RHI civil servants still making ‘insane’ basic errors, court told – and their decisions ‘catastrophically’ hurt farmer
Vast RHI subsidy cuts are based on work by civil servants which continues to be riddled with basic errors, the High Court has been told.
After years of delay – much of it for legal and political reasons – claimants yesterday finally had their day in court to challenge the biomass boiler subsidies being slashed by up to 96% from that what Arlene Foster and her officials promised would be unalterable.
Boiler owners had challenged the initial more modest cuts to the scheme in 2017 and lost that High Court action. They are appealing that verdict but the appeal has still not been heard, almost four years later.
Instead, they have taken a fresh challenge to 2019 legislation rammed through Westminster by the then secretary of state Karen Bradley in the face of concern about how that was done with scant scrutiny.
The judicial review which began yesterday is being taken by Tom Forgrave, an award-winning poultry farmer from north Antrim who is a director of the Renewable Heat Association NI (RHANI).
In Belfast High Court yesterday his lawyer, Gerry Simpson QC, set out a scathing analysis of what he said were continued elemental deficiencies in how Stormont’s Department for the Economy is running the scheme.
The department’s justification for cutting subsides to much less than those paid in GB and the Republic of Ireland is that it says the maximum legal payment under EU state aid law is just over £2,000 a year for the most popular type of boiler. It argues that allowing claimants to get more than a 12% rate of return on their investment would constitute illegal state aid.
However, Mr Simpson said that the 12% figure was essentially meaningless because all sorts of level of subsidy could be said to involve a 12% return depending on which costs were allowed to be part of the equation.
He said there were “fundamental flaws” in the department’s arguments on the issue.
Mr Simpson said that, contrary to what the department is arguing, it was not the rate of return – something which would involve complex calculations by each individual – which was guaranteed to participants, but rather the tariff level which was guaranteed.
Mr Simpson told the court that one of the department’s key calculations for what it claims is the rate of return was based on the cost of 900 litres of kerosene. He said: “Only an insane businessman, my Lord, running a commercial business would buy kerosene in 900 litres. That’s a domestic volume. That’s what your lordship gets for the house.
“It’s much more expensive than commercial volumes. If you were buying the commercial volumes, you would get 12,000 litres, which would be fundamentally different.”
Mr Justice Humphreys asked: “Doesn’t all this illustrate the difficulty of the concept of this scheme being fixed to a rate of return because whenever the figures are created they’re nothing more than best market estimates?”
Mr Simpson agreed, and added: “That’s why ... the suggestion that it’s the rate of return which is grandfathered is fatuous. It doesn’t make sense.”
The judge replied: “Well, how could it be? How could the tariffs be adjusted to ensure it was always a 12% rate of return?” Mr Simpson said: “It couldn’t be, my Lord. That in our respectful submission ... shows that it’s just meaningless to try to do that exercise.”
The QC said that “there could be 10 rates of return” and that even a senior departmental official gave evidence to the inquiry to say that the department’s methodology for calculating the rate of return was “meaningless”.
Reading from Stormont documentation, he told the court that government had said that “‘the outcome of future reviews will not impact on existing installations’. Now, if the English language is to mean anything, my Lord, that’s as clear as daylight.”
Reading from Stormont papers, he said: “‘[the department] acknowledges that in order to have the necessary certainty and confidence for investments in renewable heat to be made, there also needs to be certainty over tariff levels’ – not rate of return; tariff levels – ‘in the coming years. DETI is therefore committed to the principle of grandfathering where support levels are guaranteed. In practical terms this means that any changes to tariff levels – higher or lower – which result from planned reviews only affect new projects accredited on or after the date at which new support levels are introduced.’”
“Now, that could, we respectfully say my Lord, scarcely be clearer.”
Lawyer sets out farmer’s financial plight after believing Stormont
Farmer Tom Forgrave had gone from receiving £26,000 for each of his RHI boilers to just over £2,000 – a cut of 90%, the court was told.
Gerry Simpson QC said that Mr Forgrave borrowed £508,000 from the bank, using some of his land as security, and has a loan repayment commitment for 10 years of £72,000 a year.
He said that his annual cost of fuel is £157,000, of which £99,000 is paid by Moy Park as a fuel allowance, and that he also has annual repair costs of £14,000 and electricity costs of £12,000.
That means that Moy Park is paying just over half of the cost of the heat required to produce its chickens on Mr Forgrave’s farm, demonstrating the huge financial benefit to the massive company – which once paid all its farmers’ heating bills – as a result of the RHI scheme.
Mr Forgrave argues that the department has broken article one of protocol one of the European Convention on Human Rights which protects his right to property.
Setting out some of the errors in how the scheme was designed and managed, Mr Simpson said: “The state did not act in good time, and that has led to what are draconian panic measures”.
His client, he said, “has very significantly, and now he finds, catastrophically changed his position as a result of representations from government he was entitled to take in good faith”.
The QC said that applicants had a “right to a guaranteed tariff level for 20 years ... that’s the bulwark of our case”.
He highlighted that the payments were publicly said to be “grandfathered” and that government told applicants that their income from the scheme was guaranteed, giving them certainty to borrow money and invest.
Mr Simpson took the judge through key sections of the RHI Inquiry report which highlighted the department’s myriad failures.
He said: “But none of these errors is an error of the applicants.”
The QC said that Mr Forgrave had been subjected to several audits and had been “given a clean bill of health”.
Mr Simpson said that “where mistakes have been made by government, a different proportionality approach must be taken”.
Mr Justice Humphreys asked: “Does that mean that in the case where the state has made an obvious error, that it should spread the cost of that error widely across taxpayers generally rather than imposing the burden on individuals who have signed up to the scheme?”
Mr Simpson replied: “Yes, my lord.”
Mr Simpson highlighted that the cuts had been so deep that there was now a huge underspend, and less than a third of the budget which the Executive is given by the Treasury for RHI is being spent.
The case continues.
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