No silver bullet in an insulation maze

The Insulation Royal Commission will cost $20m but the mistakes the Rudd Government made and the warnings they received are already well known. Why didn't they act on those warnings earlier?

Yesterday I explained that the Rudd government’s insulation rebate scheme has been the subject of at least seven investigations on top of the Royal Commission the government has just launched (A royal commission without a mission? December 16). The Government has now revealed in the mid-year economic and fiscal outlook that they will spend $20m on this Royal Commission.

Yet we don't need a $20m Royal Commission to learn what mistakes the Rudd government made in its roll-out of the insulation rebate program, a number of which it was warned about early on. If the government rolled out the program with far greater concern for the quality of insulation installations it could have avoided a great deal of the angst and negative publicity that ensued. 

But the government and the broader community would then have had to accept the speed and scale of the program roll-out to be more modest, the cost higher and, therefore, the program less helpful in offsetting the financial crisis downturn. Conditions would have been applied that made it harder for firms and workers to participate.

In considering the government’s response to the warnings it received, one must always keep in context the nature of the circumstances in which they were received. 

In rolling out any government program, particularly one with more than a billion dollars in funding, public servants and politicians are always bombarded by stakeholders with competing and conflicting claims. While they are usually cloaked in a concern for the wider public interest, self interest is not hard to discern. But this doesn’t mean these stakeholders are always lying; usually there is an element of truth to much that they say. But it can be difficult to sieve out the grain of truth from exaggeration, urban myths and highly unlikely imagined scenarios.

It is true that roofs are full of electrical wiring which, if handled incorrectly, pose risks of electrocution and fire. 

When the government was in the process of developing the program, it was warned by the Insulation Council of Australia and New Zealand and the National Electrical and Communications Association that foil insulation posed a particular risk of electrocution. Still, it is entirely possible for it to be installed safely but installers need to be careful. Given that one of the primary purposes of the program was to provide a ready form of employment to low-skilled unemployed with no experience and only rudimentary training, it would have been best for the government to exclude foil insulation from eligibility. This is not to mention the fact that foil’s insulating properties deteriorate quite quickly if placed horizontally in the roof due to the accumulation of dust.

In addition, halogen downlights were known to be a major fire risk as they had been commonly installed very poorly, with nothing covering the very hot light or the transformer. Consequently, fires were likely in the event either flammable material was placed nearby or they were covered by insulation. It’s worth noting that the government required insulation to be installed to Australian Standards, and these specify that insulation be installed with clearance spaces around lighting fixtures.  Still, given the low cost of halogen lighting covers, and their easy installation, it would have been smart for the government to require that said covers be installed in any home with halogen downlights, simultaneously with insulation. The government actually ended up doing exactly this, achieving two goals at once – substantially reducing fire risks while improving energy efficiency. But, unfortunately, it was several months into the program and media hysteria over homes burning down had already seriously undermined confidence in the program.

Banning foil and requiring halogen lighting covers are simple changes that if they had been done at the very commencement of the program would have made a big difference to its perceived success.  

Yet before accusing Peter Garrett of “industrial manslaughter”, one needs to keep in mind that at the time the program was conceived (and to this very day) any person can go down to their local Bunnings and buy insulation to install in their home – absolutely no safety checks or qualifications are required, and it's perfectly legal.

Meanwhile, even those who installed insulation for a living at the time the program was unveiled were subject to minimal requirements. The Insulation Council of Australia and New Zealand observed in a submission to the Senate Inquiry that prior to the insulation program:

This market segment was in effect unregulated. Work in this market was considered of small scale and value and, as such, anyone could become employed with no experience. Prior to the EEHP [the Home Insulation Program], contractors and installers were not required to have any of the current EEHP prerequisites such as registration, OH&S certificates or training.… nor had there been requirements to install insulation to the existing Australian Insulation Installation Standards.

Yes, the government was warned by ICANZ about the risk of electrocution involved in using foil insulation. But what you need to also keep in mind is that the sole two companies which make-up ICANZ membership – Fletchers and CSR – completely dominated the supply of the main foil alternative: glasswool batts. The government would have recognised that if they were to exclude foil from eligibility it would have handed Fletchers and CSR a major market advantage (although CSR and Fletchers also produce foil) and possibly led to a major hike in the price of insulation. At the same time, foil insulation suppliers would have complained bitterly about their exclusion being discriminatory. 

If you take the time to read through the submissions to the Senate inquiry you’ll find various insulation supplier camps: glasswool, foil, polyester and blow-in cellulose.  Each bitterly complains about the other camp’s shortcomings, while spruiking their own advantages. For example, the foil camp complains that other insulation products present more of a fire risk and are not good insulators in tropical climates. 

It would take a brave government official to ban foil when it is possible to install it safely with a reasonable level of care, and Australia had then not suffered cases of electrocution from its installation.

Now, of course, ICANZ were the only one providing warnings about foil. NECA, which “represents the best interests of the electrical contracting industry” according to its website, also warned about electrocution risks as well as fire.

So what did they recommend the government do to mitigate this risk? They told the government that, “all installation of insulation in roof cavities involve a compulsory pre-installation inspection by a registered electrical contractor and a follow-up inspection at the completion of installation”.

This would have been great at creating work for electrical contractors, but it would have been disastrous for the effectiveness of the program in employing low skilled workers and getting large numbers of homes insulated. Anyone who’s had to get an electrician out to their home recently would know that this would substantially increase the cost of insulating a home, and impose a major manpower constraint on its rollout.

Given that insulation had been rolled out for decades in people’s homes without the requirement for an expensive pre-inspection and then sign-off by an electrician, one can probably understand if the government viewed such a demand with a degree of scepticism.

Yes, the government could have paid greater heed to warnings of fire and electrocution, and with some simple changes reduced such risks. But given the circumstances they faced, such decisions may not have been as easy as hindsight suggests.