Browse content similar to 06/12/2016. Check below for episodes and series from the same categories and more!
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MUSIC: I Got This by Amphibious Zoo DJ Crew | 6:21:53 | 6:21:56 | |
Did you hear the one about the Renewable Heat Incentive? | 6:22:01 | 6:22:04 | |
It was a government scheme which went hugely over budget. | 6:22:04 | 6:22:07 | |
Supposedly a green scheme, reducing our reliance on fossil fuels. | 6:22:07 | 6:22:12 | |
But believe it or not, as well as being economically a disaster, | 6:22:12 | 6:22:16 | |
it actually turned out to be damaging to the environment. | 6:22:16 | 6:22:20 | |
There was a series of extraordinary, extraordinary blunders, | 6:22:20 | 6:22:24 | |
and now, because of those blunders, we're likely to spend | 6:22:24 | 6:22:27 | |
the next 20 years picking up a tab of hundreds of millions of pounds. | 6:22:27 | 6:22:32 | |
Tonight on Spotlight, we hear about the missed alarmed bells | 6:22:34 | 6:22:38 | |
and we reveal a previously unseen e-mail from a whistle-blower, | 6:22:38 | 6:22:42 | |
which was ignored by Arlene Foster's department. | 6:22:42 | 6:22:45 | |
The scheme will support generators of renewable heat | 6:23:08 | 6:23:10 | |
through long-term incentive payments. | 6:23:10 | 6:23:12 | |
It seems to have gone wrong. | 6:23:12 | 6:23:14 | |
You wonder, in fact, did anything go right with it? | 6:23:14 | 6:23:17 | |
We realised we had a big, big problem. | 6:23:25 | 6:23:27 | |
It's running into hundreds of millions of pounds of public money. | 6:23:33 | 6:23:37 | |
It's almost like burning the money. | 6:23:37 | 6:23:39 | |
Possibly, this is the biggest financial penalty imposed | 6:23:49 | 6:23:53 | |
on taxpayers in Northern Ireland that has occurred in my lifetime. | 6:23:53 | 6:23:57 | |
This is the story of how a team of civil servants | 6:24:00 | 6:24:04 | |
came up with a renewable energy scheme that was so flawed, | 6:24:04 | 6:24:09 | |
insiders are calling it "the biggest shambles since DeLorean". | 6:24:09 | 6:24:14 | |
Some even believe it could be one of the biggest financial blunders | 6:24:14 | 6:24:20 | |
in the history of the Northern Ireland state. | 6:24:20 | 6:24:22 | |
OK, members, we're ready for the witnesses. | 6:24:28 | 6:24:31 | |
The Public Accounts Committee at Stormont | 6:24:34 | 6:24:37 | |
is investigating what went wrong. | 6:24:37 | 6:24:39 | |
Can I just welcome Dr Andrew McCormick? | 6:24:41 | 6:24:43 | |
The Non-Domestic Renewable Heat Incentive scheme | 6:24:48 | 6:24:50 | |
was about helping the environment, about renewables | 6:24:50 | 6:24:54 | |
and to reduce harmful emissions, | 6:24:54 | 6:24:56 | |
but from what we've seen from the outworkings of it, | 6:24:56 | 6:24:58 | |
it's nearly the opposite of it. | 6:24:58 | 6:25:00 | |
The scheme has not only been bad for the environment, | 6:25:00 | 6:25:03 | |
but a waste of public money. | 6:25:03 | 6:25:05 | |
The man who now has to explain | 6:25:05 | 6:25:07 | |
is the Permanent Secretary at the Department for the Economy - | 6:25:07 | 6:25:11 | |
its most senior civil servant Andrew McCormick. | 6:25:11 | 6:25:14 | |
I think we do owe an apology to the committee. | 6:25:14 | 6:25:16 | |
The intention was good. | 6:25:16 | 6:25:18 | |
The execution and design have been very seriously wrong. | 6:25:18 | 6:25:22 | |
So wrong, in fact, that businesses burning fuel | 6:25:24 | 6:25:27 | |
simply to earn government money was effectively encouraged. | 6:25:27 | 6:25:31 | |
These images from a thermal camera give you a real sense | 6:25:33 | 6:25:37 | |
of the amount of heat being generated quite legitimately | 6:25:37 | 6:25:40 | |
but at enormous cost through the scheme. | 6:25:40 | 6:25:44 | |
But exactly how that happened, according to the department, | 6:25:44 | 6:25:47 | |
is still not clear. | 6:25:47 | 6:25:49 | |
The failure to comprehend what was going on lay with us. | 6:25:49 | 6:25:55 | |
There is no good answer to that. | 6:25:55 | 6:25:57 | |
There is no good explanation. | 6:25:57 | 6:25:59 | |
As I've said a number of times already this afternoon, | 6:25:59 | 6:26:02 | |
there is no good explanation. | 6:26:02 | 6:26:04 | |
'To understand how this green scheme was supposed to work, | 6:26:04 | 6:26:07 | |
'I met Michael Doran, | 6:26:07 | 6:26:08 | |
'who helps businesses move from fossil fuels to renewables.' | 6:26:08 | 6:26:12 | |
OK, what we're talking about is heat. | 6:26:12 | 6:26:16 | |
So businesses, until this scheme, almost all used oil and gas? | 6:26:16 | 6:26:20 | |
In Northern Ireland, yes. Oil and gas are fossil fuels | 6:26:20 | 6:26:24 | |
and what we're trying to do is to move towards renewables. | 6:26:24 | 6:26:27 | |
So what we're using now is wood. | 6:26:27 | 6:26:29 | |
We're using the same kind of boiler, | 6:26:29 | 6:26:31 | |
except it's running on wood pellets. | 6:26:31 | 6:26:33 | |
'Diana Gass owns several garden centres. Earlier this year, | 6:26:37 | 6:26:41 | |
'she replaced the oil-fired boilers with wood pellet boilers. | 6:26:41 | 6:26:45 | |
'She says she was attracted by the environmental benefits.' | 6:26:45 | 6:26:48 | |
It's very quiet, very clean, there's no fumes anywhere. | 6:26:48 | 6:26:52 | |
It fits in with our business quite well. The whole idea of being green, | 6:26:52 | 6:26:55 | |
gardening, getting out in the fresh air, you know, | 6:26:55 | 6:26:58 | |
it goes with the whole thing, growing your own food. | 6:26:58 | 6:27:00 | |
-Well, the thing itself is even green. -Yeah, it is indeed! | 6:27:00 | 6:27:03 | |
SHE LAUGHS | 6:27:03 | 6:27:04 | |
Diana Gass' business had to invest tens of thousands of pounds | 6:27:06 | 6:27:10 | |
to move from oil boilers to wood pellet boilers. | 6:27:10 | 6:27:13 | |
The Renewable Heat Incentive scheme | 6:27:13 | 6:27:15 | |
helped businesses with the cost of making that leap. | 6:27:15 | 6:27:18 | |
Say I'm a businessman, and I want to move to renewables, | 6:27:20 | 6:27:23 | |
but I have an oil boiler - | 6:27:23 | 6:27:25 | |
how much is it going to cost me to move across? | 6:27:25 | 6:27:27 | |
For boilers that are in this scheme, typically, it's about £25-£30,000. | 6:27:27 | 6:27:32 | |
So how does the government then encourage people to do that? | 6:27:32 | 6:27:35 | |
What they are trying to do is to incentivise change | 6:27:35 | 6:27:38 | |
and they have to give you money to do that, | 6:27:38 | 6:27:40 | |
because you've got to incentivise people to pay for the boiler. | 6:27:40 | 6:27:44 | |
The civil servants in Arlene Foster's department responsible | 6:27:44 | 6:27:48 | |
for setting up the incentive scheme were the energy team. | 6:27:48 | 6:27:51 | |
The team was headed up by this woman - Fiona Hepper. | 6:27:52 | 6:27:56 | |
The Spending Review has seen | 6:27:56 | 6:27:58 | |
Treasury commit to a renewable heat incentive for GB. | 6:27:58 | 6:28:01 | |
A former senior civil servant in the department has told Spotlight | 6:28:01 | 6:28:06 | |
that Ms Hepper often dealt directly with Arlene Foster. | 6:28:06 | 6:28:09 | |
'The first mistake Mrs Foster's energy team made | 6:28:13 | 6:28:16 | |
'was setting the rate of payment too high.' | 6:28:16 | 6:28:19 | |
What they do is they pay an amount for the heat that you generate - | 6:28:19 | 6:28:23 | |
but what's actually happened here is that they've set a rate | 6:28:23 | 6:28:27 | |
which is higher than the cost of the fuel in the boiler. | 6:28:27 | 6:28:31 | |
Therefore, you're actually incentivised | 6:28:31 | 6:28:34 | |
to run the boiler for as many hours as possible. | 6:28:34 | 6:28:38 | |
So, in other words, what they are paying you is more | 6:28:38 | 6:28:40 | |
-than it costs you to run it? -That's exactly the problem. | 6:28:40 | 6:28:43 | |
In other words, in this scheme, the more you burn, the more you earn? | 6:28:43 | 6:28:47 | |
-Basically, yes. -That sounds like a really fundamental cock-up. | 6:28:47 | 6:28:50 | |
Yes, it is. | 6:28:50 | 6:28:52 | |
The system means that, for the next 20 years, | 6:28:52 | 6:28:55 | |
the payment is very likely to be higher than the cost of the wood. | 6:28:55 | 6:29:00 | |
So how did Arlene Foster's energy team get the rate so badly wrong? | 6:29:00 | 6:29:04 | |
Back in 2011, a rate was proposed, | 6:29:06 | 6:29:08 | |
which was less than the cost of the wood. | 6:29:08 | 6:29:11 | |
At the time of the original arithmetic for the scheme, | 6:29:11 | 6:29:14 | |
the cost of the wood to burn in the boilers was higher than | 6:29:14 | 6:29:19 | |
the subsidy that would've been paid. | 6:29:19 | 6:29:20 | |
By the time the scheme came into operation, | 6:29:20 | 6:29:23 | |
that relationship had reversed, and that was fatal. | 6:29:23 | 6:29:26 | |
'The change came about after a public consultation, | 6:29:27 | 6:29:31 | |
'where pressure was applied by businesses | 6:29:31 | 6:29:33 | |
'to raise the rate or tariff.' | 6:29:33 | 6:29:35 | |
There are many voices in the context of the consultation | 6:29:36 | 6:29:40 | |
saying that the tariff was too low. | 6:29:40 | 6:29:42 | |
Andrew McCormick took over | 6:29:42 | 6:29:44 | |
as the boss of the Department of Enterprise - | 6:29:44 | 6:29:47 | |
now the Department for the Economy - in 2014. | 6:29:47 | 6:29:51 | |
There'd been strong pressure during consultation to have higher tariffs. | 6:29:51 | 6:29:55 | |
And so, the rate - the tariff - was increased. | 6:29:55 | 6:29:59 | |
But the energy team in the department didn't realise | 6:29:59 | 6:30:02 | |
that the rate was now more than the cost of the wood. | 6:30:02 | 6:30:06 | |
The subsidy on the fuel was greater than the cost of buying the fuel. | 6:30:06 | 6:30:09 | |
This was a "heads, you win, tails, you can't lose" type situation, | 6:30:09 | 6:30:14 | |
where simply, the owner of the boiler was going to make money, | 6:30:14 | 6:30:17 | |
so long as he ran the boiler for more hours. | 6:30:17 | 6:30:19 | |
Despite supposedly being a green scheme, | 6:30:20 | 6:30:23 | |
the higher rate discouraged energy efficiency. | 6:30:23 | 6:30:27 | |
This is the paradox of it - burn more wood and you get more money. | 6:30:27 | 6:30:31 | |
It's not an incentive | 6:30:31 | 6:30:32 | |
to improve or enhance the environment. | 6:30:32 | 6:30:35 | |
It's an incentive to put more smoke up into it. | 6:30:35 | 6:30:37 | |
The scheme was set up here in November 2012. | 6:30:41 | 6:30:45 | |
A similar scheme had been introduced in Great Britain the year before. | 6:30:45 | 6:30:49 | |
The GB scheme has a vital in-built cost control, | 6:30:49 | 6:30:53 | |
which was not copied across to our model. | 6:30:53 | 6:30:56 | |
Another crucial mistake by Mrs Foster's energy team. | 6:30:56 | 6:31:00 | |
But at the heart of the scheme was a fatal flaw - | 6:31:02 | 6:31:04 | |
the lack of anything like sufficient control. | 6:31:04 | 6:31:08 | |
It meant the department ended up with a scheme where, | 6:31:08 | 6:31:11 | |
the more you burn, the more you earn. | 6:31:11 | 6:31:14 | |
Cash for ash. | 6:31:14 | 6:31:16 | |
With hindsight, you know, deep regrets. | 6:31:17 | 6:31:20 | |
Had we stayed closer to the GB scheme, | 6:31:20 | 6:31:23 | |
maybe even been a subset of it or a variant on it, | 6:31:23 | 6:31:26 | |
rather than a separate scheme, that might have been better. | 6:31:26 | 6:31:29 | |
Not copying the GB model meant the absence of a key safety valve, | 6:31:29 | 6:31:34 | |
called tiering. | 6:31:34 | 6:31:36 | |
Michael Doran explained to me how an ideal heat incentive scheme | 6:31:36 | 6:31:39 | |
should work - paying a high rate initially that drops off. | 6:31:39 | 6:31:44 | |
So we're drawing here a little graph of the amount of money | 6:31:44 | 6:31:48 | |
that you're getting over the year. | 6:31:48 | 6:31:50 | |
OK. | 6:31:50 | 6:31:51 | |
So, in an ideal world, you set a rate | 6:31:51 | 6:31:55 | |
that's relatively high | 6:31:55 | 6:31:57 | |
for the first number of hours over the year, | 6:31:57 | 6:31:59 | |
then you drop that rate | 6:31:59 | 6:32:01 | |
and you pay a lower rate for the rest of the year. | 6:32:01 | 6:32:04 | |
-And why do you start off with a higher rate? -Two reasons. | 6:32:04 | 6:32:06 | |
First of all, you're trying to cover the cost of the boiler upfront. | 6:32:06 | 6:32:11 | |
So, the boiler's quite expensive and we know that the government | 6:32:11 | 6:32:13 | |
doesn't just send cheques to people and say, "Here, buy a boiler." | 6:32:13 | 6:32:16 | |
What they're doing is they're giving them a higher rate in each year, | 6:32:16 | 6:32:20 | |
-in order to cover the cost of the boiler? -Yeah. | 6:32:20 | 6:32:22 | |
And you're also trying to encourage people to be energy efficient. | 6:32:22 | 6:32:27 | |
-So that's why you drop the rate down? -Yes. | 6:32:27 | 6:32:29 | |
Because you don't want people generating heat just to get money. | 6:32:29 | 6:32:32 | |
-Yeah. -OK, so that's an ideal scheme? | 6:32:32 | 6:32:34 | |
-Yeah, that's one way of doing it. -Yeah. | 6:32:34 | 6:32:36 | |
That's not the way that the scheme was introduced in Northern Ireland. | 6:32:36 | 6:32:39 | |
-Just explain to me, then, what we did here. -OK. | 6:32:39 | 6:32:42 | |
-We've got the same graph. -Yes. | 6:32:42 | 6:32:44 | |
So we've got the payment. | 6:32:44 | 6:32:48 | |
-Payments start off high. -Yes. | 6:32:48 | 6:32:50 | |
But the payment continued on at that rate for the entire year. | 6:32:50 | 6:32:55 | |
-There was no drop. -OK, and this scheme lasts for 20 years, | 6:32:55 | 6:32:59 | |
-so is it like that for the whole 20 years? -You're getting that rate | 6:32:59 | 6:33:02 | |
for the whole 20 years and that's where the scheme went wrong. | 6:33:02 | 6:33:04 | |
'The lack of a key cost control - tiering, dropping the rate down - | 6:33:06 | 6:33:11 | |
'is acknowledged by the department as a fatal blunder.' | 6:33:11 | 6:33:15 | |
The hard fact is that there was not a proper assessment of the risk. | 6:33:15 | 6:33:20 | |
That the big... | 6:33:20 | 6:33:21 | |
Especially the risk arising from the absence of a tiered tariff. | 6:33:21 | 6:33:25 | |
The failure to copy the GB model meant the department | 6:33:25 | 6:33:29 | |
ended up with a scheme which was fundamentally flawed. | 6:33:29 | 6:33:33 | |
And it missed a crucial opportunity to right that wrong. | 6:33:33 | 6:33:38 | |
Less than a year after the scheme started, a whistle-blower | 6:33:38 | 6:33:42 | |
approached the minister Arlene Foster with concerns. | 6:33:42 | 6:33:46 | |
The minister referred the whistle-blower to her department. | 6:33:46 | 6:33:49 | |
The whistle-blower met Fiona Hepper and other officials, | 6:33:49 | 6:33:53 | |
a meeting she later noted in an e-mail. | 6:33:53 | 6:33:56 | |
Spotlight has exclusively obtained a copy of that e-mail | 6:33:56 | 6:33:59 | |
from the whistle-blower to the department | 6:33:59 | 6:34:01 | |
and, in it, the whistle-blower is remarkably clear | 6:34:01 | 6:34:04 | |
in setting out her concerns. | 6:34:04 | 6:34:06 | |
For example, she tells the department, | 6:34:06 | 6:34:08 | |
"It's now in the interests of businesses here to waste energy." | 6:34:08 | 6:34:12 | |
And it shows she says she warned the department, in autumn 2013, | 6:34:13 | 6:34:18 | |
about the serious flaws in the scheme. | 6:34:18 | 6:34:20 | |
The whistle-blower's apparently very clear advice was ignored. | 6:34:20 | 6:34:24 | |
It wouldn't be the last time. | 6:34:24 | 6:34:27 | |
Shortly after the scheme was introduced, | 6:34:27 | 6:34:29 | |
the department missed yet another chance to control the costs. | 6:34:29 | 6:34:33 | |
In 2013, London introduced a cost control to the GB scheme | 6:34:33 | 6:34:38 | |
called degression. To understand it, think of the budget like a cake. | 6:34:38 | 6:34:44 | |
In Great Britain, there was only one cake to go round, | 6:34:46 | 6:34:49 | |
and the more applicants there were, the less cake they each got. | 6:34:49 | 6:34:53 | |
No matter how many applicants there were, | 6:34:53 | 6:34:55 | |
the overall funding never got any bigger. | 6:34:55 | 6:34:58 | |
There was only one pot of cash | 6:34:58 | 6:35:00 | |
and, the more applicants there were, the less they each got. | 6:35:00 | 6:35:04 | |
This is degression. | 6:35:04 | 6:35:07 | |
Do your records show if the department had been advised | 6:35:07 | 6:35:12 | |
-that the English scheme had decided to introduce degression? -Oh, that... | 6:35:12 | 6:35:16 | |
-Sorry, yes, we were well aware of that. -You were? All right. | 6:35:16 | 6:35:18 | |
Through informal contact and indeed ministerial correspondence, | 6:35:18 | 6:35:21 | |
so that was there, and... but wasn't acted on. | 6:35:21 | 6:35:26 | |
So, despite information from London to the minister Arlene Foster, | 6:35:26 | 6:35:30 | |
Northern Ireland didn't have the same control. | 6:35:30 | 6:35:33 | |
Here, there wasn't just one cake, there was cake all round! | 6:35:33 | 6:35:37 | |
Arlene Foster turned down our request for an interview, | 6:35:40 | 6:35:43 | |
but in a statement, she said that at no stage | 6:35:43 | 6:35:46 | |
was any proposal for cost controls, like tiering or digression, | 6:35:46 | 6:35:51 | |
made to her by departmental officials. | 6:35:51 | 6:35:54 | |
With such a high rate, and without key cost controls, | 6:35:55 | 6:35:59 | |
the Northern Ireland scheme was lucrative. | 6:35:59 | 6:36:02 | |
-# I'm living well! -I'm living good, babe! # | 6:36:02 | 6:36:07 | |
The Audit Office, which has investigated, | 6:36:07 | 6:36:10 | |
said one industry in particular could benefit massively. | 6:36:10 | 6:36:14 | |
The poultry business. | 6:36:14 | 6:36:15 | |
Well, this example, on the poultry industry in Northern Ireland | 6:36:15 | 6:36:19 | |
compared to Great Britain, shows the enormous difference | 6:36:19 | 6:36:21 | |
that this enhanced subsidy was making in Northern Ireland. | 6:36:21 | 6:36:24 | |
The profit would be £737,000. | 6:36:24 | 6:36:28 | |
In Great Britain, the comparable profit would be £66,000. | 6:36:28 | 6:36:33 | |
This is chicken country. | 6:36:35 | 6:36:37 | |
As you drive around this part of County Tyrone, you can't help | 6:36:37 | 6:36:40 | |
but notice these big poultry houses dotted across the countryside. | 6:36:40 | 6:36:45 | |
And hundreds of poultry farms in Northern Ireland | 6:36:45 | 6:36:49 | |
are now getting their heat from these wood pellet boilers. | 6:36:49 | 6:36:53 | |
Because of the flaws in the RHI scheme, | 6:36:53 | 6:36:56 | |
some of those poultry farmers are making serious money. | 6:36:56 | 6:37:00 | |
24/7 usage, in some contexts, | 6:37:00 | 6:37:02 | |
entirely legitimate and reasonable, the business' need for it, | 6:37:02 | 6:37:06 | |
and, in poultry or whatever, it's absolutely fine. | 6:37:06 | 6:37:09 | |
The Renewable Heat Incentive was so generous that some people thought | 6:37:09 | 6:37:13 | |
it was too good to be true. But it wasn't - | 6:37:13 | 6:37:16 | |
and, in the early part of 2015, applications did start to go up. | 6:37:16 | 6:37:20 | |
The number of applications was rising rapidly. | 6:37:28 | 6:37:32 | |
At that stage, the department didn't really understand the root cause. | 6:37:32 | 6:37:37 | |
But what it did know was that it was burning through cash. | 6:37:37 | 6:37:40 | |
There was a belief, though, within the department, | 6:37:40 | 6:37:43 | |
that the Treasury was covering the money. | 6:37:43 | 6:37:46 | |
The department would soon find out | 6:37:46 | 6:37:48 | |
that that was another critical mistake. | 6:37:48 | 6:37:52 | |
-# Daydream! -Daydream -I fell asleep amid the flowers... # | 6:37:52 | 6:37:56 | |
They believed that Northern Ireland's day-to-day funding, | 6:37:56 | 6:37:59 | |
the block grant, was safe. | 6:37:59 | 6:38:02 | |
It seems that the department, Andrew, | 6:38:02 | 6:38:04 | |
would've operated from 2012 to 2015 | 6:38:04 | 6:38:07 | |
on the basis that there was no risk to the block grant... | 6:38:07 | 6:38:10 | |
..and that everything was going to be covered by the Treasury. | 6:38:11 | 6:38:14 | |
In practice, yes. | 6:38:14 | 6:38:15 | |
That was a mistaken belief. | 6:38:17 | 6:38:18 | |
The Treasury was only prepared to pay 3% | 6:38:18 | 6:38:21 | |
of the overall cost of the scheme across the UK. | 6:38:21 | 6:38:25 | |
When the bills came in, and they were going well above 3%, | 6:38:25 | 6:38:29 | |
the Treasury was perfectly entitled to say, "Stop! What's going wrong?" | 6:38:29 | 6:38:33 | |
The Treasury e-mailed the department in 2011 | 6:38:34 | 6:38:38 | |
to warn there would be a limit. | 6:38:38 | 6:38:39 | |
The Treasury itself did give clear indications in the early days... | 6:38:41 | 6:38:45 | |
But this is... I'm now talking about the spring of 2011. | 6:38:45 | 6:38:50 | |
..that there would be budgetary limits. | 6:38:50 | 6:38:53 | |
It was known and understood within the department. | 6:38:53 | 6:38:56 | |
Somehow or other, that got forgotten about. | 6:38:56 | 6:39:00 | |
Another loud alarm bell had been ignored. | 6:39:03 | 6:39:06 | |
London had said all along there would be a limit. | 6:39:06 | 6:39:09 | |
The department was in the middle of a crisis. | 6:39:13 | 6:39:15 | |
It faced a massive bill, which London wouldn't pay for. | 6:39:15 | 6:39:19 | |
An attempt was made to persuade | 6:39:19 | 6:39:22 | |
the Department for Energy and Climate Change, | 6:39:22 | 6:39:24 | |
or DECC, in Whitehall, to come up with the money. | 6:39:24 | 6:39:27 | |
But the high point of that drama | 6:39:27 | 6:39:29 | |
didn't happen in a grand room in Stormont. | 6:39:29 | 6:39:33 | |
You said earlier on, you know, | 6:39:33 | 6:39:35 | |
it was passed to you in the back of a taxi | 6:39:35 | 6:39:37 | |
on the way to a meeting in DECC, you were told to ask for more money. | 6:39:37 | 6:39:41 | |
-I wouldn't quite say it like that, yes. -You did or you...? | 6:39:41 | 6:39:44 | |
-Well... -A touch of that, yes, OK. -Yeah. | 6:39:44 | 6:39:46 | |
That too is astounding. | 6:39:46 | 6:39:47 | |
You know, on your way to a meeting with senior people | 6:39:47 | 6:39:50 | |
over in London, like, what impression does that give to them? | 6:39:50 | 6:39:53 | |
They're bound to be saying, | 6:39:53 | 6:39:54 | |
"What kind of an outfit am I dealing with here?" | 6:39:54 | 6:39:57 | |
The department failed to persuade London to come up with the cash. | 6:39:58 | 6:40:03 | |
The record shows that that was a blind alley. | 6:40:03 | 6:40:05 | |
That we went up a blind alley. | 6:40:05 | 6:40:08 | |
The department had mistakenly believed that the Treasury | 6:40:08 | 6:40:11 | |
was paying come what may. | 6:40:11 | 6:40:13 | |
Some have questioned whether that false belief led to mistakes. | 6:40:13 | 6:40:16 | |
Would you accept that that type of complacency | 6:40:19 | 6:40:23 | |
led directly to the failed regulation by the department? | 6:40:23 | 6:40:27 | |
It's definitely connected. There's no question about that. | 6:40:29 | 6:40:31 | |
And one does get the feel that there isn't the scrutiny of that, | 6:40:31 | 6:40:35 | |
because it's not coming out of the block grant. | 6:40:35 | 6:40:37 | |
Now, if it's not coming out of the block grant, | 6:40:37 | 6:40:39 | |
there seems to be a mentality "What does it matter?" | 6:40:39 | 6:40:42 | |
Well, it does matter. It's all public money. | 6:40:42 | 6:40:45 | |
'Without London covering, the department tried to take action. | 6:40:45 | 6:40:49 | |
'They indicated they would change the scheme. | 6:40:49 | 6:40:52 | |
'But that led to hundreds of applications | 6:40:52 | 6:40:55 | |
'while the scheme was still lucrative. | 6:40:55 | 6:40:57 | |
'It made a bad situation even worse.' | 6:40:57 | 6:41:00 | |
They basically had to go back to the drawing board | 6:41:02 | 6:41:04 | |
-and redesign the scheme. -So the department suggested | 6:41:04 | 6:41:07 | |
they were going to move to this less lucrative scheme | 6:41:07 | 6:41:10 | |
-and what happens then - people rush through the door. -Yeah. | 6:41:10 | 6:41:13 | |
In that period, | 6:41:13 | 6:41:15 | |
the market understood that there was going to be | 6:41:15 | 6:41:18 | |
a reduction in the monies that were coming out of it, | 6:41:18 | 6:41:21 | |
so there was a big spike, | 6:41:21 | 6:41:22 | |
-so the number of applications went up substantially. -I see! | 6:41:22 | 6:41:25 | |
-Of course. -They inadvertently create this spike. | 6:41:25 | 6:41:29 | |
'In just two months, | 6:41:29 | 6:41:31 | |
'this spike accounted for nearly half a billion pounds of the cost.' | 6:41:31 | 6:41:35 | |
The story was obviously out. | 6:41:37 | 6:41:39 | |
Gossip was going from one person to another "This is so profitable, | 6:41:39 | 6:41:42 | |
"it won't last much longer, get in quickly." | 6:41:42 | 6:41:45 | |
'The scheme was changed and was now how it should've been at the start | 6:41:45 | 6:41:50 | |
'and still financially attractive enough for Diana Gass, | 6:41:50 | 6:41:53 | |
'who applied after the change - proof that people would | 6:41:53 | 6:41:57 | |
'still have applied for a less lucrative scheme.' | 6:41:57 | 6:42:00 | |
It'll take us about ten years before we start to make any saving. | 6:42:00 | 6:42:03 | |
But even if there isn't, we're getting a better product | 6:42:03 | 6:42:05 | |
for our money. We would get a better, consistent heat. | 6:42:05 | 6:42:08 | |
The change to the scheme came too late. The damage had been done. | 6:42:08 | 6:42:14 | |
RHI was closed in February. | 6:42:14 | 6:42:16 | |
The financial consequences are dramatic. | 6:42:17 | 6:42:20 | |
The total comes to over 1 billion. 1.18 billion, if I recall correctly. | 6:42:22 | 6:42:26 | |
-1.18 billion, just to...? -The total value of the total scheme, yes. | 6:42:26 | 6:42:30 | |
The Treasury will fund just over half of that, | 6:42:30 | 6:42:34 | |
leaving Northern Ireland with a huge cost. | 6:42:34 | 6:42:37 | |
We're footing an extra bill, | 6:42:37 | 6:42:38 | |
which seems as if it's between £400 and £500 million, over 20 years. | 6:42:38 | 6:42:43 | |
The department has already had to start finding money | 6:42:43 | 6:42:47 | |
that could've gone elsewhere. | 6:42:47 | 6:42:48 | |
People come in and tell me about the impossible delays imposed on them | 6:42:48 | 6:42:54 | |
for a hip replacement, or a knee joint, | 6:42:54 | 6:42:57 | |
or schools are scraping to make ends meet - | 6:42:57 | 6:43:01 | |
and yet, we've maybe up to £500 million | 6:43:01 | 6:43:05 | |
that's going to be pared off those services | 6:43:05 | 6:43:09 | |
in order to pay for this squander. | 6:43:09 | 6:43:11 | |
Even though the scheme was closed, | 6:43:11 | 6:43:13 | |
the department still didn't know where it had all gone wrong. | 6:43:13 | 6:43:17 | |
To the astonishment of some, it took the department to effectively | 6:43:17 | 6:43:20 | |
impersonate a business and carry out a secret shopper exercise | 6:43:20 | 6:43:25 | |
before it finally worked it out. | 6:43:25 | 6:43:27 | |
The tariff had been too high all along. | 6:43:27 | 6:43:30 | |
What Internal Audit did was ring a supplier | 6:43:31 | 6:43:34 | |
as a secret shopper-type of approach. | 6:43:34 | 6:43:37 | |
They phoned up and said, "What would it cost to install a boiler | 6:43:37 | 6:43:40 | |
"and what would be the cost of fuel?" | 6:43:40 | 6:43:42 | |
That was in March of this year. That's after the event. | 6:43:42 | 6:43:47 | |
It doesn't change anything. | 6:43:47 | 6:43:49 | |
But between internal audit and external audit, | 6:43:49 | 6:43:52 | |
they are the people who have finally, finally realised | 6:43:52 | 6:43:55 | |
there's a root cause issue, which is too high a tariff. | 6:43:55 | 6:43:58 | |
The department now understood why the scheme had provided | 6:44:00 | 6:44:03 | |
an unacceptably high rate of return. | 6:44:03 | 6:44:05 | |
It only finally worked this out after the scheme had closed. | 6:44:07 | 6:44:11 | |
You only set out then to find out the cost of the boiler | 6:44:12 | 6:44:15 | |
and fuel in 2016, when the man on the street found out, | 6:44:15 | 6:44:18 | |
"Here, I can get my henhouse all heated up, | 6:44:18 | 6:44:21 | |
"and even my own house," yet you, the people sitting in here - | 6:44:21 | 6:44:25 | |
and maybe earning £80,000, £90,000 £100,000 a year - did not know that? | 6:44:25 | 6:44:30 | |
And now, we're paying the consequences | 6:44:30 | 6:44:32 | |
out of the block grant for it. | 6:44:32 | 6:44:34 | |
Heads should roll! | 6:44:35 | 6:44:37 | |
So, who were Arlene Foster's civil servants, earning those big numbers? | 6:44:40 | 6:44:45 | |
The senior officers involved | 6:44:48 | 6:44:49 | |
would've been Fiona Hepper as the grade 5, | 6:44:49 | 6:44:52 | |
um, David Thomson, who's now retired, as the grade 3, | 6:44:52 | 6:44:55 | |
and David Stirling is the permanent secretary. | 6:44:55 | 6:44:58 | |
As we know, Fiona Hepper was the head of the energy team | 6:44:58 | 6:45:01 | |
and often dealt directly with Arlene Foster. | 6:45:01 | 6:45:04 | |
Patsy McGlone chaired the Stormont committee, | 6:45:04 | 6:45:07 | |
which scrutinised the energy team. | 6:45:07 | 6:45:10 | |
They were supposed to report to us twice a year. | 6:45:10 | 6:45:12 | |
It was upwards on a year and a half | 6:45:12 | 6:45:14 | |
before they came before the committee. | 6:45:14 | 6:45:16 | |
The more questions we asked, the less clarity there was. | 6:45:16 | 6:45:19 | |
Whenever you leave a committee room more confused, | 6:45:19 | 6:45:23 | |
with less clarity than what you went into it on an issue, | 6:45:23 | 6:45:27 | |
you realise there's a problem. | 6:45:27 | 6:45:29 | |
Before the scheme's flaws became apparent, Fiona Hepper was promoted. | 6:45:29 | 6:45:34 | |
David Thomson retired in June 2014. | 6:45:34 | 6:45:37 | |
We asked him for an interview, but he declined. | 6:45:37 | 6:45:41 | |
David Stirling was their boss, | 6:45:41 | 6:45:43 | |
the most senior civil servant in the Department of Enterprise, | 6:45:43 | 6:45:46 | |
and ultimately accountable when the scheme was set up. | 6:45:46 | 6:45:49 | |
I will accept full responsibility | 6:45:49 | 6:45:51 | |
for any failings which occurred during my time. | 6:45:51 | 6:45:55 | |
He moved to the same role in the Department of Finance | 6:45:55 | 6:45:59 | |
before the flaws in RHI were known about. | 6:45:59 | 6:46:01 | |
Much of the coverage of the scheme has focused on claims of fraud. | 6:46:03 | 6:46:07 | |
-NEWSREADER: -A whistle-blower claimed some companies put in | 6:46:07 | 6:46:10 | |
boilers they didn't need, that a farmer was heating an empty shed. | 6:46:10 | 6:46:14 | |
Each was hoping to rack up £1 million of profit over 20 years. | 6:46:14 | 6:46:18 | |
Spotlight has seen some of the findings | 6:46:21 | 6:46:23 | |
of a confidential investigation ordered by the department. | 6:46:23 | 6:46:27 | |
Nearly half of almost 300 sites inspected | 6:46:28 | 6:46:30 | |
are doing something the department didn't intend - | 6:46:30 | 6:46:34 | |
for example, not being energy efficient - | 6:46:34 | 6:46:37 | |
but not in a way that breaches the regulations. | 6:46:37 | 6:46:40 | |
Things went fundamentally wrong in the design, | 6:46:40 | 6:46:43 | |
which led to opportunities for, um, abuse and overuse, | 6:46:43 | 6:46:49 | |
which is eligible within the terms of the scheme, | 6:46:49 | 6:46:52 | |
but not the intention of the scheme. | 6:46:52 | 6:46:54 | |
In other words, most of the costs of the scheme, | 6:46:54 | 6:46:57 | |
most of the massive overspend, | 6:46:57 | 6:46:59 | |
comes from the department's blunders and not from fraud. | 6:46:59 | 6:47:02 | |
But it's the treatment of the whistle-blower | 6:47:04 | 6:47:07 | |
who approached Arlene Foster in 2013 which is at the heart of the story. | 6:47:07 | 6:47:11 | |
Correspondence that the committee has received | 6:47:12 | 6:47:15 | |
from a whistle-blower, a member of the concerned public, | 6:47:15 | 6:47:18 | |
shows that there were clear warnings to the departments | 6:47:18 | 6:47:21 | |
in relation to the wasteful use of heat as far back as October 2013. | 6:47:21 | 6:47:25 | |
The whistle-blower had expressed her concerns | 6:47:25 | 6:47:28 | |
to the minister Arlene Foster. | 6:47:28 | 6:47:31 | |
The whistle-blower then met the head of the energy team, Fiona Hepper, | 6:47:31 | 6:47:34 | |
and other officials in autumn 2013. | 6:47:34 | 6:47:38 | |
The point was made that, um, | 6:47:38 | 6:47:41 | |
the scheme was not operating as intended. | 6:47:41 | 6:47:44 | |
It seems, on the face of it, from that, | 6:47:44 | 6:47:48 | |
a very, very clear signal to act | 6:47:48 | 6:47:51 | |
and to at least ask the question "What does she mean?" | 6:47:51 | 6:47:55 | |
The whistle-blower's concerns were not addressed. | 6:47:59 | 6:48:02 | |
In her e-mail sent in May 2014, she put her fears in writing. | 6:48:03 | 6:48:09 | |
By then, Fiona Hepper had left the department. | 6:48:09 | 6:48:11 | |
The whistle-blower's e-mail says, | 6:48:12 | 6:48:15 | |
"What we're seeing on the ground in Northern Ireland is that buildings | 6:48:15 | 6:48:19 | |
"are using more energy than before, because it pays them to do so. | 6:48:19 | 6:48:23 | |
"The flat rate means there's no incentive at all to be efficient. | 6:48:23 | 6:48:27 | |
"So the heat in buildings is on all year round, | 6:48:27 | 6:48:30 | |
"with the windows open everywhere." It then says, | 6:48:30 | 6:48:34 | |
"When we had spoken, you did not believe that people would do this, | 6:48:34 | 6:48:38 | |
"but believe me, it's happening." | 6:48:38 | 6:48:40 | |
The whistle-blower added, "It's got to a stage | 6:48:42 | 6:48:45 | |
"where it cannot be ignored any longer." | 6:48:45 | 6:48:48 | |
The problem of "the more you burn, the more you earn" | 6:48:50 | 6:48:54 | |
had been identified. | 6:48:54 | 6:48:55 | |
The whistle-blower warned the department | 6:48:55 | 6:48:58 | |
and was effectively ignored. | 6:48:58 | 6:49:01 | |
This e-mail was literally, literally worth hundreds of millions of pounds | 6:49:01 | 6:49:07 | |
to the Northern Ireland taxpayer, and nothing was done about it. | 6:49:07 | 6:49:11 | |
To me, that was the first, er, clear opportunity | 6:49:12 | 6:49:16 | |
for the point that the tariff was too generous | 6:49:16 | 6:49:19 | |
to be identified and understood. | 6:49:19 | 6:49:22 | |
As a matter of fact, it wasn't. | 6:49:22 | 6:49:24 | |
The whistle-blower's e-mail was by far the loudest | 6:49:24 | 6:49:27 | |
of a series of alarm bells which were ignored. | 6:49:27 | 6:49:31 | |
Would you agree that, in terms of public money, | 6:49:31 | 6:49:34 | |
this is the biggest financial scandal in living memory? | 6:49:34 | 6:49:37 | |
-In Northern Ireland? -Yeah. | 6:49:38 | 6:49:41 | |
I can't recall anything that was on the scale. | 6:49:41 | 6:49:45 | |
We asked David Stirling and Fiona Hepper a series of questions | 6:49:45 | 6:49:50 | |
about their roles in the failure of the RHI scheme. | 6:49:50 | 6:49:53 | |
Both said they couldn't answer because of the ongoing PAC enquiry. | 6:49:53 | 6:49:57 | |
Arlene Foster said she couldn't be interviewed | 6:49:58 | 6:50:01 | |
because of time pressures, including a trip to China. | 6:50:01 | 6:50:05 | |
In a statement, she said, | 6:50:05 | 6:50:06 | |
"Investigations into the whistle-blower's claims..." | 6:50:06 | 6:50:09 | |
But the whistle-blower had first approached Mrs Foster | 6:50:15 | 6:50:19 | |
and she referred her to the department to investigate. | 6:50:19 | 6:50:22 | |
We asked Mrs Foster if she made any other attempt | 6:50:22 | 6:50:25 | |
to follow up on the woman's claims. | 6:50:25 | 6:50:28 | |
She did not respond directly to this question. | 6:50:28 | 6:50:31 | |
She pointed out that the Permanent Secretary had told the PAC | 6:50:31 | 6:50:35 | |
that her handling of the whistle-blower | 6:50:35 | 6:50:38 | |
had been "entirely appropriate". | 6:50:38 | 6:50:40 | |
She said... | 6:50:40 | 6:50:42 | |
Those ongoing costs are likely to be at least £400 million. | 6:50:53 | 6:50:58 | |
That could have paid for the new Omagh Hospital, | 6:50:58 | 6:51:00 | |
the York Street Interchange, Belfast's rapid transit system, | 6:51:00 | 6:51:04 | |
and converting the A26 at Frosses to dual carriageway, | 6:51:04 | 6:51:08 | |
with £15 million left over. | 6:51:08 | 6:51:10 |