Sam McBride: The little-known £5 billion subsidy which helps unravel the RHI riddle
Two and a half years ago on a cold March night in Exeter, Arlene Foster addressed Devon Conservative Association and told them what they wanted to hear.
The DUP leader, by then at the peak of her influence in London, defined her unionism in selfless terms: “We are the party for Northern Ireland but our unionism doesn’t end at the Irish Sea.
“We will always fight hard for the best deal for Northern Ireland but we care about vulnerable people in Bangor, North Wales the same way as those in Bangor, North Down. That of course is the very essence of our unionism.”
The audience might have reacted differently had they realised that the messenger extolling this pan-unionist ideology was someone who had presided over schemes which will transfer billions of their pounds across the Irish Sea for supposedly environmental subsidies which in some cases actually harmed to the environment.
On Tuesday the Audit Office published an 80-page report into the Northern Ireland Renewables Obligation (NIRO), a vast green electricity subsidy with which Mrs Foster was intimately involved.
Its revelations, informed by an 18-month investigation, were not only in themselves remarkable but provide context which makes it much harder to claim that RHI was a mistake rather than part of a wider policy of extracting as much from London as possible.
In the short term this policy has enriched some of those able to get in before the bonanza closed, but in the long term it will be disastrous.
Even for those who got in on time, RHI has already fallen apart, leaving many claimants wishing they had never heard of the scheme, while it is becoming clear that a substantial proportion of the NIRO money is actually ending up with far away venture capitalists and bankers.
The scale of these schemes has opened the eyes of both the Treasury and a growing body of informed opinion in Great Britain to what was happening and the backlash against this profligacy is likely to bluntly land on the deserving and the undeserving whenever Stormont attempts to secure future financial support for what it says is a worthy cause.
The official story about the RHI scandal has always been that it was due to incompetence – and there was such wild incompetence, that is in some ways credible – rather than a calculated attempt to make it as expensive as Stormont could get away with.
But if there was another green energy subsidy run by the same people at the same time where many of the same factors were present, that incompetence claim would become a much less likely explanation, taking into account all that we know.
Enter NIRO. Although there are several differences between the schemes, there are uncanny similarities:
1) As with RHI, this subsidy was overwhelmingly not funded by Northern Ireland. The Audit Office calculates that of the potential £5,000,000,000 bill for the 20-year scheme, three quarters of it will come from GB electricity bill payers.
2) As with RHI, Arlene Foster – advised by her longstanding spad Andrew Crawford – took decisions which made the scheme more generous in key areas, despite her party often having been critical of green energy subsidies.
3) As with RHI, decisions taken by Mrs Foster created perverse incentives. With the NIRO, people were deliberately altering wind turbines to cut their output in order to qualify for the most lucrative tariff which was quadruple that on offer for the largest and most efficient turbines. That delivered poor value for money for consumers – but since most of those consumers were in GB, it sucked larger sums of their cash across the Irish Sea.
4) Giant poultry processor Moy Park, the greatest single beneficiary of RHI, was a key beneficiary of this scheme, using it to help fund anaerobic digesters which helped it dispose of huge volumes of poultry litter which had been, until the NIRO, an impediment to its expansion. Mrs Foster doubled subsidies for such plants.
5) As with RHI, when London made clear it was no longer paying, the scheme was shut rather than Stormont deciding that it was sufficiently important to pay for it itself. Northern Ireland went from having the UK’s most generous green subsidies to now being the only part of the UK without a subsidy for renewable heat or electricity – two decisions taken once access to what one civil servant described as ‘free money’ from GB ended.
6) As with RHI, the ministers and civil servants involved in setting up and running the scheme knew that they would be long gone by the time it was closed and the final bill was known, given the unusual 20-year commitments which it entailed.
7) As with RHI – and as recently as this week – the Department for the Economy, which runs the scheme, has claimed that it was “a major success” (when closing RHI it described that scheme as “very successful” – something the then spad in the department said they knew to be false). The most benign explanation is that officials defines success simply by the fact that there had been huge uptake, rather than focussing on the cost to the public purse of that ‘success’.
But we do not need to rely on a comparison of the two schemes to understand that what happened with the NIRO helps explain what happened with RHI. Out of the mouth of Mrs Foster’s long-standing spad came the admission – little remarked upon at that time – that he had viewed RHI as following what the NIRO (set up under direct rule but then made more generous by Mrs Foster) had done.
The powerful young spad told the RHI Inquiry: “I always likened the RHI scheme to the NIRO...that was always my view when the RHI was being set up...that there was a parallel in the two schemes moving forward”. He went on to say that the NIRO saw Northern Ireland getting “more than its...share” of the UK pot and he was “just replicating, I suppose” that scheme when creating RHI.
Mrs Foster similarly linked the two schemes’ ability to draw in extra money: ‘We were aware that NIRO was being funded and there wasn’t any difficulty if Northern Ireland went over its share as it were. And in fact for some people it would be seen as a good thing because we were taking more out of the pot as it were and bringing it into the Northern Ireland economy.”
Had Northern Ireland been delivering more of a national policy goal, of course it should have received greater reward. But that was not happening here. Inflating the subsidy meant that Northern Ireland was incentivising itself – with GB cash – to deliver worse value for money and less green energy per pound.
Could it be coincidental that people who viewed it as “a good thing” to get more than our fair share just so happened to construct two separate schemes which succeeded in that goal?
The outcome of this policy has been disastrous – not just for Mrs Foster’s reputation, for devolution itself, for the renewables industry which has seen boom and bust, and for the reputation of unionism, but also for how Northern Ireland, as an entity financially dependent on a huge subvention from GB, is viewed in London.
Last Saturday the Daily Mail, a newspaper whose scant interest in Northern Ireland is likely reflective of its reputation for an intuitive feel for its readers’ views, devoted a double-page spread to an exposé of the NIRO.
The paper calculated that one turbine near Ballymena generated about £48,000 of electricity last year but was also entitled to £287,000 in subsidies, meaning it has likely paid for itself three times over since being installed in 2017.
The Mail described the scheme as the result of “blundering civil servants” who had created “a licence to print money”, the paper of middle England seemingly unable to comprehend that anyone in Stormont might have seen it as a policy goal to consciously suck in the maximum sum.
There was always going to be a day of reckoning for the sort of economic nationalism discreetly practiced by the DUP and Sinn Féin after they came to power in 2007.
As the sums just get bigger and bigger, so might grow the scale of that reckoning.
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