The Real Lesson From Pink Batts


On the same day that the Commission of Audit was released in Canberra, Tony Abbott’s Royal Commission into the Home Insulation Program (HIP) resumed its hearings in Brisbane. Reading like a neoliberal how-to guide, Tony Shepherd’s report calls for a new wave of outsourcing and privatisations. Yet the evidence emerging from the HIP Royal Commission provides a salutary warning for Abbott and Hockey: outsourcing government programs to the market comes at a cost.

Abbott’s instigation of a Royal Commission into Rudd’s “pink batts” scheme is clearly an exercise in keeping Labor’s failures fresh in our minds. But the Royal Commission paints a picture of a government program that failed primarily because of its reliance on “market delivery” — precisely what Hockey’s Commission of Audit demands more of.

Over a month in to the Royal Commission it is increasing clear that it was the design of the HIP that made the program “an accident waiting to happen”. By outsourcing the program to the free market the HIP allowed unsafe and unsupervised work to be carried out by young, untrained workers. The deaths of the four young men working on the scheme were not just tragic accidents, they were the result of a program design that came from Rudd’s own office for Prime Minister and Cabinet and his hand-picked stimulus chief.

The insulation industry was deemed a great “shovel-ready” stimulus target by Rudd and his staff precisely because the lack of existing regulation meant there were no barriers to entry — great for flushing money into the economy and boosting small business, not great for creating meaningful energy efficiency or ensuring workers’ safety.

Behind the headlines about missed warnings and a rushed rollout, much of the Royal Commission’s proceedings have revolved around the program’s business model. As the Brisbane hearings have revealed, the market delivered rebate model was not initially favoured by the Environment Department staff charged with getting the scheme off the ground, but was foisted on them by senior officials close to Rudd.

Former assistant director of the Environment Department Kevin Keefe described how, 20 days into the program, he was abruptly presented with a new “free market” business model. In March 2009 Keefe attended a meeting that included Senator Mark Arbib, Rudd’s hand-picked stimulus coordinator Mike Mrdak and other senior staff from the Department of Prime Minister and Cabinet. Keefe believed the meeting would discuss the progress his department had made in getting the HIP up and running. But the heavy-hitters from Rudd’s department “blindsided” Keefe and presented a wholly new model as a fait accompli.

As Keefe testified, the message of the new model was clear: “don’t do things in a government slow way. Let’s let the market do its work … let the market rip”. This laissez-faire logic was at the heart of the HIP’s design around a rebate. As witness after witness has told the commission, a “principle” of the program was that the key legal relationship in the HIP lay between the householder and the installer. The Commonwealth was the funder, not the provider. Or, as then secretary of the Environment Department Robyn Kruk put it in her statement to the Commission “… there was a strong emphasis on encouraging a high level of participation by homeowners and low-skilled workers by removing red-tape and making the program business friendly”.

The fateful decision to remove the requirement that each installer under the HIP be trained, to only requiring a trained supervisor (itself ill-defined in the program guidelines), was also justified by the notion that the government should not create “barriers” to participation.

Just as it was designed to do, the HIP created a surge of market activity virtually overnight. Prior to the scheme there were roughly 70,000 houses retrofitted with insulation every year — at the height of the HIP the number reached 180,000 in one month. As one installer reported to the Queensland Coroner last year, the attitude for the tens of thousands of start-up companies that flooded into the sector was “make hay while the sun shines”.

Those responsible knew that the HIP rebate would distort the insulation industry and draw in thousands of new start-up businesses. From a stimulus perspective, that was the point. And yet still they designed the program around the premise that existing OH&S laws would be enough to regulate industry and ensure the safety of the new recruits entering the nation’s ceilings.

It was when the department tried to beef-up safety rules, after the electrocution of 25-year-old Matthew Fuller in October 2009, that the anarchy created by the HIP was fully revealed. Even after then minister Peter Garrett banned stapling metal fasteners into foil insulation, an audit found that 33 per cent of installers were still using the banned metal staples. The “light touch” design of the HIP made it impossible to impose effective safety rules down the track.

For 30 years governments on both sides of politics have increasingly outsourced public services to the private sector under the rubric of efficiency and savings. The Commission of Audit’s call to sell off state assets and build new infrastructure through public private partnerships is more of the same. The effect is a hollowed-out public service, unable to regulate, with no in-house knowledge of how to safely deliver services. If the government listens carefully to the messages coming from their Royal Commission they will think twice before continuing down this path.

New Matilda is independent journalism at its finest. The site has been publishing intelligent coverage of Australian and international politics, media and culture since 2004.