A prince never lacks legitimate reasons to break his promise. So wrote Niccolo Machiavelli half a millennium ago, encapsulating how the powerful always seem to find a way to do what the lowly cannot.
ike the Machiavellian prince, Stormont has been good at making promises, and this week it received legal approval for breaking some. On Thursday, Belfast High Court rejected a challenge taken by claimants who signed up to the supposedly unalterable 20-year payments from the Renewable Heat Incentive (RHI) to how their subsidies have been slashed.
The scandal was once used by Sinn Fein to justify toppling Stormont, but now it just another story. That is understandable — in a pandemic and the fallout of Brexit, more important stories demand attention.
But even if they are less publicly apparent, the long tail of implications which flow from this scandal continue, and those implications have the potential to extend far beyond the immediate area of energy subsidies.
When Arlene Foster launched RHI in 2012, the scale of the commitment was, in hindsight, remarkable. The legislation made clear the subsidy rates could only go up with inflation, and marketing material said it was a guaranteed income stream for two decades.
Just weeks after the launch, Mrs Foster wrote to banks to urge them to lend to claimants.
Crucially, she said tariffs were “grandfathered… regardless of future reviews”, a legal term meaning they are exempt from future legislative changes.
The letter also referred to a 12% rate of return, something Mrs Foster subsequently said meant she did not realise how wildly lucrative what was to become known as ‘cash for ash’ was. But even basic number-crunching would have made clear the returns for many would be vastly beyond 12%.
Short of Mrs Foster carving her promise in tablets of stone, there is little more Stormont could have done to make this guarantee more unbreakable.
The man behind the legal challenge, Ballymoney poultry farmer Tom Forgrave, was one of those who stood to make a fortune if the scheme had stayed open. On his evidence to the court, he had invested more than £500,000 in his business as a consequence of RHI — not counting the ongoing bills for the 10 biomass boilers which he operates under the scheme — and that meant loan repayments of £68,000 a year.
When politicians slashed subsidies, he still faced the same bills. He told the court that earlier this year he had to restructure loans to pay £36,000 a year over a longer period.
Those figures are not in dispute, but the Department for the Economy, which runs the scheme, contests some of Mr Forgrave’s other figures. However, that department’s shocking mismanagement of RHI does not give an impartial observer much confidence in the rigour of its work, despite its repeated claims that “lessons have been learned”.
The court ultimately found it was not the best forum to settle the dispute about figures, so that area remains unresolved.
By May, Mr Forgrave had been paid £1.1million in subsidies. The department claimed this would have risen to almost £8million over 20 years if the payments had not been cut. Mr Forgrave disputed this, but what was not in dispute was that he was going to receive an awful lot of money. That means, and Stormont knows that means, that he will receive little public sympathy. But there has never been any suggestion that Mr Forgrave was one of those heating empty sheds or perversely seeking to milk the scheme.
Mr Justice Humphreys was careful to say in his judgment: “It should be stressed that there is no doubt that the applicant has been, and remains, a good faith participant in the scheme.”
This applicant did what the government told him to do, did not abuse the scheme and for a while made a small fortune from it, but he now finds himself in difficulty because of failures by the government.
Having started writing about this topic five years ago, it has long been clear to me that the scheme was absurdly overgenerous. Some boiler owners argue otherwise, pointing to the sums made by some people in GB. All that proves is that the GB scheme was also broken and that Stormont took something flawed and made it worse.
The story became grubbier when it became clear that Mrs Foster’s special adviser, Andrew Crawford, was passing confidential government documents about the scheme to his relatives who installed boilers (they say the documents did not impact on their decision).
For that reason, the public were angry, and politicians responded to that anger by slashing the subsidies. What had been locked-in payments of £26,000 a year per boiler were cut to £13,000. Then civil servants from the department which so spectacularly failed asked Westminster to cut them much further. That legislation was rushed through a largely empty Commons chamber, and now most boilers attract an annual payment of just £2,200.
Reinstating the original scheme would have been disastrous. Not only would that have come at the expense of public services, but it would ultimately have harmed claimants. Any business going back to the cash for ash tariffs would have been ostracised and boycotted.
This week’s ruling rejected an attempt to overturn the Westminster legislation which cut tariffs. Privately, several boiler owners have told me they do not want to go back to the original tariffs and want to negotiate a compromise but fear that saying so publicly would damage their legal position. It is difficult to see how — just because someone has a right does not mean that they must exercise that right, and if a court upheld their claim, that would not prevent a negotiation.
Mr Forgrave not only argued that the first cut to subsidies in 2017 eradicated the overspend on the scheme, but he backed up that claim with evidence. Stormont’s accounts show that it has moved from a big overspend to a massive underspend of the money available to fund a green heating system. Last year, £22million for this purpose was returned to the Treasury.
That fact is potentially significant. The DUP’s Diane Dodds, who had been minister until losing her job when Mrs Foster was toppled as DUP leader, had proposed to throw everyone out of the scheme and shut it — with small compensation payments.
The huge cuts to the existing subsidy, and then the ejection of them all from the scheme would mean a pot of money — perhaps hundreds of millions of pounds — would be available to launch a new green heat scheme.
It just so happens that this is what Northern Ireland’s biggest company, the vast poultry processor Moy Park, has been lobbying for. The company, owned by the colossal US meatpacker Pilgrim’s Pride (itself owned by the Brazilian meat behemoth JBS), wants to see a green heat scheme opened again so that its remaining farmers can enter it.
That is because while, on paper, it was the farmer who made the money and attracted the opprobrium from RHI, it was Moy Park which, on the evidence to the inquiry, reaped many of the financial rewards. Its complex pricing structure meant it was able to pay farmers for a smaller percentage of heating costs, in the knowledge taxpayers were more than making up for the shortfall. The problem for farmers now is that taxpayers are no longer making up the shortfall, but with Moy Park controlling virtually all of the local poultry industry, they have no choice but to continue selling to it.
RHI has contributed to a major expansion by Moy Park and a striking increase in its profitability. Last month, the company, which has long been supremely well-connected with many of Stormont’s power-brokers, published its accounts. Despite the impact of the pandemic and a 9% fall in revenue, its profit has increased by almost 12% to £75.8 million (although headquartered in NI, some of that relates to other European operations).
Two weeks ago, it emerged only one civil servant had been disciplined — lightly — for their role in this scandal, while the politicians have not been punished. To put that in context, a police constable who took two packets of Jaffa Cakes from a charity stall without paying the full price was this week sacked from West Yorkshire Police.
All of the burden has essentially been borne first by taxpayers who funded the lavish scheme, and now by those who entered the scheme and who have seen promises torn up.
Mr Justice Humphreys said the scale of the RHI mess was such that it was in the public interest for Stormont to correct its errors, even though it was responsible for them.
He said “the court ought to afford a wide margin of discretion to policy makers. A judicial review court is not in a position…to gainsay the decisions made by legislators in pursuit of legitimate interests”.
A judge has to enforce the law, and if the law says Stormont’s broken promise is lawful, it is lawful. But as Ulster University senior economist Esmond Birnie observed, “You tamper with the security of property rights at your peril”. He said RHI “has done reputational damage to NI in this regard”.
There can now be little certainty that government promises in regard to other green energy technologies will stand. If RHI can be dealt with, why not wind turbines and anaerobic digestors? The greatest hope for those claimants is that Stormont is less likely to be interested because their subsidies are largely funded by GB money.
This case is now likely to end up in the Supreme Court. Promises are easily made, and sometimes they’re easily broken — but the consequences linger.