point – a period of three years.

  CHAPTER 14

  YOU’RE ON YOUR OWN

  On Friday, 13 November 2015, Tim Cairns was taking his children to a church kids’ club when his phone rang. It was Arlene Foster, phoning on behalf of a constituent.

  It was five days before the RHI cuts were to come before the Assembly. Foster, aware of the looming subsidy reduction, enquired whether it would be possible to delay the scheme being made less financially attractive. The reason, she said, was that one of her constituents, Stephen Harron, wanted to install six RHI boilers and would not be able to get them into the uncapped scheme without further time.

  Harron, a salesman for Hegan Biomass, had phoned Foster, who was both his local MLA and, prior to entering politics, had been his solicitor, in an attempt to get what he said were clients’ boilers into the uncapped scheme.

  With one eye on his children, Cairns phoned Andrew McCormick and passed on the message, asking if it would be possible to delay the change by a week. McCormick said that he thought that would be impossible but that he would check. The senior civil servant said that he recalled Cairns referring to ‘a concern that not enough businesses in Fermanagh [Foster’s constituency] had been able to apply — there was certainly a reference to Fermanagh’. He said that Cairns had not mentioned Foster on the call, and it was the reference to Fermanagh that meant it was ‘clear that the call was on behalf of Arlene Foster’. Neither Cairns nor Foster dispute that the request was made largely as McCormick had said, but disputed his reference to Fermanagh.

  McCormick quickly consulted his deputy, Chris Stewart, and that night replied to Cairns that such a delay would cost £52 million over 20 years and that he would refuse to do so unless a ministerial direction was issued from Bell. Cairns passed the information to Foster and waited for what he described as ‘instructions’. With the legislation due up in the Assembly in four days’ time, there passed a weekend of what McCormick viewed as ‘material uncertainty’ over whether the changes would now go ahead on time, ‘which was a genuine and serious concern’. On Monday, Cairns texted the permanent secretary to say that they were ‘back from the brink’ and there would be no further delay.

  Although the request troubled McCormick, Cairns later said he ‘didn’t seriously believe’ that Foster was asking for an extension but was just going through the motions of asking on behalf of her constituent. Regardless of whether that was her intent, it was particularly odd for Foster to have made any such request because she was the Finance Minister. Common sense would have told her that keeping the uncapped scheme open would increase the bill to taxpayers. However, Foster told the inquiry that she was unaware of the extent of the overspend and had not discussed the issue with Andrew Crawford, who had been aware of the problem for months. Foster said that if she had been aware of the scale of the problem she would not have made the request.

  Harron’s wife did get a boiler installed on the uncapped scheme – with an installation date of 16 November, the day on which Foster dropped her request for an extension and just one day before the subsidy was cut. Harron himself ultimately installed two 60 kW boilers on 29 February 2016 – right at the end of the tiered scheme.

  As with so much in this period, Bell seems to have been an almost incidental figure who was not even aware of the request from Foster. It was Cairns who was the key conduit both for senior DUP figures attempting to influence DETI policy and for mandarins seeking to get a ministerial decision. McCormick later said: ‘I have no recollection and I am not aware of any record of Jonathan Bell pressing for early action on the RHI during the period between 3 September and the end of December 2016.’

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  Immediately after the November 2015 changes, demand for RHI dissipated – even though it was still generous. But another problem remained. Hundreds of millions of pounds of public spending had been incurred without proper authorisation. Unless something could be done to regularise that irregular spending, DETI’s accounts were going to be qualified for 20 years. That was an unthinkable situation for any public sector body. But for the department which was responsible for the economy and enforced company law in Northern Ireland, it would have been humiliating.

  Since the summer, officials had been working on attempting to convince the Department of Finance to grant both prospective approval for future expenditure on the scheme and retrospective authorisation for what had already been spent. The document into which they poured their efforts was called an ‘addendum business case’. While securing approval for future spending appeared relatively straightforward after the scheme was made less lucrative, it was clear that DETI was only likely to get retrospective approval for the uncapped scheme if it could be presented in a positive light.

  Herein lay a contradiction. For the approval process to mean anything, departments needed to be brutally frank with each other. But being brutally frank about RHI – a scheme which had run out of control and which DETI at least suspected was overcompensating claimants – was unlikely to convince finance officials to approve it as an acceptable use of public money. What DETI now did was construct an absurdly implausible picture of a scheme which – even if it did not fully understand the perverse ‘burn to earn’ incentive – the department knew was deeply flawed.

  Four years earlier, consultants CEPA had told DETI that the entire scheme was likely to lead to a net increase of 37 jobs in Northern Ireland – because new green energy jobs were often replacing what would have been jobs in oil or gas installations. But now DETI appeared to pluck figures from thin air to suit its case. The addendum business case claimed that for every 12 boilers installed, four jobs would be created for the lifetime of the boiler – a figure which equated to about 600 jobs for the almost 1,900 boilers then on the scheme. It was preposterous. But it suited DETI’s attempt to justify the huge expenditure which had been incurred and the claim survived as the document went back and forth among DETI’s top officials.

  The document claimed that for every £74 million of RHI expenditure, £107 million worth of jobs ensued. The inquiry’s technical assessor, Keith MacLean, was withering about that claim, saying ‘it’s difficult to see how that passed the snigger test’.

  The plea for retrospective approval also claimed that the ‘burn to earn’ uncapped RHI ‘provides continuous and continuing value for money’ and insisted that ‘the department could not have reasonably acted sooner’ to rein it in. The document, which was primarily written by Wightman but which had input from multiple senior DETI officials, was wildly misleading.

  As the summer wore on, the document became a departmental priority because the irregular spending was now a DETI-wide problem. DETI economist Alan Smith
was drafted in to assist with the construction of the argument that the expenditure should be approved. The figures which he calculated showed the scheme in a glowing light, with huge economic benefits and a positive return for taxpayers. He had, however, added a major disclaimer to his figures, saying that the estimated employment benefits was ‘very much reliant on assumptions’ which required further analysis, and added: ‘Care should therefore be taken in quantifying the employment benefits because of this degree of uncertainty and whether additionality of jobs has been fully tested.’

  That note of caution was stripped out by Wightman. When asked why he had done so, he told the inquiry that it was ‘human error’. He said that he had ‘no intention or desire to remove the caveat’ and he had seemingly done so ‘accidentally’. Whatever the reason for that line’s removal, it conveniently meant that DETI’s flimsy argument appeared somewhat more robust – especially because DETI did not send the document until the last moment, limiting the time for scrutiny.

  Senior finance officials had expected the document in August, but did not get it until 27 October. By now the legislation for tiering was on the cusp of being brought before the Assembly. Finance officials felt that they had no real option but to approve the prospective element of the request because by now a refusal to do so – even if there were major problems with it – would lead to the even worse outcome of the uncapped RHI continuing.

  It may have been that a lack of political pressure fed into officials going slow. Although Bell insisted that he had been a hands-on minister, there is little evidence of him pressing for the document to be urgently drawn up, or of questioning why that had not happened. And whatever limited implicit political pressure there was to get it to finance officials, it dissipated when Bell resigned from office for most of the period between 10 September and 20 October.

  The delay was also at least contributed to by Wightman having other duties. Senior DETI economist Shane Murphy said that Wightman had told him at the time that the delays were partly because ‘he was having to also take forward other work’. Trevor Cooper said that Wightman had confirmed to him in a later conversation that he had been instructed by his boss, John Mills, to prioritise another project, Energywise, over RHI. Wightman agreed that he was working on Energywise at the same time. However, he denied that it had been prioritised and said that he was working directly for Stewart on that project. He said that yet another issue – NIRO – had been prioritised above everything else.

  Mills said that he could not have told Wightman to focus on Energywise because he did not manage Wightman’s work on that. But he accepted that Wightman had other responsibilities in this period, and that with hindsight actions which he took to increase staffing were ‘insufficient’.

  Within days of receiving the addendum business case, the Department of Finance granted a conditional and heavily caveated approval for tiering. But on 21 December, DETI was informed that the request for retrospective approval had been rejected.

  Wightman was more candid with the inquiry than he had been with his fellow civil servants in the finance department. He told the inquiry: ‘I did feel under pressure from senior officials, in preparing the business case, to justify the scheme in its unamended form and for spending to be regularised.’ As earlier in the story, individual civil servants – and here a whole department – seemed more concerned about limiting criticism of themselves than they were about presenting the full unvarnished picture to colleagues so that the truth could be established and problems properly addressed. If civil servants could not even be brutally honest with each other behind closed doors, there was less likelihood of them being candid with the public.

  The document would have been even more indefensible if those working on it were aware of the widespread rumours that RHI was being abused. Cairns said that during the summer of 2015 he had received generalised rumours of abuse from Crawford and had passed these on to officials. Stewart and McCormick claimed that they had relayed those rumours to Wightman.

  Wightman said he had ‘no recollection’ of McCormick ‘directly passing on to me any warnings of possible scheme abuse. I believe I would have remembered because as a Grade 7 I did not have many direct contacts with Dr McCormick’. Wightman said he thought it was ‘much later’, around September, that he got ‘anecdotal claims of basically empty buildings being heated.’ However, in his earlier interview with PwC he had referred to such claims almost a year beforehand.

  Cooper, who as DETI’s finance director was heavily involved in scrutinising the addendum business case, said that although it claimed the scheme was ‘continuous and continuing value for money’, he knew that RHI could not be best value for money. He justified allowing that phrase to remain by saying that he was passing on the views of others within DETI. Cooper said that in other conversations with the finance department he was more candid, suggesting that – as with so much of what went on in Stormont – what went down on paper was not necessarily the real story.

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  The day in December 2015 when Stormont’s mandarins realised every penny of the 20-year RHI overspend was going to come out of Northern Ireland’s budget was ‘a day of complete dismay’, Stewart later recalled. Despite the false hope of August, when DETI misinterpreted a spreadsheet to assume that the Treasury had simply sent it the extra money which it needed, over the autumn there had been increasing signals that this was not going to be a bottomless pit. But even after reading the 2011 email from Jon Parker in the Treasury, which made clear that there would be penalties for overspending, they expected the penalties to be limited. Parker had speculatively suggested a possible figure of 5%, as well as offsetting any overspend in one year with other underspends. But DETI had never clarified this vague hypothesising in an email from a helpful Treasury official four years earlier. In the rules-based world of the civil service, it was the flimsiest of defences – especially coming ex post facto.

  By now there was a vast bill to explain to the Treasury. The spike had more than doubled what was already a problem in the spring of 2015. It was an inopportune moment at which to go to the Treasury in the hope of a sympathetic reception.

  The level of panic at this point appeared to reinforce the idea that as long as London was footing the bill there was limited urgency – but when the money was coming out of Stormont’s budget there was horror. Stewart conceded that was how it could look. But he insisted to the inquiry it was not the reason for the furious activity which happened after the realisation that Stormont was going to have to pay.

  He said:

  An overspend of the extent that manifested itself was a very serious matter for which we were always going to be, rightly, seriously criticised. But, whilst it was capable of being borne on the broad back of AME and some DEL [Stormont’s main budget], then it was at least feasible to do that. Once it reached the point where it had to be borne entirely from DEL, it’s not that it suddenly started to matter, it suddenly became completely unaffordable.

  He said that it had been ‘a day of complete dismay because we realised that … that money was going to have to be found from other programmes.’ When Cairns and Bell were given the bad news, ‘there was silence for a few seconds’, Cairns recalled. Cairns in particular must have in his mind gone back over his role in the delays.

  Now, with panic moving across the Stormont system, Crawford was made aware that the money was coming from Stormont’s budget. Senior finance official Mike Brennan emailed Crawford, now the spad in the Department of Finance, on 18 December, noting that ‘you asked if there was any update on RHI yesterday’. Brennan told him that the Treasury had informally confirmed that the formal ‘settlement letter’ ‘will state that the NI DEL will have to take the hit on the excess RHI payments’.

  Over the preceding weeks, finance officials had in vain attempted to construct arguments as to why Stormont should not have to pay. One of those arguments was that Northern Ireland was now contributing more towards the UK’s natio
nal renewable heat targets than 3% – its share of the UK population – and therefore it should get more than 3% of the national funding.

  Now Brennan told Crawford that the Treasury had come back to dismiss that plea, telling Stormont that the national targets had never factored in Stormont’s actual number of installations and had just assumed a 3% figure, so no matter how many green boilers were installed in Northern Ireland anything beyond 3% was not being counted towards the UK’s target.

  There was one small concession from London. For reasons which are unclear, Stormont was told that the Treasury would not seek to claw back the overspend in the current financial year. But that was outweighed by the message that for the next 20 years the full overspend would come out of Stormont’s budget. Brennan told Crawford that ‘in light of this we will now have to issue a letter to DETI to advise them to take corrective action immediately’. RHI would have to be shut.

  It would have been common for Stormont officials to raise an issue at official level and be knocked back, only for ministers to then get involved. But on this occasion there was no escalation by Stormont ministers to their London counterparts. Perhaps enough was understood about what had gone on with RHI to not invite any external scrutiny. The following month, McCormick said that ‘we have advised ministers that nothing would be gained by seeking to re-open this debate with Treasury, particularly in the post ‘Fresh Start’ [the recent political agreement between the DUP, Sinn Féin and the government which involved extra money for Northern Ireland] context that we find ourselves in with NIO/Treasury. Our stock is low.’