Mr Murphy has presented the inquiry with the full papers he received as a casework committee member regarding the RHI scheme - they are available in two parts on the inquiry's website here, external and here, external

But Mr Aiken notes that some important documents relating to the scheme were not in the package that Mr Murphy received.

Mr Murphy says the papers presented to the casework committee were viewed as the business case being made by DETI.

Image source, RHI Inquiry

He says one of the committee members' key observations was that the papers didn't address "the logic and rationale" as to why DETI favoured the ongoing subsidy option as opposed to the up-front grants fund.

"The papers were pretty much silent on that," he says, and that provided a big line of questioning.

The committee insisted that subsequent material that had to go to the finance department, for example, had to be clear on that rationale.

DETI's team that was setting up the RHI scheme "really did have their ducks in a line" when it presented the project to the department's casework committee for approval, says Mr Murphy.

A lot of policy work had gone into it, a public consultation had been carried out and budgets were in place, he adds, saying: "There was not a reason to block this."

Image source, Getty Images

Mr Murphy was on the casework panel and says he would've been "as good a choice as anyone" to sit on it.

He says the department's inability to cover the initial £5m admin costs of the up-front grants scheme was a "stop-go" issue that effectively counted against it.

Had there been money available to cover those costs, he adds, "that would've completely opened up things" and more consideration would've been given to cheaper, rejected grants scheme.

Things get rather technical when Mr Murphy says he does not necessarily accept the figures in the CEPA report due to the techniques used by the consultants.

That involves their selection of discount rates in making the calculations.

Image source, Getty Images

"The point is that when you start mixing-up discount rates you can get some quite funny results," Mr Murphy says.

He says he thinks quite a bit of the massive cost difference between the up-front grants option and the ongoing subsidy scheme is not "a true difference".

Sir Patrick asks Mr Aiken to inform the panel if there is a public expenditure rule that supports Mr Murphy's case "that a political decision was made on the basis of it not being made affordable", and therefore not taking into account the obvious economic comparison.

Image source, RHI Inquiry

He says the public needs to know "if this process is broken" and is not reflecting the economic realities in terms of public benefit.

The question of the unaffordable admin costs "changes the question" completely when it comes to assessing a project for value for money, says Mr Murphy.

Mr Aiken interprets his answer as meaning that the way public spending is set up, if these admin costs aren't available for a project, you can't simply pull them out of another pot where money does exist.

Image source, PA

Agreeing, Mr Murphy says the rules are "rigid", and explains that "the two pots of money need to line up".

He gives the example that you might have money in one pot to build a hospital, but that's no use if there's no money in another pot to fund nurses to work in it.

"These rules... to an outsider they all will look very strange, but they do constrain decision-making," he adds.

Inquiry chair Sir Patrick Coghlin appears to be astonished by Mr Murphy's answer that a civil service economist can effectively disregard a significant long-term expense to approve a short-term saving.

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He says an economist should be "exercising his expertise, using his qualifications for which he's there for" and he asks for evidence that Mr Connolly did the "number-crunching" that his role required.

Mr Murphy defends his staff member, saying that decisions about administration budgets were not for Mr Connolly to take.

One of the key questions for the inquiry is why DETI chose to push ahead with a ongoing subsidy model for the RHI scheme, rather than an up-front grants initiative that would've cost £329m less.

Effectively, DETI effectively said it couldn't do the cheaper option because the initial £5m admin costs for it weren't affordable.

Instead it chose the more expensive one because the £1.5m admin costs could be covered at the time.

Mr Aiken asks if it was "legitimate" for Mr Connolly, a civil service economist, to determine that spending £329m over 20 years to make a small initial saving of £3.5m represented value for money.

"Technically, yes", replies Mr Murphy, but he says he accepts that, given the circumstances: "Was that a wise course of events?"

He points out that there could've been other reasons in play as to why the cheaper option was not considered further.

There were not many people within DETI who "knew anything about energy never mind a reasonable amount" when the RHI scheme was being set up, says Mr Murphy.

That remark comes to the fore after Mr Aiken says that economist Sam Connolly, who did have energy experience, had a role in helping DETI's energy team to develop the policy for the RHI scheme and later checking that the policy provided value for money.

Image source, RHI Inquiry

Mr Aiken suggests that Mr Connolly was effectively making "his own homework".

Mr Aiken wants to know whether doing both roles complies with the guidance for economists.

Mr Murphy says there was a rule-of-thumb adopted by the economists: "When you get into actually starting to write the case you've probably crossed the line."

Mr Murphy says in his written statement that the analytical services unit (ASU) he headed within DETI was "a strong team with good experience".

He says he had a good team but it was "certainly not chopped up in a way you could specialise people to one area".

Image source, RHI Inquiry

His number one priority when he came to the job, he says, was working on the Northern Ireland Executive's policy on the devolution of corporation tax.

"I would have been absolutely involved in all the detail," he says.

Much of his other work was reacting to requests from above or appeals for advice from the staff below him.

In his written witness statement, Mr Murphy says that a "common observation" would have been that DETI's policy work was done "on a shoestring" compared to UK government departments.

He's asked to explain what he meant by that, and admits that his "choice of language isn't great".

But he says that Stormont departments tend to be more generalist that their Whitehall equivalents, with staff working on a number of policy areas rather than being able to focus on one specific topic.

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"You can't go down to [Whitehall's] level of specialty," he says.

Stomont departments have a "desire to follow" government policies in Great Britain but also to be distinctive, tailoring them to Northern Ireland, he says, but he adds: "We have a lot less scale to make that distinctiveness happen.

"You look over quite jealously to Whitehall."

Mr Murphy has extensive expertise as a senior economist, the inquiry hears.

His degree is in economics and his masters in accounting and finance, and initially worked as a gas economist.

Image source, RHI Inquiry

On joining the civil service in 2000 he worked as a economist at the Department of Finance and Personnel, approving business cases for projects, later working on economic policy.

He joined DETI in 2011 as a senior principal economist, joining its senior management team, and he now works as chief economist at DETI's successor, the Department for the Economy (DfE).

The day's business begins with the first witness Shane Murphy taking the affirmation.

He was one of the three DETI members on the March 2012 casework committee that looked at the RHI scheme, along with Trevor Cooper and Philip Angus.

The casework committee meeting was the subject of intense questioning with Fiona Hepper yesterday.

Image source, RHI Inquiry

Inquiry junior counsel Joseph Aiken has the original set of casebook papers Mr Murphy had ahead of the casebook committee meeting.

He tells Mr Murphy these are useful to the inquiry as they are "literally covered in your annotations".

Mr Aiken also has a set of handwritten notes made by Mr Murphy both before and during the meeting.

BBC News Northern Ireland

A senior civil servant conceded that missing a basic sum that showed the fundamental flaw in the RHI scheme does "not look too clever".

Fiona Hepper, who headed the Deprtment of Enterprise Trade and Investment's (DETI) energy division, which set up the scheme, accepted that her team did not spot that the subsidy rate on offer was too generous.

Image source, Pacemaker

That allowed claimants to earn more money the more fuel they burned, effectively collecting a profit.

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

BBC News Northern Ireland

An independent inquiry into the RHI 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.

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

Image source, Pacemaker

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.

When the scale of the overspend emerged, public and political concern rocketed.

As the minister in charge of the Stormont department that set up the RHI scheme, the Democratic Unionist Party (DUP) leader Arlene Foster faced calls to resign from her role as Northern Ireland's first minister in December last year.

Image source, PA

She resisted, 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.

That move brought about the collapse of the Northern Ireland Executive, and as we near a year on from that Northern Ireland remains without a devolved administration.

There were critical flaws in the way the RHI scheme was set up that left it open to abuse and that later saw its budget spiral out of control.

Crucial cost curbs that existed in a similar scheme in Great Britain were not replicated and claimants could effectively earn more money the more fuel they burned.

That was because the subsidies on offer for renewable fuels were far greater than the cost of the fuels themselves.

As a result, the scheme racked up a huge projected overspend - £700m at the most recent estimate - and the bill will have to be picked up by the Northern Ireland taxpayer.

The Renewable Heat Incentive scheme - or RHI for short - came to the fore of the Northern Ireland public's knowledge in autumn last year.

Few people, if anyone, would have expected it to have the consequences it has done in the months that followed.

Image source, Getty Images

It 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 and the fuel to run them.

Welcome along to the penultimate day of hearings at the RHI Inquiry before the Christmas break.

Two witness are due to give evidence today, Department for the Economy officials Shane Murphy and Philip Angus.

We'll have live video coverage for you as well as text commentary throughout the day.