Stormont is pretending to close RHI, but isn’t: it’s quadrupling payments, locking them in to 2036, and making scheme easier to abuse

https://www.belfasttelegraph.co.uk/opinion/columnists/sam-mcbride/stormont-is-pretending-to-close-rhi-but-isnt-its-quadrupling-payments-locking-them-in-to-2036-and-making-scheme-easier-to-abuse/a662384564.html

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Sam McBride

Today at 07:00

On Monday, Stormont set out how it plans to close the Renewable Heat Incentive (RHI) scheme, but there were two problems: key details were missing, and what it’s planning doesn’t in fact shut the scheme at all.
In fact, what’s planned here would drastically increase every RHI claimant’s payments, would lock those payments in for a decade, would make fraud easier, and would leave the department which has bungled this scheme from the outset in complete control of overseeing the spending of what it estimates could be £196m of Treasury money.

To be more precise, Caoimhe Archibald’s Department for the Economy (DfE) is proposing to shut RHI but that same day transfer everyone who’s in the scheme into a new and far more generous scheme. There are suggestions that those who’ve dropped out of RHI could now be allowed back in. Essentially it is about rebranding the Renewable Heat Incentive, not shutting it.

Monday’s proposal came in the form of a public consultation. But it seems that the department has mostly made up its mind on what to do.

It said that the closure will be “fair to participants and taxpayers alike” and the consultation is an “opportunity to shape the final arrangements”.

But key details haven’t yet been disclosed. Crucially, the department has not published the draft legislation for closure — even though that is what will decide the rules of the new scheme — and it was missing words from the original legislation which led to the RHI scandal.

Here are eight potential flaws in what is proposed:

1) It’s not closure at all

Nine and a half years ago, Stormont claimed to be shutting RHI, but didn’t. It stopped new entrants, but those already in had guaranteed payments for 20 years.

Now it’s again presenting this as closure. But even a cursory glance at the proposal shows that payments would continue until 2036 — and will soar from their current (absurdly low, in comparison to RoI and GB) levels.

Many claimants will see their annual payments quadruple to £11,000. Marketing this as closure is deeply misleading; hiking everyone’s subsidy and keeping those payments going for a decade means we’re nowhere near the end of this saga.

2) Anti-fraud efforts have failed

When the RHI scandal erupted almost nine years ago, DfE promised to root out fraudsters. It simply hasn’t done so to any appreciable extent.

Instead, it has taken the easy route by tarring all RHI claimants with the same brush. Slashing everyone’s payments has been very successful at cutting the bill, but very unsuccessful at finding who’d been screwing taxpayers.

DfE has admitted to me that it has recouped “approximately £400,000” from enforcement against claimants.

That’s a hopeless fraction of a per cent of the total expenditure on this scheme — and part of the reason for that is the department’s repeated failures to urgently inspect every installation, and then to follow its own rules, leading to court reversals.

If its anti-fraud efforts have failed for a decade, why should we believe they’re suddenly about to work?

3) New scheme payments are crude

The new scheme will involve ‘deeming’ payments — in other words, the department will take a guess at how much heat someone is likely to be producing and pay them that amount every year, irrespective of precisely how much heat they are producing.

This is great for the department because it doesn’t involve much work for civil servants.

We know that’s a key consideration, because one of the main reasons officials said they disregarded expert advice against an RHI at the outset was that it would mean too much work for them.

But here the priority for this to be easy for the department seems to trump getting accurate payments which actually incentivise green heat use — which is, after all, the only justification for the scheme in the first place.

4) New scheme wide open to abuse

What’s being proposed involves light-touch regulation, which, in relation to RHI, ought to trigger flashing red lights in MLAs’ heads as they consider this. The department is ditching the need to submit meter readings; in fact, it’s ditching the need for biomass boilers to have heat meters full stop.

That means that there’s no way for the department to know, let alone prove, how much a boiler has been used.

Indeed, unless boiler owners voluntarily choose to keep meters (which anyone with fraudulent intent wouldn’t), they would have no means of themselves knowing how much heat they’d produced.

The scheme is being deliberately set up in a way which makes it impossible to know how much heat is produced.

One source told me that boiler owners in negotiations with the department had wanted tougher safeguards to catch fraudsters but that it was the department which insisted it didn’t want metering, saying it didn’t have enough staff to run a more complex scheme with extra checks.

5) Heat calculation is flawed

The sum claimants will get each year is based on their average heat consumption during the period 2017-19, when sharp subsidy cuts took effect. DfE says this is because the scheme “had known flaws in its early years, which may have distorted boiler usage”.

But it knows that there is a separate distortion involved in the 2017-19 period. In a case against Dennison Commercials, which had 11 boilers rushed into the scheme before the most lucrative subsidy was slashed in 2015, DfE argued that the drastic fall in heat output from the company’s boilers after it retrospectively cut tariffs in 2017 implied that the company had been essentially milking the scheme.

The High Court threw out this argument, saying there were all sorts of reasons a company could use less heat, the most obvious being the commercial decision to do less of something because it no longer made business sense. Yet the department is now presenting this period of what may be atypical usage as the basis for a decade of future payments.

6) Ongoing arrogance

With RHI, the department has consistently given the sense that it knows best and so it has started with what it wants to do and worked backwards to justify why that should be done. Here that seems to be happening again.

The consultation is constructed in such a way as to offer no real alternative beyond what DfE wants. This is repeating its foundational error in this shambles. Right at the outset of the scheme, the expert consultants hired by the department advised it against an RHI; it would be better to do a grant scheme, they said.

The department didn’t want to hear that and so, after it made its views clear to the consultants, they altered their recommendations to make far their view far less explicit. There are echoes of that here.

The department is desperate to shut RHI, desperate to get the ‘free money’ available to it for this purpose from the Treasury which for years it has been wasting, and desperate not to have to pay the compensation bill to boot every RHI claimant out of the existing scheme. Using the Treasury money to pay off the existing claimants is attractive because the department doesn’t have to find this money from its own budget.

7) Repeatedly wrong

DfE is asking the public to trust it on getting this right — when it has spent years getting it wrong, without admitting that.

When it slashed subsidies, DfE officials insisted to me personally in private briefings, and to others, that fears people would turn off their boilers and revert to fossil fuels were wrong. Now it’s quietly admitting those fears were accurate. Of the original cohort of more than 2,000 boilers, the department now admits that only about 1,200 are still being used to any appreciable extent. This newspaper has reported that people have been literally giving away their boilers, yet still the department insists it was right. One source said that most of those who’ve dropped out of the scheme might be allowed in, although there’s no mention of this in the consultation.

8) Rushing the Assembly

The department has repeatedly rushed the Assembly, presenting it with a fait accompli. Here it has again left this until late in the day.

Ofgem, which administered the scheme for DfE, warned in April 2024 that it would be handing back the contract in April 2026. It gave DfE two years to sort alternative arrangements. Yet there was no sense of urgency. Instead, this consultation is only now starting and won’t finish until late November.

By the time the responses have been considered, legislation is unlikely until January, leaving MLAs just weeks to consider it. There are rumours of using accelerated passage to rush it through. Unless the MLA is a toothless plaything of the Executive, it should by now realise that this department needs more scrutiny, not less.

Philip Brett, the DUP chair of the committee scrutinising DfE, is one of Stormont’s sharper MLAs who has refused to be fobbed off by departmental assurances in the past. His party is undermined in criticising Sinn Fein on this because of its own sorry history here. But this is more important than party politics; ultimately every party stands to lose out if this is bungled again. Stormont needs to assure the public that it can handle this, and there should be a shared interest in robust scrutiny to ensure a fair outcome.

I asked DfE how many staff would police the new scheme and what that would cost. DfE said it “anticipates that only a small number of inspectors would be required to undertake an annual inspection programme”.

When asked how it would know if someone getting £110,000 over the next decade per boiler (£1.1m for someone with 10 boilers) was just turning their boilers on briefly and turning them off again, it admitted that “actual annual output in the future may differ from the figure used to determine closure payments”.

It referred to some of the boilers being audited but highlighted only two sources of evidence to be checked: fuel receipts and maintenance records.

When asked how it could assess those who grow their own wood and maintain their own boilers — or falsify such documents — the department said, vaguely, that there would be “onsite inspections”. What those inspectors would examine is unclear.

Boiler owners I’ve spoken to are split on this. Some believe this is wrong in principle and they should be paid closer to what their counterparts in Britain and the Republic are getting. But a firm majority, weary from years of failed court challenges and lobbying which hasn’t seen their payments restored, seem to just want it to end and are supportive of what’s proposed.

One major RHI claimant involved in a significant Northern Irish business said that DfE seems to have thought: “Give them a bit of a bung and that’ll keep them quiet — and maybe they’re right. It needs to finish somewhere. But I will never trust another government scheme again.”

He may be right that this is a reasonable alternative. But that should be rigorously tested in public — not only to see if the arguments stack up and fix flaws, but also to convince the public that MLAs have some basic curiosity and the ability to hold civil servants to account.

One of the strengths of what’s proposed here is that an overspend appears to be impossible. The figures seem to be based on assuming the worst-case scenario of everyone claiming high payments; if so, then there would be a guarantee this figure couldn’t go above £196m.

Ditching RHI would allow new green heat support schemes to be created, which is long overdue; Northern Ireland has been falling further and further behind much of the developed world in this area over the past decade.

But to convince people to join such schemes, DfE needs to convince us that it has changed. Thus far, there’s scant evidence of that.