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CHAPTER 2

IN THE BEGINNING

Fiona Hepper, who had nothing to contribute as an energy specialist, arrived in June 2010 to head up the team of Stormont civil servants responsible for energy policy. In a textbook move for the Northern Ireland Civil Service, Hepper was a ‘generalist’ who shifted from department to department, learning on the job, before climbing the career ladder in an entirely different area.

The psychology graduate began life in the civil service as a statistician, and over a 30-year career had worked on everything from cross-border economic cooperation to labour market policy, communications, telecoms and emergency planning.

This was how Northern Ireland had been ruled from its creation in 1921. While the ministers in charge of departments had shifted from the Official Unionist Party during the first half-century of the fledgling state’s existence, to direct rule ministers flying in and out from London, to power-sharing ministers appointed after the 1998 Good Friday Agreement, there had been one constant: the Northern Ireland Civil Service.

The energy team, which Hepper now headed, sat within the Department of Enterprise, Trade and Investment (DETI), a relatively small department of about 600 officials but with sprawling responsibilities for tourism, company law, economic development, consumer protection, health and safety law, cross-border trade and telecoms. When Hepper arrived in her new post, she had four hours with her predecessor to be briefed on the new role and was given a bundle of documentation. It was a huge job. Energy policy was in flux. There was a push for renewable energy systems, about which there was limited understanding, alongside proposals to extend the piped natural gas network in Northern Ireland and moves to harmonise the electricity markets between Northern Ireland and the Irish Republic. On top of that, DETI’s small energy team found itself responsible for transposing EU energy directives into law – a responsibility the devolved Scottish or Welsh administrations did not have to do because energy policy was only devolved in Northern Ireland.

Not long into the post, Hepper decided to create a renewable heat branch within the wider division. But while that might have implied that there was now a significant team working on the issue, it was the equivalent of one and a half full-time staff, with the official in charge of the branch working part time. But no one at the time viewed this as a Father Ted approach to public administration – it was just how things had always been done in Stormont.

Although Northern Ireland had a huge public sector compared to anywhere else in the UK, the reality was that a region of 1.8 million people was always going to be doing things on a shoestring by comparison to Whitehall, the throbbing administrative centre of the British State from which an empire had once been administered and wars directed. But despite Stormont’s small size, there was a culture of civil servants doing whatever it took to please their ministers and a reluctance to hand back power to Westminster.

By the time Hepper arrived at DETI, it had for some time been under pressure to set up a Renewable Heat Incentive (RHI) as part of an EU-wide endeavour to financially induce businesses to move from fossil fuel heating systems to sustainable green alternatives. There were two main reasons: an EU directive had set challenging targets for renewable heat. If those were not met by 2020, there would be huge fines from Brussels. The second imperative to launch RHI came from business. The rest of the UK had been moving ahead with a scheme that would launch in late 2011. Without that subsidy being extended by Stormont, Northern Ireland firms would be at a competitive disadvantage. In the aftermath of a major recession, that was a potent argument in favour of action.

The Whitehall department responsible for the GB heat subsidy had in 2008 offered Stormont the chance to piggyback on its scheme, something which would have meant Stormont agreeing for Westminster to legislate for it. Hepper’s predecessor, in consultation with Arlene Foster, the DUP minister who would spend seven years in the department, decided not to avail of that opportunity. They believed that Westminster was rushing unnecessarily and were aware of a wider political concern in Northern Ireland, which at that point was just a year into the restoration of devolved government. The unionists and nationalists who made up the Stormont Executive were agreed that the whole point of devolution was to allow them to decide their own policies. In that context, simply handing back power to Westminster was counterintuitive.

Regardless of that benign logic, which might explain what happened in 2008, from this moment of divergence suspicion would subsequently arise as to why a handful of civil servants and politicians in Belfast had decided to do their own thing and whether someone somewhere in Stormont had spied an opportunity to exploit a funding stream from London.

Civil servants and politicians often consciously chose not to record controversial information, which makes it difficult to be certain what happened in the early years of the scheme. And the fact that the department had a deliberate policy of not recording important information means that if there was any inappropriate decision to deliberately exploit the RHI funding it would almost certainly not be recorded.

After deciding to run its own subsidy for renewable heat, Stormont then took its time about deciding what that should be. Staffing shortages contributed to it taking a year for DETI to hire – largely with EU money – consultants AECOM Pöyry to produce a report on the local potential for renewable heat.

But many years later, at the public inquiry which would dissect the inner workings of Stormont like never before, the independence of that report came under scrutiny. There has long been a suspicion that civil servants sometimes hire consultants because they want an apparently independent voice to advise them to do what the officials wanted to do anyway. The inquiry revealed a level of departmental involvement in writing the report, which was not publicly apparent at the time.

Initially, the consultants sent DETI a draft version of their report. But after discussions with DETI officials they made changes to that document. In response to that changed version of the report, civil servant Alison Clydesdale, head of DETI’s sustainable energy branch, emailed the consultants in May 2010 to say that the report was now ‘closer to what we need’. But she went on to make a series of suggestions for further changes. One of the requests was to alter what the consultants were recommending should be done to incentivise renewable heat. Clydesdale wrote: ‘We would need something stronger than “some form of incentive”.’ She went on to make a series of suggestions and told the specialist engineering consultancy: ‘I’m not sure about saying that geothermal energy should be prioritised and supported over other resources – perhaps you could think about some rewording here … this wording could present difficulties going forward.’ Four days later, senior AECOM consultant Andrew Turton replied to say: ‘Please find attached the latest version of the report with the changes as requested — I hope these are now as desired!’

Having at the request of the department scored out ‘some form of incentive will be required’, the consultants then replaced it with what would be the report’s key recommendation: ‘The GB scheme appears to be inefficient for Northern Ireland … Northern Ireland needs to develop a NI specific incentive scheme.’ It seems clear that the department influenced that key recommendation, even though it had already assured the Assembly that the report would be an entirely ‘independent assessment’. However, the report presented that as a means of being less generous – not more generous – than what was being planned in GB.

Intriguingly, Turton’s initial report had contained a recommendation to review the GB RHI scheme once it started, and to ‘monitor the cost-effectiveness of the incentives through applications supported’. That was also scored out. The failure to either monitor what was going on in GB or to keep a close watch on the cost of the scheme would be two crucial areas which would make it possible for the costs of Stormont’s scheme to escalate rapidly. Why had someone chosen to remove that part of the report?

Rather than have the confidence to take the experts’ advice and then make its own decisions, DETI appeared to be wanting to steer the consultants towards telling it what it wanted to hear in certain areas. At the inquiry, Clydesdale defended her actions, insisting that much of what she had done was ‘correcting the report and correcting inaccuracies’. At the time, Foster presented the report to the Assembly as being based on ‘reliable data’ and that it had ‘considered appropriate methods of incentivisation’, something she said was ‘absolutely vital to ensure that future policy decisions regarding the incentivisation of renewable heat are based on sound evidence’.

In a September 2010 letter to the Assembly committee which scrutinised her department, Foster said: ‘I can assure you that I am committed to developing the renewable heat market in Northern Ireland and see many benefits in doing so.’ That personal commitment to RHI and a desire to be associated with it would mark many of Foster’s pronouncements when she thought the policy was popular. Once it began to implode, the minister suddenly became very keen to stress how limited her involvement had been.

Once the report was agreed between the consultants and the department, one of Hepper’s first tasks was to get her team to summarise it for the minister. On Hepper’s advice, Foster issued a press release in September 2010 to reassure those pressing for a renewable heat subsidy that Stormont was planning to follow what had happened in the rest of the UK by setting up its own incentive scheme.

By the time Hepper arrived, the need to get a renewable heat subsidy launched was also being driven by the fact that Westminster had made available to Northern Ireland a pot of £25 million for four years from 2011, which could only be spent once a Stormont scheme was launched. That was unusual in government spending. Generally, a need would be identified which would have a certain cost and then the budget would be found. But here the cart came before the horse, with money being made available and Stormont finding itself under pressure to spend it. From the outset, the central concern for some in Stormont was that the money might not be spent in Northern Ireland.

Two years after her arrival, by which time the scheme was still six months from being launched, Hepper emailed her minister’s special adviser (spad), Andrew Crawford, a figure who from early on appeared to have taken a particular interest in the scheme. In that email she referred to the ‘exceptional circumstances’ as a result of ‘the pressure to spend the Treasury money or lose it’.

As decisions were being taken about how the scheme would operate, one central preoccupation of those designing the scheme was that it would see as much of the available money spent as possible. Even if there was no deliberate desire to overspend because of a belief that it was all Treasury money, the ambition to spend as much of the available budget as possible was always going to conflict with what taxpayers might assume would be a desire to spend as little of their money as possible in order to achieve the desired goal.

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Under devolution, senior members of the Northern Ireland Civil Service were unusually keen to satisfy their political masters. Having for decades operated under direct rule ministers from Westminster, many of whom spent limited time in Northern Ireland, suddenly civil servants found themselves reporting to ministers who had firm ideas about what should be done.

Looking at the political landscape, even civil servants with stunted political antennae would have realised that the DUP and Sinn Féin were likely to be in charge for a very long time. In that context, many civil servants bent over backwards to please their ministers. Some officials were reluctant to give their minister bad news. But in some cases, this was not necessarily in the politician’s interest.

In November 2008, four years before RHI would be launched, Hepper’s predecessor as head of energy division, Jenny Pyper, was sent a memo by a subordinate. In it, Pyper was reminded that when they had opted out of the UK-wide RHI scheme, she had sent a submission to the minister on the issue but they had taken out a paragraph saying that DETI ‘cannot hope to develop this area of work with current resources’. Years later, when they were asked to explain how the debacle had started, civil servants would claim that they had inadequate resources to set up the RHI scheme Foster asked them to create – and Foster would say that she had never been told of the extent of the staffing difficulties in energy division.

Just five days before that memo, Pyper – who would go on to become the Northern Ireland Utility Regulator – received another memo from an official who alluded to the glacial pace of Stormont’s own thinking on incentivising renewable heat. Referring to a Whitehall document to which DETI had been invited to contribute, they said: ‘I am finding it hard to find something positive to say on heat, so it is not mentioned specifically.’

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By her own admission, Hepper was ‘not an energy expert’. Nor were those around her in the team designing the RHI scheme. Joanne McCutcheon, the part-time official who headed up the renewable heat branch, came from a telecoms background. Completing the tiny team was Peter Hutchinson, a relatively junior official who had joined the civil service five years earlier, graduating with an arts degree before grappling with the complexities of biomass boilers, air source heat pumps, photovoltaic panels and tariff methodologies. Like the others, Hutchinson was a generalist, who had come straight into DETI from university. But Hepper had no qualms about the team, taking the view that they would ‘learn on the job’. After all, it was how the Northern Ireland Civil Service – and to a large extent, its Whitehall equivalent – had operated for longer than anyone could recall.

However, with it clear that none of those designing the policy were experts, the department acted as it invariably did in these situations – it turned to private consultants. Hepper and her boss authorised a contract that would ultimately see £100,000 paid to Cambridge Economic Policy Associates (CEPA) for recommendations about incentivising renewable heat. If the RHI scandal resulted from a series of genuine mistakes from the outset, rather than a calculated attempt to fleece money from the Treasury, then that decision was critical to all that followed.

The situation exposed a fundamental weakness for government departments largely staffed by generalists: they were hiring in outside consultants because officials lacked expertise to do the work, yet those same civil servants would be the ones scrutinising the work for deficiencies. The absence of internal specialists meant that there was always the potential that the consultants would bamboozle the client with apparently detailed analysis, with the department lacking the cognitive clout to query the report.

Later, CEPA would claim that when it was given the contract it had less expertise in renewable heat than the department that hired it. The global consultancy firm’s director, Mark Cockburn, said: ‘we were learning a new area as we went along’, and as a result it had sub-contracted part of the work to another consultancy, AEA. It was the partially sighted leading the partially sighted and ultimately both would see their reputations damaged as a result of the arrangement.

Seven years later, Cockburn told the public inquiry that ‘I don’t think we had many conversations’ about the risk of the subsidy being overly generous. At that point, he said, the emphasis was to design a scheme, which was sufficiently attractive to encourage uptake, with the idea that it would be giving claimants too much money regarded as ‘a very remote possibility’. The desire to make a green energy scheme generous, rather than Stormont using its powers to pare back Westminster’s approach, was at first glance curious. The DUP – which held the energy portfolio for the unbroken decade in which devolution operated from 2007 to 2017 – was at best sceptical about green energy.

Prominent DUP politicians were firmly opposed to any environmental subsidies. Their reasons ranged from opposition to overburdening taxpayers to a belief that global warming was not caused by human activity.

The most outspoken critic was Sammy Wilson, the Finance Minister at the time when RHI was set up. In one of his frequent forays against environmentalists, the East Antrim representative denounced ‘the high priests of the new global warming religion’ for foisting high energy prices on the public.

But while Wilson was steeped in the DUP, with enough outspoken comments to fill an encyclopaedia, Foster was a very different figure. The epitome of the New DUP, she had spent years in the Ulster Unionist Party before defecting to the DUP in 2004 as the balance of power within unionism decisively shifted in favour of the party founded by Ian Paisley. Largely eschewing the heady rhetoric of the likes of Wilson, she became a Stormont minister in 2007 and cultivated a reputation for tough pragmatism with a desire to be seen to be attentive to the business community.

That circumspection meant that she was never given to the sort of controversial pronouncements on climate change, which the Finance Minister relished. But she had not endeared herself to environmental groups either. They were furious when in 2008 Foster, the then Environment Minister, rejected the case for an independent environmental protection agency, leaving Northern Ireland the only part of the UK and Ireland without such a body. So any decision to create a green energy subsidy more generous in Northern Ireland than in the rest of the UK would not have been expected under a DUP minister – unless there was some secondary benefit which they could see. Given the scale 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.