by Sam McBride
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Given the sea of rumour and allegations, which have swirled around RHI, the most convincing thing about Fred Maxwell’s story was the openness of the man who told it. The major RHI claimant agreed to be interviewed and then walked into a newspaper office to hand over financial documentation behind his payments.
The Clogher Valley poultry farmer grew his business to become Northern Ireland’s largest producer of chickens. Maxwell installed the first of his ten biomass boilers in July 2013. Sitting in the News Letter’s office in September 2017 – six months after the first RHI cuts took effect – the industrial scale farmer estimated that by that stage his total investment in the boilers and their running costs was about £2.1 million – mounting by £4,000 each week for fresh wood chip. He had received more than £900,000 in subsidy by February 2017.
Three of his boilers were used to dry wood for the other boilers. But they had not been accredited by Ofgem, a decision he said was ‘scandalous’ because Stormont encouraged him to install the drying facility and Stormont’s Greenmount Agricultural College had used it as a positive example of burning locally sourced timber. The middle-aged farmer said: ‘The loans were all done based on the RHI income and the farm income – once one of those goes, the other has to prop it up because banks have to be paid. They won’t take no for an answer. They have to get their money.’ Maxwell’s wife, Amanda, argued passionately for audits to identify fraudulent claims: ‘We’re not doing this for any crook – they make me sick, just thinking about them. They need to hook them out and make them pay their money back.’
At the height of the scandal, Maxwell faced unfounded allegations from the blogger Jamie Bryson that he was ‘a large DUP donor’ and that he had close relationships with senior DUP spads who advised him on how to maximise RHI returns. Bryson, who had DUP sources aware that he would publish material which journalists would not report due to libel concerns, reported a suggestion that ‘there was an agreement that some of the profits creamed from the RHI scheme would be funnelled back into the party as ‘donations’. There was never a shred of evidence for that. Mrs Maxwell vehemently said that it was ‘absolute nonsense’, adding: ‘I wouldn’t give them DUP dopes one penny; never have, never will. They couldn’t run a tap … I’ve never been to a DUP meeting in my life – would I waste my night?’
With the inaccurate allegation that they had been part of some DUP inner circle benefiting from RHI, and with the public perception that every RHI claimant was a swindler, she said that they faced social stigma. She likened it to being in a room full of innocent people where everyone knows that one of them is a rapist, leading to everyone facing suspicion until the innocent men in the room are cleared. Her husband phlegmatically said: ‘Dirt sticks and no matter what ever happens, this is with us for the rest of our lives because that’s what people think.’
The Maxwells were among five RHI claimants, most of whom were farmers, who I spoke to in September 2017. All said that they were facing extreme hardship and mental trauma – in some cases because they had used the promise of the lucrative RHI funding to fund business expansion with huge loans. One man broke down as he spoke of his debt being like a ‘ball and chain’ which had him working 100 hours a week.
Another man told how he was initially turned down for a loan but he had ‘really pushed’ the bank and took his borrowings to the limit. ‘I wish I’d never gone anywhere near it,’ he said. Dismissing the erroneous perception that most of those on the RHI scheme had some link to the DUP, he said ‘I’m not in the DUP or any party – I think they’re all useless’. Breaking down, he said: ‘It’s a nightmare. I’ve borrowed £350,000 over 10 years. Next month I’ve an £8,000 payment to make. I’m working night and day to pay that. I’m spending no time with my family. I could strangle the civil servants because they aren’t accountable – I’ve done nothing wrong but I’m the one who’s paying.’ Like most claimants, he had still not been audited but said: ‘I wish they would come out and audit because this is putting my head away.’
A boiler installer said that he did not have a boiler, but his father was a claimant and
on current levels he cannot repay his loans … he collapsed one day and was in hospital for three weeks. The stress is palpable. You’ve got the financial stress and then the emotional stress because they don’t feel able to speak to anybody. I know someone who went to his GP who, in his view, was less than sympathetic. There is an underlying sentiment that other services have taken a hit and RHI is responsible, which I don’t believe is the case.
Claimants had on their side a considerable moral argument because in September 2016, three months before BBC Spotlight, DfE’s top civil servant, Andrew McCormick, endorsed what most claimants had done as normal human behaviour. At the Public Accounts Committee, DUP MLA Trevor Clarke asked him: ‘If you needed 280 kW of heat, would you go for three burners or one? Would you go for three on the basis that you would get 5·9p per kWh or for one at 1·5p per kWh?’ McCormick replied: ‘Obviously, you would go for the one that is more lucrative.’ Clarke asked: ‘What would you have done wrong?’ McCormick replied: ‘Nothing.’
David Kernoghan, a farmer in Broughshane, installed five boilers – four 99 kW units to heat poultry sheds and a smaller 35 kWh boiler for an office and his house. While building two new poultry sheds in summer 2013, RHI had been suggested to him by his electrician – who specialised in poultry houses and saw what was going on elsewhere. But Kernoghan was wary about the large investment and the ‘hassle’ of the extensive plumbing. Eventually, he came to the view that ‘if I didn’t do it, I knew I could be put out of business because there are very tight margins in poultry’. When his first units were installed in July 2014, he said that Moy Park was ‘not pushing’ biomass and to him seemed ‘not overly interested’ in what he was doing. ‘Moy Park are a hard firm – but they’re professional. I like working with them. I want to do business, they want to do business and I’m happy.’ He said that politicians and civil servants ‘don’t seem to realise the damage they’ve done to Northern Ireland – and they don’t seem to care’. Though bruised by his experience and left distrustful of government promises, Kernoghan had at least paid off the cost of his boilers. Others were not in that position.
Alan Hegan was heavily involved in RHI – as a claimant, a boiler installer and a biomass fuel supplier. But by 2018, he said that his boiler installation business had ‘all but collapsed’. Although he did some work in England for a period and continued to service boilers in Northern Ireland, he said that his company was heading for possible closure. A similar company ceased trading the previous week, he told the RHI Inquiry in October 2018.
He said: ‘There’s not one biomass boiler that has been installed in Northern Ireland in the last two years.’ Hegan said that Stormont’s decision to break its promise meant that confidence in government had been ‘shattered’. He said that the industry would not recover and he did not know how lucrative Stormont would have to make a green energy scheme to persuade people to take a risk.
Hegan also said that he could not accept that the department responsible for energy did not know that the cost of biomass fuel was less than what it was paying in subsidy. In forthright testimony, he said: ‘This was not a secret. Everybody was widely aware of this – but this was accepted.’ He highlighted that tariffs in GB – where there were cost controls to stop unlimited burning – were also higher than the cost of fuel to speed uptake. Dismissing Stormont’s argument that those who knew that the subsidy was higher than the cost of fuel did not alert it to that fact in a ‘conspiracy of silence’, he said:
I say that’s a similar argument to saying [major gas suppliers] Firmus and Phoenix Natural Gas have a conspiracy of silence that they’re not telling the department what price natural gas is … there’s no conspiracy of silence as to the price of pellets … it’s the equivalent of saying ‘we don’t know what price diesel is; we don’t know what price petrol is’.
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bsp; He said that he would have seemed ‘a fool’ if he had pointed out to civil servants what price biomass fuel was, adding: ‘It would be like me ringing up the department at the minute and saying “do you know what price mains gas is?” He added: ‘It is my steadfast opinion that DETI was aware but chose to ignore the issues, in their quest to roll out the programme.’
CHAPTER 24
FREE MONEY
Two decades before RHI was conceived, the Northern Ireland Civil Service identified the moral hazard that would contribute to the destruction of devolution in 2017. In 1992, as the Troubles continued to rage but what would become the peace process was getting quietly under way, a civil servant in Stormont’s Department of Finance performed a detailed analysis of public spending in Northern Ireland. His confidential assessment, which went to Stormont’s top mandarins, calculated that the previous year government spending in Northern Ireland was close to 43% higher than the average in the rest of the UK, and that in several areas of expenditure Northern Ireland was receiving ‘between three and four times’ more than the UK as a whole. The only area he could identify in which Northern Ireland received less money was roads and transport.
To this day Northern Ireland remains enormously dependent on GB in financial terms, receiving about £10 billion more per year from the Treasury than is raised locally in taxation. The 1992 civil service analysis was striking because it did not major on the Troubles as the reason for increased public spending, an argument still being used – and with some legitimacy – by many local politicians more than 20 years after the Troubles ended.
The author of the paper probed the strength of Stormont’s argument that Northern Ireland either deserved the money which it received or ought to be receiving even more. He said that while the higher spending had not been the subject of ‘direct controversy’, there was ‘a common perception in Whitehall that NI is very generously funded, if not actually over-funded’. He set out what ‘at least at a superficial level’ explained Northern Ireland’s increased dependence on the taxpayer – proportionately higher social security spending because of higher unemployment and lower incomes, higher agriculture expenditure because of a larger agricultural sector, higher health spending ‘because of higher levels of morbidity’, higher education spending because of a relatively young population ‘and so on’. But he said there was a dichotomy between the ‘apparent wealth’ of Northern Ireland’s public sector and the difficulty which they found each year in funding public services.
The Department of Finance official then raised a question, which is crucial in understanding RHI: is higher public spending always necessarily a good thing? He wondered whether having a large pot of money which had to be spent could lead to undesirable behaviour. He raised what he said was a controversial question – the degree to which the ‘need’ for public expenditure is dependent upon that money being available. He said that there was the potential for moral hazard ‘where the existence of public expenditure gives rise to a “need” to absorb it by encouraging undesirable changes in the behaviour of individuals or organisations …’ He said that if this was the case it would ‘call into question the general assumption that securing a larger share of available public expenditure in the UK for NI is a desirable objective’.
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In February 2016, as RHI was about to be shut and MLAs were beginning to ask awkward questions, senior DETI official John Mills spoke the unspeakable. Appearing before the Assembly committee which scrutinised DETI, he was asked why cost controls had not been introduced earlier. The official, a veteran of the Northern Ireland Civil Service (although ironically he was English), replied candidly: ‘At that point, the Northern Ireland scheme was under performing and we were not using up what you might say was free money in terms of AME [Treasury money] to bring it in. So the minister decided that the priority should be on the introduction of the domestic RHI scheme so resources were devoted to that.’
As already recounted, Mills later retracted his claim about Arlene Foster having consciously decided to delay cost controls. But the rationale in his mind for that decision – whoever took it – was that it was a legitimate and unsurprising policy objective to keep open a deeply flawed scheme in order to use up ‘free money’ from London. It was a perfect exemplar of the perverse outcome which the Department of Finance official had identified some 24 years earlier. But Mills was not some rogue official operating to radically different values than his colleagues and his political masters. While he expressed the philosophy in cruder terms that was common, the idea that one of Stormont’s overriding goals was to spend as much of London’s money as possible was deeply engrained across the devolved political and administrative apparatus.
In some circumstances, there was nothing wrong with such a view. If the national government in Westminster wanted Stormont to contribute to a national effort – in this case, cutting carbon emissions to stave off EU fines – then the financial incentive to do so was a legitimate carrot. But that benign hypothesis was not what was happening with RHI. Stormont had decided not to copy the GB scheme, which would have seen a fair distribution of funding across the UK, and instead created a far more generous scheme. Despite repeated warnings, it ignored the problem until the budget had been broken and it began to fear that it might impact its own funding.
Foster’s spad, Andrew Crawford, had been personally given allegations that RHI was being abused, yet after having been warned he said that he could not see what the problem was because London was paying. In his own words, ‘I would have thought that this is to NIs [sic] advantage’.
DETI Permanent Secretary Andrew McCormick was not aware of that email when it was sent in mid-2015. But he was not oblivious to the philosophy behind it. Mandarins knew that ministers wanted to get as much money into Northern Ireland as possible. In a note to the Head of the Civil Service in February 2016, as he sought to defend himself in the face of awkward questions about what had unfolded, McCormick said that if it had been known earlier that London was not paying the full bill, ‘DETI may have recommended to ministers that we should move straight to suspension, rather than to introduce tariff controls’. He said that ‘had the [funding] position been clarified earlier, we might have had an opportunity to introduce cost controls at an earlier stage’.
Just prior to the scandal erupting in December 2016, McCormick went further, telling the Public Accounts Committee that civil servants agreed in mid-2015 to delay cost controls ‘because that was the view that was wanted [by the DUP]. It was a determined view, partly driven by the thought that it would maximise our take on funds from London. That was definitely part of the thinking. That was wrong and not acceptable, but …’ That indicates that there was a looser approach to money coming directly from the Treasury. And yet Stormont’s bible on public spending, the voluminous Managing Public Money, was clear that the same principles should apply to the use of all taxpayers’ money. It said that as accounting officers, the permanent secretaries of Stormont’s departments had to ensure value for money ‘judged for the public sector as a whole, not just for the accounting officer’s organisation’.
McCormick’s predecessor at DETI, David Sterling, told the inquiry that although as an accounting officer he was required to treat the spending of public money with the same diligence, ‘if there’s an opportunity to draw down money which will give an economic benefit in Northern Ireland, the realpolitik here is that we draw down the maximum amount that we can because we will get an economic impact from that’. He said that ‘if it [RHI] had been constructed differently, we might have been incentivised in a different way and indeed more strongly to go for the cheaper option’.
Sterling, by then Head of the Civil Service, insisted that the desire to get the most money into Northern Ireland would not lead to departments compromising value for money but added that ‘you’re not obliged to choose the cheapest option on all occasions – there are other factors’. He added:
When you are in a devolved
administration, you will seek to maximise the amount of resource you can get from the Treasury – it might generate some surprise but it shouldn’t. That’s the way in which we operate … Part of the reason for that is that you obviously want to maximise the resource available for the local economy and for public services but on top of that there’s an expectation – ministers and politicians – that we will again draw down the maximum amount that is available.
David Scoffield QC asked if he would have thought ‘the more money we can get from England, the better … so let’s fill our boots’. Sterling replied: ‘I wouldn’t be that cynical.’ But while Sterling either wasn’t that cynical – or was too shrewd to put it in those terms – Crawford did not have any such compunction and clearly saw overspending not as an error but as a perfectly acceptable policy. That is clear from his 2015 email. However, McCormick told the inquiry that the spad had at one point used that precise phrase.
