Belfast Telegraph

UK Website Of The Year

Heating empty shed 'to land farmer £1m of public money'

Published 05/07/2016

Northern Ireland Audit Office's auditor general Kieran Donnelly has criticised the Renewable Heat Incentive scheme
Northern Ireland Audit Office's auditor general Kieran Donnelly has criticised the Renewable Heat Incentive scheme

A farmer is allegedly in line to receive £1 million of public money over the next 20 years for heating an empty shed due to a Stormont failure to control a renewable energy scheme, auditors have revealed.

The claim of a burning-ash-for-cash racket was made by a whistleblower and outlined in a damning Northern Ireland Audit Office report on the running of the Renewable Heat Incentive (RHI) scheme.

Large factories in Northern Ireland are also allegedly on course to pocket £1.5 million over two decades for running incentivised biomass boilers all year round in premises that previously were not heated.

More than £1 billion of public money will be paid to Northern Ireland-based businesses by 2036 after they installed new appliances under the RHI scheme, which is now closed.

The RHI encouraged the installation of costly eco-friendly heating systems by paying a tariff per kilowatt of heat burned over a 20-year period.

Auditor general Kieran Donnelly has questioned the level of expenditure and claimed major design and operation errors left the initiative exposed to abuse.

Mr Donnelly said: "This scheme has had serious systemic weaknesses from the start."

He has qualified the 2015/16 accounts of Stormont's Department of Enterprise, Trade and Investment (DETI) in relation to that year's £30.5 million spend on RHI.

The anonymous whistleblower contacted the Office of the First Minister and Deputy First Minister earlier this year. The claims are being investigated by the DETI's successor, the Department of the Economy.

Mr Donnelly's report revealed the allegations as he outlined the RHI scheme's weaknesses, but it did not look into the accuracy of the specific claims.

Aside from the concerns of abuse, auditors discovered an administrative oversight let the scheme operate without the approval of the Department of Finance for seven months last year - during which almost £12 million was spent on RHI.

Thousands signed up to the RHI scheme, which started in 2012 and was extended to domestic customers in 2014. It was administered on behalf of DETI by the Office of Gas and Electricity Markets.

However, unlike in the rest of the UK, in Northern Ireland no cap or payment tier system was placed on the money that could be claimed in proportion to the size of boiler. In effect, that enabled a business to burn unnecessary heat just to make money.

Mr Donnelly described this as a "critical mistake".

He said a business burning a biomass boiler 24/7 in Northern Ireland could make around £864,000 profit in the next 20 years. A business in England burning the same boiler would make £192,00 in the same period.

"The fact that the Department decided not to mirror the spending controls in Great Britain has led to a very serious ongoing impact on the NI budget and the lack of controls over the funding has meant that value for money has not been achieved and facilitated spending which was potentially vulnerable to abuse," he added.

The scheme was tightened up in November with the introduction of tiered payments, but before the change came into effect there was a surge in applications to sign up to the RHI on the pre-existing no-cap tariff system.

There were 923 non-domestic applications under the RHI scheme in its first 34 months, before an announcement in September 2015 that the scheme would be tightened up with the introduction of tiered payments. It took two months for the change to come into effect, and in that time 881 applications were made to sign up to it on the pre-existing no-cap tariff system.

The surge left DETI exposed to a huge overspend if it was to continue to run the scheme.

The announcement of the closure of the RHI to new applicants came only three months later. The Department of the Economy is to undertake an audit exercise to establish the bona fides of many of those who rushed to apply before the deadline.

It was envisaged the UK Government would fund most of the RHI scheme, but the expenditure commitment in Northern Ireland over the next 20 years is well above a Treasury funding cap, meaning Stormont will need to find hundreds of millions to make up the shortfall.

"Over the next five years, this additional cost to the NI block is estimated to be £140 million and significant costs will continue to be incurred until 2036," said Mr Donnelly.

In response to the audit report, Stormont Economy Minister Simon Hamilton said lessons must be learned.

"At the outset I thank the Audit Office for their work to date on what are extremely serious issues," he said.

"The Audit Office's findings in respect of the Renewable Heat Incentive scheme (RHI) are deeply shocking and catalogue multiple failings in the design and administration of this scheme. The potential ongoing costs of this scheme to Northern Ireland taxpayers are incredible and the accusations of fraud will be rigorously investigated.

"Whether it is the absence of tiered tariffs or controls on costs, at various stages of the scheme there were serious systemic failings and opportunities were missed to remediate the situation by those directly responsible for administering the scheme.

"Since becoming Economy Minister in late May, I have held meetings with senior officials about the RHI scheme and how things reached the point of it being over-budget. On foot of these discussions, external consultants are already being appointed to conduct on-the-spot and thorough inspections of installations to ensure they meet the spirit and letter of the scheme.

"While the policy purpose of the scheme was well founded, aimed at increasing our use of renewable technology, there will be no toleration of fraud and where it is identified it will be firmly dealt with. In addition, we are already actively considering options as to how the costs of the scheme could be controlled in the future. All options will be considered to determine whether future liabilities to the public purse can be minimised.

"I take the issues raised by the Audit Office extremely seriously and I have instructed departmental officials to work through the range of serious issues raised. Lessons must be learned for the future to ensure this type of situation never arises again".

Read More

From Belfast Telegraph