Rivals challenge Foster’s RHI claim after ‘guarantee’ letter to banks revealed

Posted By: December 30, 2016

Belfast Telegraph. Friday, December 30, 2016


First Minister Arlene Foster

A pledge by Stormont’s First Minister to claw back millions committed in a botched energy scheme has been questioned after it emerged she told bankers that payments would be guaranteed.

In a letter to Northern Ireland’s leading banks written at the outset of the ill-fated Renewable Heat Incentive (RHI), Arlene Foster said the state-funded eco-subsidies offered applicants a “good return on investment”.

Fatal errors in the RHI have left Stormont facing a potential £490 million overspend bill over the next 20 years.

It was supposed to offer a proportion of the cost businesses had to pay to run eco-friendly boilers, but the tariffs were set too high, and without a cap, so it ended up paying significantly more than the price of fuel.

This enabled applicants to “burn to earn” – getting free heat and making a profit as they did it.

Claims of widespread abuse include a farmer allegedly set to pocket around £1 million in the next two decades for heating an empty shed.
Democratic Unionist leader Mrs. Foster, who was in charge of the scheme’s development during her time as economy minister, has faced down calls to step aside from all the other main Stormont parties, including the DUP’s partner in the ruling executive, Sinn Fein.

Mrs. Foster has remained defiant amid the “ash for cash” scandal and insisted the projected overspend can be halved.

The basis of that assertion has now been challenged by political rivals after the contents of her January 2013 letter to banks was revealed.

In the letter, which was published online by the News Letter on Thursday evening, the then economy minister wrote: ” Tariffs are ‘grandfathered,’ providing certainty for investors by setting a guaranteed support level for projects for their lifetime in a scheme, regardless of future reviews.”

She added: “The government support, on offer through the incentive schemes, is reliable, long term and offers a good return on investment.”

The letter was written to encourage banks to lend to would-be RHI applicants who needed initial capital to purchase the costly green boilers.

Ulster Unionist MLA Steve Aiken said the letter demonstrated the “urgent need” for all documents related to the RHI to be made public.

“It is clear that Arlene Foster wrote to banks and lending institutions to vouch for the validity of the now scandalized Renewable Heat Incentive scheme,” he said.

He added: “Given that someone in the Executive was flying a kite last week about the closure of the scheme, perhaps Arlene Foster can explain how they’re going to do that given that she herself wrote to banks and lending institutions to assure them about the tariffs and the consistency of support over 20 years?

“It’s another fine mess for a scandal-prone Executive, and Mrs. Foster is right at the center of this one.”

Traditional Unionist Voice leader Jim Allister said the letter showed Mrs. Foster was “actively promoting the scheme.”

“This points to a far greater ministerial attachment to this scheme than hitherto has been admitted,” he said.

“Moreover, as these letters stressed the long-term security of the tariffs – guaranteeing the tariffs would be exempt from downward movement – it further underscores ministerial knowledge and satisfaction with that situation – to the detriment of the taxpayer.

“With Mrs. Foster boasting to the banks that RHI provided a good return on investment, it is clear she knew and endorsed the profit being made by RHI beneficiaries on taxpayers’ money.”

Noting the remark about guaranteed support levels, Mr. Allister said: “This now makes it more difficult for the Executive to retreat from the contractual commitments made.

“With each new revelation, Arlene Foster is on the ever-shrinking ground. The need for a full judicial inquiry is more imperative than ever.”

It was originally envisaged that the Treasury would foot the bill for the RHI. But the costs spiraled well beyond London’s financial commitment. The total RHI spend in Northern Ireland is estimated at £1,150 million over the next 20 years.

The Treasury is set to cover £660 million of that, with Stormont landed with the remaining £490 million.

A spokeswoman for the Department of Economy said the letter was “reasonable and appropriate” given the context facing the minister in January 2013.

She said the flaws with the scheme were not well documented at the time the letter was written.

“Indeed, the subsequent reporting of this matter has demonstrated that the impact of the tariff and the rate of return are complex and technical issues,” she added.

“When the then DETI (Department of Enterprise, Trade, and Investment – the predecessor of the Department of Economy) Minister briefed lending institutions in January 2013 about renewable supports, the statement about the non-domestic RHI was entirely consistent with the Department’s then understanding i.e. that the rate of return would be at a level of 12%.

“At that time, the Department had not recognized the much higher rate of return due to a misunderstanding that the tariff was lower than the market price.

“Indeed, action to encourage uptake was being considered as there was an underspend. Such action, including the letters to the banks, would have been entirely reasonable and appropriate, but for the design flaws in the scheme which had not been recognized by DETI at the time when these letters issued.

“The scheme, as set out in the letter would not have given rise to the problems about cost controls which were later experienced.

“Unfortunately, this was not how the scheme operated in practice due to errors back in 2012 which have already been detailed by the Northern Ireland Audit Office.”

SDLP leader Colum Eastwood said: “Arlene Foster is a First Minister who has lost the confidence of the Assembly and of the public.

“As further information comes to light relating to her specific knowledge about the detail and scale of the RHI scheme, the pretense that she was not across every ‘jot and tittle’ has lost all credibility.

“We now know that Arlene Foster personally wrote to banks seeking investment in the RHI scheme offering ‘guaranteed support’ which would endure ‘regardless of future reviews.’ In one sentence, the First Minister outlines the critical flaw in the whole project.

“Arlene Foster’s instinctive resistance to calls for her to stand aside pending a public inquiry is understandable, but it is fundamentally misguided.

“This is about more than the career of one politician. The longer the First Minister stays, the most lasting damage she does to the institutions and to faith in government.

“If Arlene Foster has done nothing wrong, as she claims, then she has nothing to fear from a public inquiry with full powers to compel witnesses and evidence.”