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Summary

  1. Design of botched scheme outlined to Renewable Heat Incentive Inquiry
  2. DETI's former head of analytical services Shane Murphy faces questions
  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 today...

We've had some interesting insights into the inner workings of the civil service today...

Parliament Buildings at Stormont
BBC

Join us again tomorrow morning at 09:45 - Mr Murphy will be back to conclude his evidence session.

Have a great evening.

What happened today at the RHI Inquiry?

BBC News Northern Ireland

The inquiry demanded to know why economists who signed off the RHI scheme did not consider an alternative which was hundreds of millions pounds cheaper.

There were two options at the outset - an up-front grants model and an ongoing subsidy offer that would run for over 20 years.

Wood pellets
Tchara

The grant scheme was rejected because the administrative costs were £5m, while the subsidy scheme cost £1.5m.

The subsidy scheme was chosen, even though its total costs were £300m higher than the alternative.

'Unaffordable admin costs killed cheaper scheme'

The final question of the day comes from chair Sir Patrick, and he returns to an earlier point...

Sir Patrick
RHI Inquiry

He asks whether DETI's "assertion" that the £5m administration costs of the up-front grants scheme were not affordable "put an end to any objective consideration" of it.

"Yep - it took it off the table in my interpretation," concludes Mr Murphy.

'We wouldn't have approved embarrassing scheme'

Mr Aiken asks if the casework committee would have been seen as a "fait-accompli" or whether it would've been "embarrassing for anyone" if it hadn't given approval to the RHI scheme.

"Yes, in a nutshell," says Mr Murphy, adding that people would only take something to the committee that they expected to get though.

Mr Murphy
RHI Inquiry

He says that the committee wouldn't have approved the scheme if it could have "embarrassed" DETI when it went on to be assessed by Stormont's finance department.

"I would absolutely be confident that a casework committee would not conveniently adopt something just to send it to the likes of DfP to knock it down," he adds.

He goes on to say that the committee asked "the right questions" and "didn't have a strong reason to block this and we let it through".

'Subsidy analysis should've happened in 2012'

Last year, Mr Murphy was asked by the economy department's permanent secretary Dr Andrew McCormick (below) to draw up a "retrospective analysis" on the RHI scheme tariff calculations of 2012.

Dr Andrew McCormick
BBC

The results showed that higher usage of the biomass boilers on the scheme resulted in much higher rates of return in subsidies.

Dr McCormick noted in an email that as usage increased, the subsidy effectively became pure profit, and he wrote: "I fear this kind of analysis could have been done in 2012."

'Had it been dafter, I might've asked daft question'

Mr Aiken sums up Mr Murphy's view about missing the error with the tariff/fuel cost figures.

"You wished you'd seen it and you didn't," he says. "But it isn't reasonable for the panel to take the view that you should have seen it, and that you ought not to be criticised for not seeing it."

Mr Murphy says: "Had it been a bit dafter I might have asked a daft question, which might have accidentally stumbled upon this."

And he says that what might look obvious now "was not anywhere near as obvious at the time".

The inquiry in session
RHI Inquiry

Mr Aiken asks Mr Murphy if DETI economist Sam Connolly should have spotted the problem.

"If someone was deeply involved in something in the policy analysis you would expect them more times than not to spot this," he says.

Sir Patrick says he feels they should be cautious with this line of questioning in order to be fair to Mr Connolly.

'Wrong perception that subsidy error was obvious'

There is a "commonly-held perception" that the critical error that led to the RHI scheme subsidy being overgenerous was "obvious", Mr Murphy says, but he argues against that view.

He says it is only obvious in "hindsight".

Wood pellets
BBC

He says there was another tariff calculation in the documents that he received that was "even more out of kilter" but he complains that it hasn't been scrutinised in the same way.

Sir Patrick responds bluntly: "It means that CEPA got it wrong twice and it means the casework committee got it wrong twice.

"It just happens that the public lost a lot of money in respect of one of them."

'I didn't appreciate key subsidy error'

Mr Murphy says he did not "appreciate" a key detail in the documents he received about the RHI scheme that showed the tariff on offer was higher her than the cost of the fuel it was supposed to subsidise.

That is even though he underlined the bit it in the document that made it clear.

The subsidy error was one of the most fundamental problems that led to the RHI scheme's enormous overspend because it effectively allowed people to earn more money the more fuel they burned.

Boiler
BBC

Mr Murphy says he didn't see the inconsistency and he wouldn't have tried to work it out because he didn't not have the knowledge required to understand the complexity of the calculation behind it.

"I would not have deduced the the cost of fuel was indeed lower than the tariff, " he adds.

Inquiry chair Sir Patrick Coghlin isn't impressed: "It's not a question of deduction - it's a question of two completely inconsistent statements that appeared in this report."

'Genuine challenge to scheme details'

Inquiry panel member Dame Una O'Brien questions whether the casework committee gave adequate scrutiny to the RHI scheme.

She noted yesterday that the committee's assessment came at an advanced stage of the scheme's development.

Dame Una O'Brien
RHI Inquiry

She asks whether the committee merely helped the scheme on its way through the approval process, rather than sending it "back to the drawing board".

Mr Murphy defends the committee's role, saying: "Am I comfortable that there was a genuine challenge process exercise to this? I am comfortable."

'We shouldn't have to hunt for answers'

The contents of the CEPA report, which spoke of the up-front grants option in "glowing terms", did not appear to back up DETI's favour for an ongoing subsidy scheme, says Mr Murphy.

He says in his written statement that it "did not really put on record the thinking... around the relative merits" of the subsidy approach.

People looking at charts
Getty Images

He tells the inquiry now that he would've expected there to be "a very strong reason" why the department wanted to run with the much more costly option.

He says that the committee would "prefer that the facts would be set out in front of you rather than having to hunt for them".

'Consultants' view was rose-tinted and oversold'

In his written statement to the inquiry, Mr Murphy tells the inquiry that his "overriding impression" from the CEPA's report was one of "mixed or inconclusive messages".

He reviewed the report as part of his review work for the casework committee.

A document that reads: Strictly confidential
Getty Images

He acknowledges in his statement that the body of the report appears to favour the up-front grants model, which was ultimately rejected.

But its conclusion is "much less clear-cut", leaving "the door open" for the ongoing subsidy model, as was eventually selected.

He tells the inquiry now that the way CEPA presented the grants option was "idealistic", and "a little bit oversold, a little bit rose-tinted".

'Judging scheme over wrong cost a significant error'

Pointing out that the casework committee was giving its approval on the RHI scheme on the basis that it would cost £242m when it fact it would be much more, Mr Aiken puts it to Mr Murphy that that "that's a significant error".

Joseph Aiken
RHI Inquiry

"It's certainly a material error," accepts Mr Murphy.

"How much more expensive did this all have to be before someone said: 'Hold on a minute!'?" comments Mr Aiken.

'No-one noticed cost estimate was £100m too low'

In February 2012, CEPA worked out that there would be an extra £111m spent on subsidies but the monetisable benefits were not recalculated, which would've skewed the overall cost estimation.

Mr Aiken says that it was therefore not possible for the casework committee to know to the exact overall cost of the scheme, but it would've been near £350m - Mr Murphy accepts that point.

Mr Murphy
RHI Inquiry

But the documents regarding the RHI scheme that were the presented to the casework committee said that the cost would be the original estimate - £242m.

Mr Aiken says nobody on the committee appears to have noticed that the estimated cost was probably short by about £100m.

Mr Murphy defends the committee, saying that there would've been a "realisation and an expectation that the bill probably went up".

Crunching the numbers...

The inquiry takes a detailed look through the projected cost of the RHI scheme, so we'll try to explain as clearly as possible...

Consultants at CEPA estimated in June 2011 that the total cost of subsidies to be paid from the scheme would be £334m.

There was a further £71m in administration and other costs to add to that figure, taking the total to £405m.

An abacus
Getty Images

They worked out that the monetisable benefits from doing the scheme was £163m.

From there, they worked out that by subtracting that number from the £405m total, the overall projected cost of the scheme was £242m in June 2011.

But the story doesn't end there...

'Our first query was on £200m cost difference'

The inquiry is shown dozens of pages of the casework committee papers about that RHI scheme that Mr Murphy has presented as evidence, and his annotations - picking out key details and making observations - are contained throughout.

Mr Aiken asks if that is proof that he was aware that there was going to be a huge cost difference of more than £200m in the two options that were being considered for the scheme.

£50 notes
Getty Images

"I would've been clear," he says, explaining that that's why he probed the issue at the eventual committee meeting when the RHI scheme was assessed for approval.

"It was the first and number one issue that was raised by the panel."

Bad news for Mr Murphy...

We're back for the afternoon session, but before Mr Aiken gets into gear he has bad news for Mr Murphy.

He'll have to come back tomorrow morning for more questioning - overruns are becoming par or the course.

The inquiry in session
RHI Inquiry

Suitably refreshed after the break, we're now going deep into the detail of the contents of the papers relating to the RHI scheme that were submitted to the casework committee.

You can find them here if you're mad keen to follow along.

Time for lunch...

Quick break for a bite to eat now, and we'll be back just after 14:00 for the afternoon session with Mr Murphy.

'Officials didn't have tools to review scheme'

The synopsis of the RHI scheme that was submitted to the casework committee says the initiative "will have scheduled reviews built into" it.

Mr Murphy says he takes this to mean that "changes to tariffs could be actioned", and that "inevitably things could change".

The committee "would expect a) vigilance; and then b) responsiveness" in any review function for the scheme, he adds.

An finger on an emergency stop button
Getty Images

As we heard yesterday, a mechanism to review the scheme and shut it down in case of an budget emergency - an projected overspend, for example - would've taken "a number of months" to take effect.

Inquiry panel member Dr Keith MacLean asks whether a six- to 12-month delay before action can be taken was adequate.

Mr Murphy says that by 2015 the review of the scheme's subsidies didn't appear to have been done and officials "didn't seem to have any tools to respond", which seemed "very much at odds" with what the committee had been told three years earlier.

'Our job was just to kick the RHI tyres'

Inquiry chair Sir Patrick Coghlin questions the whole purpose of the casework committee.

He queries Mr Murphy's view that it was not expected to delve deep into the mathematical detail in the figures it was presented with by the team setting up the RHI scheme.

A man kicking a tyre
Getty Images

"Is that really the impression that is intended to be left for the public to see about this mechanism in Northern Ireland government?" he asks.

Mr Murphy explains that the committee's role was not a technical one and says its analysis of the project is a "general tyre-kicking exercise".

Sir Patrick suggests he is, again, fairly unimpressed by the workings of the civil service, saying: "I am concerned as to what the public think is going on in casework."

'Who should've got calculator out to check wrong figures?'

As a casework committee member determining whether or not to approve the RHI scheme, Mr Murphy says he would not "necessarily have your calculators out" and be checking the detail of the spreadsheets.

But inquiry panellist Dr Keith MacLean stops him there and asks whose responsibility it would've been to "check the basic arithmetic".

A man using a calculator
Getty Images

He makes the point that tables and figures in the documents were consistently wrong and he says: "So far I've not found anybody who believes they're the right person to have got their calculator out."

Mr Murphy points the finger at the consultants at CEPA because they drew up the figures.

His says that the casework committee would not expect "material errors" in what it is asked to assess.