8 Jul 2013

Why The Pink Batts Scheme Failed

By Ian McAuley

Partisan hacks who blame Kevin Rudd for the pink batts deaths have got it wrong. The deregulators who eroded the insulation industry's safeguards deserve scrutiny, writes Ian McAuley

The Queensland Coroner has strongly criticised the parties involved in the Homeowner Insulation Scheme – hardly a surprise. The contractors whose negligence led to deaths, the State Government which failed to regulate the industry and the Commonwealth which funded the scheme all bear responsibility for the deaths, fires and lesser shortcomings.

Those who seek to sheet all blame on the Commonwealth, or more particularly on Prime Minister Kevin Rudd, should remember that installers have been prosecuted and that there will probably be more prosecutions. The Coroner’s report recommends that three managers from two insulation companies be referred to the Queensland Attorney-General for alleged breaches of the state Electrical Safety Act.

In particular it is hypocritical for the Opposition to try to make partisan gain out of the Commonwealth’s administrative failures, exemplified by Liberal Party environment spokesperson Greg Hunt, who doesn't think Rudd is "a fit and proper person to be the Prime Minister of our country” (a test which would disqualify everyone who has ever taken senior public office). The failures which led to these deaths stem from 30-year-old policy directions and administrative decisions of both Labor and Coalition governments – if anything pursued more vigorously by the Coalition.

Installing insulation in roof cavities is not complex and carries a very low risk of fire, electrocution or heat stress, if done properly. Under the scheme it was not. The Commonwealth Auditor’s report found that 29 per cent of installations had deficiencies “ranging from minor quality issues to serious safety concerns”, and that the program was run in a way that was open to fraud, finding 4000 cases of potential fraud including 67 cases of payments to contractors having been made without any work having been done (pointing out that this was in the context of 1.1 million completed installations).

The main failure was that the scheme’s administrators in the Department of the Environment, Water, Heritage and the Arts put too much faith in an industry which was only lightly regulated and was open to fly-by-night operators. With hindsight we can say that they should have known better, but the policy environment in which they were working had set them up to fail.

There are three components of that policy environment – a faith in deregulation, the sacred status of “small business”, and a de-skilling of the Commonwealth public service.

The home insulation industry cries out for safety regulation, not only for the sake of workers and homeowners, but also to protect the reputation of ethical firms in the industry. It is easy for fly-by-night operators to enter the industry – a light truck and a ladder are all the capital investment required. And it is very hard for most consumers to judge the quality or safety of the work done. These are inherent market failures which require regulation, but regulation has become unfashionable. One beneficial outcome of the scheme is that it has led to a deal of scrutiny of the home insulation industry and most states have significantly improved their regulations.

Alongside the deregulation obsession has been a notion that small business is intrinsically virtuous. Politicians speak of small business with reverence, as if, in contrast to evil multinationals and supposedly unproductive government bureaucracies, small business is the repository of good business practice. This naive view conveniently overlooks the heterogeneity of the sector. 

It’s easy to think about your trusted GP, the tradesperson with whom you’ve been dealing with years, high-tech startups and fifth generation farmers. But small business also has its share of unethical, inexperienced and sloppy operators – those ready to take safety short cuts, those who see customers as suckers, and those who see a pool of government money as an opportunity for plunder rather than as a community benefit.

In fact, small businesses present more such opportunities than larger businesses because the high turnover of companies and individuals in small business makes it hard for organisations such as Choice and government consumer protection agencies to keep track of shonky operators.

Then there is the deskilling of the Commonwealth public service. Administering this scheme were Canberra-based senior public servants who would have been competent in the paperwork of contract law, but who were unaware of (or had forgotten) simple physical facts which any high school student should know. The heat from a 100 watt light bulb wrapped in insulation needs to go somewhere. A 12 volt downlight carries 20 times the current of an equivalent 240 volt light, increasing the fire risk in electrical connections. Old houses have frayed insulation on their wiring, and aluminium sarking is a very good electrical conductor. Not only did they lack this basic technical knowledge, but also they seemed to be remote from industry.

Had this program been run in the 1970s it would have been administered by competent engineers from the now-disbanded Commonwealth Department of Housing and Construction – people with good technical knowledge who knew the industries with which they were dealing. They would almost certainly have been operating out of state offices rather than from Canberra, and would have been awake to the risks of fraudulent and dangerous work. They would have known the poor general record of the home insulation industry, and would have known which firms to deal with. And they would have known that suddenly opening up opportunities for new businesses in an industry with low barriers to entry – in insulation or in solar panels – can be severely damaging to existing firms who are undercut by those who compromise on safety and quality and who, as a consequence, damage the whole industry's reputation.

But, as pointed out by Tim Roxburgh of the Centre for Policy Development, the fad of privatisation and contracting out resulted in the Commonwealth losing such expertise. The public servant who has risen through the ranks over the last 30 years is more likely to be a generalist, skilled in providing political support to ministers, but generally lacking technical and on-the-ground practical knowledge.

In all, there is nothing clear-cut about apportioning blame. When someone drives recklessly on a public road and injures himself and others we don’t necessarily apportion any blame to the government which built the road – nor should we. In fact, governments can cause more pain and misery through neglecting to act rather than in making mistakes when they do act. For example on the badly underfunded Bruce Highway north of Brisbane there are 40 deaths and 500 casualties a year. Had the Federal Government not implemented stimulus programs such as the school building and insulation schemes when the financial crisis hit, then maybe the accusation that Rudd was not a fit and proper person to be Prime Minister would have been justified.

Those on the right extol the virtue of “personal responsibility” (see, for example, the Liberal Party platform) but they miss no opportunity to criticise whatever government is at hand when something goes wrong. In the case of home insulation no-one seemed to care about the industry’s poor safety record until the Commonwealth became involved, but there is strong evidence, based on CSIRO research, that the 1.1 million installations carried out under the Commonwealth’s program had much better safety performance than the industry had before the scheme was implemented (Somehow the Murdoch media missed this analysis).

Rudd, in apologising for his Government’s failures, has acted honourably, but we should see these failures in a more general context. In any tragedy there are widening circles of responsibility. In the inner circle are those with proximate and immediate responsibility who are facing the wrath of the justice system, and that was properly the focus of the Coroner’s report. In the next circle are governments who unwittingly allow opportunities for malfeasance.

There is an even wider circle which encompasses our beliefs about the role of government. We have uncritically embraced simplistic beliefs about deregulation, privatisation and the intrinsic virtue of small business, and have been so disparaging of government that we allowed our government agencies to lose those capacities which are vital to good public service. We must all shoulder some of the responsibility for these failures.

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Posted Monday, July 8, 2013 - 14:36

But Ian, even the most ancient annals of Hamurabi recognised that there is a limitation to the usefulness of regulation in building codes and practices.

Your piece is useful and informative, but it also obfuscates the debate surrounding regulation in that it seeks to suggest, inaccurately so, that those who "revere" deregulation also "revere" the complete absence of regulation.

Reverence of regulation or the ebsence of it, on either side of a reasonable extent, is extremist, and your piece suggests that you reside beyond the perimeters of those reasonable bounds.

Jade w
Posted Monday, July 8, 2013 - 19:34

And the LNP want even less safeguards.  My heart goes out to those poor families who have unimaginable pain visited up them and the young men who could have been saved.  As unbearable as pain can be we have to be careful not to jump out of the frying pan into the fire.  I realise it is cold comfort for the famiies and friends affected.

Posted Monday, July 8, 2013 - 19:46

Rockjaw are you serious. Ian is spot on.

Every rule, regulation, by law ever written has been written because humans can't be trusted.

Every 1 thats ever gone flatting with mates will know that unless you have rules no body will ever clean the toilet or the dirty ring in the bath tub.

You can't play footy without rules and look at the Batting scandal, horse racing fine cotton scandal etc. Why? Because humans can't behave & rules are required to control human behavior.   The Public works department used to make sure that when u built a hospital u could get the Ambo into the emergency bay. What happened at Campbelltown, roof too low, brilliant. 

It is my experience that humans are like drunks walking down a hallway when it comes to almost everything we do. 1st we over compensate when some 1 gets killed then after a few years when the HoHa has died down we over compensate the other way get rid of regulation until some 1 gets killed again. We stumble and bounce of walls as we walk through life.

The problem we have is that without rules etc.. we can only ever be reactive when something happens, as in crime, where as the business person can be pro active until some 1 reports him or a/the crime.

Talk about where some of this regulation should be Fed or state controlled, well, Liberal State governments are going to get around fed rules anyway.

we are in the century of greed because all the guilty minds who gave us WW2 have gone to hell and now we have nothing but rightious, we can't do no wrong idiots running around.


What caused the GFC?, the removal of the GLASS & SEAGALL ACTS, this rules were put in place to stop the 1930 repeating. They worked well & that is a proven fact, Clinton wanted a housing Bubble economy but the Bankers didn't want to play, so Clinton opened a can of worms & the worms are still eating us out of house &. home.


The GFC is the perfect example as to why we need rules, why did Australia do better then the rest of the world, because we had rules, still & if the Bankers had have had their way we would now be in there with the Greeks & Italians. So be careful what you wish for.

The transport Industry in N.Z had some stupid regulations, but then only because of Protectionism practiced by Politicians who owned Transport Companies..

There are rules and then there are rules. The British system of law was set up to favor the rich, so those are stupid laws if your working class, but very desirable when your a Monarch.

Look at Criminal Law and Statutory laws.





Posted Tuesday, July 9, 2013 - 13:58

As an ex-employee of the Department of Housing and Construction, formerly known as the Department of Works, I can affirm that these tragedies and the accompanying  fraud would not have occurred on our watch because we had both the technical skills and the contract skills in every state office to ensure it.  All of this was lost in the blind headlong rush to deregulation and privatisation and we the people continue to pay the penalty.  May Keating rot in hell alongside Thatcher!

Posted Tuesday, July 9, 2013 - 16:34

My gold batts save me over $200 per year in heating costs alone. No-one ever mentions that if all 1.2 million installations save that much then Australians save a quarter billion dollars every year, and will do so forever. It's also a bit rich blaming the person who paysthe tradesman, for shonky workmanship. If I employ an electrician to redo the wiring in my house, he sends in an improperly trained apprentice to do it, and the apprentice is killed, I'm held responsible because I paid the electrician? I bloody hope not!

Posted Tuesday, July 9, 2013 - 16:44

lelder, You got it. Right wing nut jobs trying to destroy any power the working classes have or ever had.

They have infiltrated the unions movement and therefore the Labour Party by financing the AWU and others to combat the more militant unions, from there they set about destroying everything else.

They have brought on Privatisation to destroy all forms of Employment that could, did and would Harbor Unions. They infiltrated the feminist Movement after the movement defeated child slave labour by pushing in Lesbians to discredit it, that success then led to the rich setting about to destroy the labour movement from within. It was after all Churchill who said "careful of the enemy within" he knew because he was, he did more to destroy the old empire then anyone. When they changed from working class imigration to Business it changed the Land Scape of the population, add to that Mom and Dad investers and the whole joined is full of wannabe right wing dreaming nutters. They'll wake up one day, but by then will all live in a Zoo like enviroment. Historians have been a waste of time for humanity but animal mind doctors certainly taught the rich how to drag us along by our ego's. look at the Dumb Yanks they agreed to the Draft/Conscription to get a vote in that pathetic Democracy and all they managed to do is sell the lives of the young and able bodied down the toilet bowl of constant war to feed the arms industry. Real smart. And we try and model ourselves to those no hopers who can't even be bothered to vote now that they have the vote, they don't even vote to save their own lives. So, working class eggs.

Does not look good for the working classes and we still won't stop breeding more competition for ourselves. We are too quick to believe Hollywood and all the Glitz and Glamour.


Posted Tuesday, July 9, 2013 - 17:00

leder, your reference to Keating reminds me of his disparaging remarks about the electricity generators consisting of "19th century kit" to justify privatisation. His policies have done more to increase prices than environmental provisions. And created pests knocking on people's doors trying to rip them off.

Posted Tuesday, July 9, 2013 - 17:16

Local government has long experience in dealing with the home building trades. If the Commonwealth had a direct connection, via the constitution, with that level of government, I suspect that the program would have been less prone to shonky operators than its being administered by an innocent commonwealth department hundreds of kilometres away.

This affair provides another reason to support the local government referendum later this year. 


Posted Tuesday, July 9, 2013 - 18:47

Just because we changed government didn't mean the atmosphere of Work Choices had left the workplace.

Ditto to lelder the scheme just wasn't administered, it was very lassiz faire,

Total lack of consultation might be a good criticism.

Serious case against Deregulation and Privatisation no:637445137

Posted Wednesday, July 10, 2013 - 00:29

Building regulations are a State  issue.  In W.A. I never heard of the insulating project going wrong.  My daughter had her home installed with  insulating under the plan.  It was excellent material and job done with excellent tradesman.  She was quite pleased with it all. 

Who was the politician who had the portfolio to oversee it?  Was it Peter Garrett?  Gracious of Kevin Rudd to take responsility for the bereaved......one would have thought he would merely have come in behind  the person who had the portfolio??  Somebody needed to speak the apologies and it should have been promptly done by the politician under whose porfolio it functioned, I think.  Better late than never I suppose.

Posted Wednesday, July 10, 2013 - 07:30

The Building Industry has always been shonky and corrupt.

Shonky pest controllers exposed on Channel 7

Shonky houses either never finished or poor quality materials despite all monies payed etc.

The list goes on, look at the entire building Industry as a whole, from corruption of the Wollongong Council by Developersa etc. to Corruption of entire state Governments by developers.

Its very rich for people to cherry pick facts to support their argument, its another to tell the whole truth. Coruption is as old as man, their are shonky Mechanics, Doctors, even people who lay asphalt are shonky. The privatised employment AGENCIES had as much to do with the shonky small business people being out their in the first place. They were payed hansomely by the Government to get them their certificates, yet did not train them to actualy lay the materials properly, they only helped with setting up the Business and getting the appropriate certificates.


So, reality check people, there is more to a Car then just the engine and its horse power or a cars shiny wheels.

Posted Wednesday, July 10, 2013 - 08:09

Now let me tell you about regulation stupidity. In England a country with far more people and population density you can fit an LPG conversion in your own car as a home mechanic. But Australia & N.Z the homes of Protectionism because Politicians own these companies we can not fit LPG conversions. It is against the law. Why ?, have you ever heard of an LPG Car exploding and killing people in England, we hear of terrorist bombings. Terrorists don't even use LPG powered cars as bombs. In America small Chevy Pick up Trucks had their not so dangerous fuel tanks exploding under side impact conditions and they covered it all up.

So regulation to do what, protect certain vested interest groups at the expense of others, thats what we need to question. Not whether or not we need regulation of human behavior.


It costs you 4500 dollars minimum now to convert a car and it went up this high because of Government Subsidies, they al got greedy same as the Private Health Insurance Business.

Rorts to protect vested interests, thats what our problem is and always was.

remember the Rum rebellion, well we haven't changed. all the Leading figures in Australias dark past were corrupt greedy morons and we named districts and towns after that garbage.

So. any wonder???????????????. DAH!

Great going Australia, hero parades to celebrate stupidity and admiring crooks, thats us.

Remember the AWB scandal, wool to Iraq, YES thats it, thats our problem in a nut shell.

Vested interests and Protectionism by & through regulation and not for regulations sake, thats the problem. Now talk the good talk and walk the walk. Known knowns & you guessed it ??????. Facts please! Good Article Ian, for an Economics Professor/Lecturer your not such a bad bloke. Keep them coming, we have enough rorts out their to write a 12 volume Encyclopedia set. The AWU Union is a rort set up financed by Business, so lets not be blinded by the word union or federation as in Farmers Federation another but fancy word  for union style activity or Protectionism.

Posted Wednesday, July 10, 2013 - 10:27

Well said Ian. As a small businessman for 40 years I can assure you that there are many shysters in the ranks and that the dream of these shysters is to somehow get their snouts in the government contractors trough.

They seem to have adopted  the rightwing belief that government is bad and they are therefore entitled to rip off as much as they can.

Posted Wednesday, July 10, 2013 - 14:37

A good article Ian. Greg Hunt and the Coalition have a selective memory on many things, including workplace safety.  As Bernard Keane recently wrote in Crikey, workplace deaths have been significantly reduced under Labor .. by one third. Under John Howard's government fatalities in the construction industry spiked, when anti-union Commissions and Taskforces were put in to harass workers. This is the true attitude of the Coalition to workplace safety.

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