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Summary

  1. Design of botched scheme outlined to Renewable Heat Incentive Inquiry
  2. Mark Cockburn from consultancy Cambridge Economic Policy Associates gives further evidence
  3. Inquiry set up after public concern over scheme's huge projected overspend
  4. Retired Court of Appeal judge Sir Patrick Coghlin chairing inquiry at Stormont
  5. Public evidence sessions expected to last until well into 2018

Live Reporting

By Robin Sheeran and Iain McDowell

All times stated are UK

That's all for this week...

A busy week on the red benches draws to a close with a few questions from the panel, and Mr Cockburn is reassured that the inquiry does not need him to come back.

"I don't think Mr Cockburn wants to be back here next November or December for his third visit to the Senate chamber," jokes Mr Lunny.

The empty Senate chamber
Press Eye

Join us again on Tuesday at 10:15 GMT for an evidence session with Department for the Economy officials.

Thanks for following our coverage - have a great weekend.

What happened today at the RHI Inquiry?

BBC News Northern Ireland

The London-based consultants who designed the flawed RHI scheme were told that their "reputation is at stake".

The RHI Inquiry
Pacemaker

Inquiry chair Sir Patrick Coghlin made the remark during the evidence session with Mark Cockburn, the director of Cambridge Economic Policy Associates.

Mr Cockburn was pressed on why warnings about the risk of overcompensation in the scheme were not highlighted in a report to Stormont officials who were introducing it.

'Good to work with DETI despite challenges'

In spite of the problems that have since emerged with the RHI scheme, CEPA "was happy to win" the contract with DETI, and its consultants enjoyed doing the project for the department, says Mr Cockburn.

The RHI Inquiry
RHI Inquiry

The civil servants at DETI's energy branch "were challenging in many ways because there were so many requests", but he adds that "they were good to work with".

After spending a day-and-a-half in the witness chair, he is probably glad to hear these words from the inquiry counsel: "I don't have any further questions."

'Appropriate diligence was required to spot error'

In his written evidence, Mr Cockburn says that all that was required to identify problems with the RHI scheme's tariff was "appropriate diligence".

Mr Lunny asks him: "Do you think that appropriate diligence is something that DETI could reasonably have expected CEPA to have exercised?"

A man examines documents with a magnifying glass
Getty Images

"Sometimes it is a fact that you don't spot your own mistakes, you do need a second set of eyes on things," replies Mr Cockburn.

He goes on to say that CEPA's additional report work in 2012 for DETI on the RHI scheme "could have been better".

'Missing tiering was consultants' human error'

Last year, Mr Cockburn appeared before the Northern Ireland Assembly's Public Accounts Committee to answer questions in its inquiry into the RHI scheme.

On the issue of the need for tiering, he told the committee: "Hands up, we missed it."

At the beginning of this public inquiry, the senior counsel David Scoffield QC said CEPA's evidence represented a "considerable retreat" from its position of accepting responsibility.

Mark Cockburn
RHI Inquiry

Mr Cockburn has since taken issue with that suggestion in his latest submission of written evidence to the inquiry, observes Mr Lunny.

Mr Cockburn says he was simply setting out additional context, and he has "not moved away from" the accepting that it is "obvious" that CEPA missed the tiering requirement.

On missing tiering, he adds: "That was human error - all we needed was for someone to just say: 'Are you sure about that?'"

'Why was need for tiering not seen?'

Mr Lunny turns to the matter of the tiering of tariffs, an approach that could have helped to prevent the payments offered by the scheme from running out of control.

Tiering works by dropping the amount of the subsidy on offer once a certain limit of heat usage has been reached, with the intention of preventing a claimant from overusing their heating system to collect more cash.

In the Great Britain scheme, a tiering system was in place, meaning there was no "perverse incentive" for a burn-to-earn abuse of the scheme.

Boiler
BBC

Mr Lunny says there is an important question about whether the need for tiering in the Northern Ireland scheme should have been spotted by CEPA and DETI in 2012.

He suggests that Mr Cockburn's position appears to be that "you regret that you didn't spot it; that you should have spotted it, but it wasn't within your remit".

Mr Cockburn says it's "not ultimately clear" that it was within CEPA's remit but he can understand why it could have been seen that way and accepts that there ought to have been tiering of the 5.9p tariff in 2012.

'Haha... that's why you shouldn't run subsidy scheme'

As we heard yesterday, there were options for what form Northern Ireland's renewable heat scheme would take.

Among them was a challenge fund, basically an up-front capital grant scheme for biomass boiler installations, with the grants awarded on a competitive basis.

Another option, which was ultimately adopted, was a continuing subsidy scheme.

An email inbox
Getty Images

Mr Lunny points out that challenge fund schemes cannot go over budget because it ends once the set pot of money has been spent, but an ongoing scheme - as was the case with the RHI - can "run out of control".

He says that CEPA did not give "a stark warning" to DETI about that risk, but he looks at an email exchange in February 2016 between two CEPA staff in which they discuss the impending closure of the RHI scheme after its vast overspend emerged, and one writes: "Haha... this is why you should not have administered schemes."

Mr Cockburn says he believes CEPA did give the warning and will refer the reference to the inquiry when he finds it.

'Disappointed we didn't consider earlier review'

CEPA advised DETI to review an RHI scheme after two to three years.

But Mr Lunny notes that the company had experience of consultancy work on a Feed-In tariff (FIT) scheme for electricity generation in Great Britain in the summer of 2011.

A problem had been identified in the FIT scheme, which had been operating since 2010, and it was promptly addressed by the government after a review in 2011.

Wide shot of the inquiry
RHI Inquiry

Mr Lunny wants to know why CEPA did not use their experience of the FIT scheme to suggest to DETI that a review should be held in, say, 18 months, rather less than two to three years it suggested.

Mr Cockburn says that "with perfect hindsight and 360 degree vision" it perhaps would have done so.

"I'm disappointed that we didn't reflect on the knowledge that we had and incorporate it," he adds.

'Budget wasn't enough to do detailed work'

CEPA were unable to go into a deep level of analysis of details of the RHI scheme because of the limited budget it was given by DETI, says Mr Cockburn.

"You're assuming that we had some kind of endless budget to go and think of every eventuality," he responds to Mr Lunny's questioning about why certain analysis was not done.

Sterling banknotes
PA

He says the work had gone "two or three times over-budget".

Sir Patrick takes issues with that saying it was up to CEPA to say to DETI that the money on offer for its work was insufficient, and then decide whether to continue with the contract.

He says civil servants at DETI "were entitled to rely" on CEPA's reputation as experts, which is "at stake in this".

'Risk analysis missed because we didn't expect it'

Consultants did not carry out a crucial analysis of the risk of claimants being overcompensated in the RHI scheme because they considered it to be a "remote possibility".

Mr Lunny presses him, saying that CEPA's job was to look at risks and ways of mitigating them.

A man making calculations
Getty Images

"There was no evidential track record of these things happening," Mr Cockburn adds.

He says no-one "would've thought there would've been no other means of preventing it".

'Tariff calculations show unacceptably high returns'

In 2016, the Northern Ireland Audit Office (NIAO) complied a report on the RHI scheme, exposing the major problems that hadled to its overspend and ultimate closure.

Mr Lunny acknowledges that Mr Cockburn has taken exception to some of the report's findings.

He says the auditor general produced what was "a type of sensitivity analysis" and quotes from some of the report's figures - the conclusion is that each example shows "an unacceptably high rate of return" for businesses taking part in the scheme.

Donal Lunny
RHI Inquiry

It continues: "The potential for these type of returns should have been identified and prevented when the scheme was being designed."

In a 2016 email to his CEPA colleague Ian Morrow, Mr Cockburn says "this risk was recognised", but Mr Lunny puts it to him that he "didn't mention it in any of your reports to DETI".

Mr Cockburn says he thinks that "the risk that was recognised was that tiering (of the tariff) should have been included".

'Consultants no more expert than civil servants'

Consultants who were paid about £100,000 to give advice on the design of the RHI "were no more expert" than staff at the Stormont department that commissioned them, says Mr Cockburn.

Why then, asks inquiry panellist Dame Una O'Brien, did CEPA bid for the work to advise DETI on the design of the scheme?

A man pointing to figures on a screen
Getty Images

He says CEPA had "no experience of renewable heat" projects, so it collaborated with another firm, AEA Technologies, which had worked on the similar Great Britain RHI scheme.

Inquiry adviser Dr Keith MacLean points out that the mistakes made in the calculation of the subsidy offered in the Northern Ireland RHI scheme were fundamental economic mistakes, rather than anything that would've required specific expertise in renewable heat.

'Civil servants should be competent'

It is usual to expect that civil servants within Stormont departments "have a degree of understanding and competence", says Mr Cockburn.

He makes this point when he's asked why consultants at CEPA do not appear to have made clear to DETI how changes to certain key variables would affect the calculation of the subsidy tariff on offer through the RHI scheme.

In the economic model used to calculate the subsidy levels, it presumed that scheme claimants would use their biomass boilers on average for about 17% of the time.

Mark Cockburn
RHI Inquiry

But in reality the boilers were run for much longer than that because many businesses, such as poultry farms, had a much higher heat requirement.

Therefore, claimants using their boilers for a longer period of time that the consultants had assumed they would could collect more money than was intended.

Mr Cockburn's argument is that it was assumed that DETI had an understanding of how it would work "because they're running policy".

'An efficient early start'

Inquiry chair Sir Patrick Coghlin kicks off the day's proceedings by noting that they are beginning three minutes ahead of the planned start time.

"Very efficient, " he says.

In truth, the inquiry has already been plagued by numerous delays with witnesses being told they will have to return on another day to complete their evidence sessions.

Sir Patrick Coghlin
RHI Inquiry

Junior counsel Donal Lunny picks up where we finished yesterday, with Mr Cockburn of CEPA.

Just to bring you up to speed, CEPA was commissioned by Stormont's Department for Enterprise, Trade and Investment (DETI) to prepare a report in 2011 on how the RHI scheme should be set up (click to download).

What happened yesterday at the RHI Inquiry?

BBC News Northern Ireland

A director of a consultancy firm that designed the RHI scheme said his team should have noticed a fatal flaw in the plans.

Economists at Cambridge Economic Policy Associates (CEPA) gave recommendations on the final shape of the project, including the proposed subsidy tariffs it would offer.

The Senate chamber at Stormont's Parliament Buildings
Pacemaker

But they failed to spot the discrepancy between the cost of the renewable fuel and the incentive to switch to it.

You can find our full live coverage of yesterday's session here.

What is the RHI Inquiry?

BBC News Northern Ireland

An independent inquiry into the scandal was established in January by the then finance minister Máirtín Ó Muilleoir.

He ordered it in the wake of the huge public concern and what was then a developing political crisis surrounding the scheme.

Sir Patrick Coghlin
BBC

The RHI Inquiry began last month and Sir Patrick Coghlin (above), a retired Court of Appeal judge, is its chair and has been given full control over how it will operate.

It will look at:

  • the design and introduction of the RHI scheme
  • the scheme's initial operation, administration, promotion and supervision
  • the introduction of revised subsidies and a usage cap for new scheme claimants in 2015
  • the scheme's closure

For more information on the RHI Inquiry, you can read our handy Q&A.

RHI scheme - the fallout

Public and political anger erupted when the scale of the overspend emerged.

The Democratic Unionist Party (DUP) leader Arlene Foster (below) had been the minister in charge of the Stormont department that set up the RHI scheme in 2012, and she faced calls in to stand down as Northern Ireland's first minister in December last year.

Arlene Foster
PA

She refused, and Sinn Féin's Martin McGuinness then quit as deputy first minister in protest at the DUP's handling of what had by then become a full-blown political crisis.

By doing so, he brought about the collapse of the Northern Ireland Executive. Now, nearing a full year on from that, Northern Ireland remains without a devolved administration.

You can find much more detail on the RHI scheme in our need-to-know guide.

RHI scheme - the flaws

The budget of the RHI scheme ran out of control because of critical flaws in the way it was set up - the most recent estimate for the overspend was set at £700m if cost controls are not introduced.

Burning £20 notes
BBC

Claimants could effectively earn more money the more fuel they burned because the subsidies on offer for renewable fuels were far greater than the cost of the fuels themselves.

The massive overspend bill will have to be picked up by the Northern Ireland taxpayer.

RHI scheme - what was it?

Before we begin, here's a quick refresher on what the RHI scandal is all about...

The Renewable Heat Incentive scheme - or RHI for short - came to the fore of the Northern Ireland public's minds in autumn last year... and the fallout from the scandal attached to it is still being felt in the region's politics today.

A biomass boiler
Getty Images

The scheme was set up by the Northern Ireland Executive in 2012, as a way of encouraging businesses to switch from using fossil fuels to renewable sources for generating their heat.

Those who signed up were offered financial incentives to buy new heating systems, biomass boilers, for example, and the fuel to run them.

Good morning

It's the start of December but it's a wonderful day up on Stormont hill, with the morning sun turning the Portland stone facade of Parliament Buildings a nice yellowy shade.

We're back here to bring you live video and text coverage of the RHI Inquiry's final evidence session of the week.

Parliament Buildings at Stormont
BBC

Mark Cockburn of the London-based consultancy Cambridge Economic Policy Associates had a full day of questioning yesterday, and he's back for more today, with proceedings beginning shortly.

Just a half day today - it's all due to finish at 13:00.