of the catastrophe that was to follow, some people would look back at what had happened during the design of the RHI scheme and wonder if someone in the DUP had not been primarily thinking about the environment at that point but had spotted the potential to supplement Stormont’s budget by the back door.
CHAPTER 3
LET’S SPEND BIG
In late June 2011, consultants CEPA delivered their verdict on how Stormont should incentivise renewable heat. Except, bafflingly, they didn’t. The company, which would be paid about £100,000 to advise DETI on how to encourage green heating systems, delivered a report which did not fulfil their central contractual obligation.
Key sections of the lengthy technical document focussed on a comparison between setting up a Stormont-run RHI scheme, or a grant-based scheme, called a challenge fund. The challenge fund would competitively allocate the available funding from the Treasury each year, allowing the market to provide the most cost-effective means of using the money. Once the funding ran out each year, it would shut, making it impossible to overspend. The alternative, an RHI scheme, would by contrast provide ongoing payments over 20 years to each boiler owner, with the payments linked to how much heat they produced. Having examined the numbers, it was clear to CEPA that the challenge fund provided vastly superior value for money.
On three separate occasions throughout the 145-page report, CEPA said: ‘the challenge fund delivers the most renewable heat, at the lowest cost’. The report did say that an RHI scheme would have other benefits – such as providing a long-term signal to the renewables industry and encouraging people to use their boilers, rather than simply install them and revert to fossil fuels – but was clear that such a scheme would be ‘significantly more expensive over the long term’. CEPA calculated that an RHI scheme would cost about £200 million more than the challenge fund. It wasn’t even close.
But then, having said that, the report made no recommendation. To anyone who might have studied the report, it was a strange outcome – but all was not as it seemed. Behind the scenes, CEPA felt that the department had steered it away from saying what it really thought.
Private emails from six years later – by which point CEPA was preparing to face the public inquiry into a scandal in which it had played a crucial role – helped unravel the mystery of how the consultants delivered a report, which did not meet their contractual obligations. Yet, the civil servants seemed happy with it and agreed to pay them £100,000 without quibble.
In one email, Iain Morrow, a former CEPA employee who had been heavily involved in writing the report, told the consultancy’s director, Mark Cockburn, that in 2011 it had been ‘clear that DETI wanted an RHI’ – a 20-year expensive scheme – rather than any other proposal. In the email, which the inquiry compelled the company to release, he went on:
They would have liked us to recommend an RHI, but we felt, I think, that we couldn’t make the judgement for them about whether their internal issues made a challenge fund unworkable. So, we agreed with them that the report would not make a firm recommendation. I seem to remember that this wasn’t something they accepted easily. They wanted us to make a recommendation, but we said that it could only be to do a challenge fund, which they didn’t want.
Sitting before the public inquiry in 2017, Cockburn admitted that ‘there probably was some negotiation over what the final position would be’. He was pressed by inquiry chairman Sir Patrick Coghlin as to why CEPA had not directly recommended what it believed was the best option. The consultant replied that because of DETI’s views ‘we might have had to be a bit more nuanced about it.’ Coghlin asked: ‘Why would you have to be more nuanced if you have integrity about your reputation?’ The middle-aged Cambridge economics graduate implied that his view of the independence of CEPA was rather different to how the company had originally described it. Readers of CEPA’s 2011 report were informed that it had carried out an ‘independent economic appraisal’. Cockburn suggested that he did not think CEPA should overly rock the boat by recommending something which might be awkward for the client ‘if they didn’t feel comfortable with it’.
The image, which emerged from the inquiry, was of a ventriloquist consultant who – in exchange for a large sum of money – was essentially echoing back to DETI elements of what it wanted to hear. Although it was perhaps not prepared to do whatever the client wanted – and did not recommend an RHI scheme – CEPA was willing to substantially fudge its professional opinion purely because those paying it wanted that to happen.
Arlene Foster’s spad, Andrew Crawford, told the inquiry that when he looked back on the period he was baffled as to the apparent predisposition of officials towards an RHI. He insisted that both he and Foster were ‘agnostic’ as to what form the incentive should take.
On CEPA’s evidence, the non-experts in DETI were successfully leaning on the expert consultants to alter their findings for the future of a scheme worth many hundreds of millions of pounds over two decades. And yet civil servant after civil servant – who, whether in DETI or the Department of Finance, were asked to sign off on the scheme – would go on to tell the inquiry that they had put faith in the recommendation for an RHI scheme because of the credibility of CEPA. Rachel McAfee, an economist in the Department of Finance, was one of many officials to scrutinise the RHI proposal, said that due to her lack of energy expertise ‘I would have relied so much on the consultants’.
The civil servants in DETI’s energy division, who worked with CEPA on the report, denied to the inquiry that there had been any attempt to substantially change it. Energy division boss Fiona Hepper said indignantly: ‘We were certainly not pushing them in one direction or another. That is not what we were paying for.’ Peter Hutchinson, the mid-ranking official beneath her who was the main point of contact with CEPA, was less emphatic, but said that he did not remember attempts to get CEPA to support an RHI scheme. ‘Not that I can recall,’ he told the inquiry. ‘We went back to them and said “those recommendations [in a draft report] don’t stack up” … I don’t recall having a, you know, that kind of negotiation or anything like that. I don’t think that’s right.’ But despite the civil servants’ denials, CEPA’s evidence was compelling because it reflected badly on the company. The idea that a major global economic consultancy was something of a gun for hire, willing to alter key recommendations of its reports to suit a paying client, was an argument that undermined the firm’s credibility – and that of both Morrow and Cockburn. It was difficult to see what motive they could have had for concocting it.
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CEPA’s draft report had arrived with DETI at the end of May 2011, prompting a series of DETI comments and questions to the consultants, one of which said that CEPA needed to ‘be very clear why RHI is [the] preferred option over [a] challenge fund.’ In a telling response, CEPA replied on 15 June to say: ‘Our recommendation is based on the assumption that DETI wants to do an RHI. The challenge fund option is for comparison purposes to show what could be achievable.’ That comment suggested that DETI’s mind was all but made up and the challenge fund was simply being put into the report so that – on paper at least – there could be some comparator.
There was further evidence that the department seemed to have made up its mind before the consultants had reported or the minister had formally taken a decision. In a document sent to Whitehall to justify what Stormont was doing, Peter Hutchinson in DETI’s energy division set out that a decision had been reached that ‘the most appropriate method … has been assessed with consideration given to several options … the Northern Ireland RHI option is consistent to the GB position and provides long-term, stable support for those wishing to invest.’ The document is dated 19 May 2010, but Hepper told the inquiry that she believed it was from 2011. Even if it was May 2011, it was still a month before Foster had as minister decided that there should be an RHI as opposed to some other solution.
But,
