Insulate the damage, and hope the storm blows over.

Today was I think the worst day politically speaking of the Rudd Government. First Greg Combet announced the cancellation of the Home Insulation Program Mark II, then Kate Ellis announce the Government was reneging on its 2007 election promise to build 260 childcare centres, and instead was only going to build 38.

Two big news stories.

And then the NRL announced that the Melbourne Storm was to stripped of two Premierships, fined $1.7m and unable to win any points this season due to salary cap breaches.

Suddenly the front page for tomorrow is not all about the Government, instead it’s the biggest sports story in this country for over a decade.

But let’s stick with politics, and firstly the childcare broken promise.

Ellis defended the decision saying a report done into childcare places concluded that:

"An injection of more centres would threaten the viability of existing services and potentially cause disruption for Australian families, just as the market is finally settling after the ABC Learning collapse,"

and that:

They say 30 per cent of long day care places are not being used. Comparisons between the September quarter 2005 and 2009 show more children are using child care and there are more childcare places. Child care is also described as cheaper now.

But the reports also say the proportion of childcare places being used has fallen from 77 to 75 per cent.

"This evidence we have released today, we have committed to continuing to release evidence so that we can make the best decisions for the stability of child care in Australia, said Ellis

All of which may be true. For example the report does say:

Child care utilisation shows the proportion of available child care hours that are actually being used.
The proportion of child care hours being used was 75 per cent in September 2009, compared to 77 per cent in September 2005.
One quarter of available child care is not being utilised. Taken with the vacancy data, this suggests that on aggregate there is child care available.

Bu if we look at the graph produced beneath that line we see that there were actually more spaces available in 2007:

So what we have is not so much an improvement of vacancies, but pretty much a static level – essentially an admission that there wasn’t that big a problem to begin with.

Not a good look.

There is good news for the Government on the costs of child care:

From 1 July 2008, the Child Care Rebate increased from 30 per cent to 50 per cent of all approved out‐of‐pocket child care costs up to a maximum of $7,500 per child, which was indexed on 1 July 2009 up to a maximum of $7,778 per child.

ABS data shows that this increase contributed to the reduction in the net costs of child care to parents by more than 20 per cent in the June to September quarter 2008.

In 2004‐05 the Government provided $1.5 billion to parents to help with the costs of approved child care through the Child Care Benefit. By 2008‐09 Government support for parents had increased to $3.3 billion covering both the Child Care Benefit and the Child Care Rebate.

But that ain’t going to wash – especially as people always know of someone who is tr5ying to get their kid into day care. Yes that person might be trying to get into the best day care in their area, but that won’t matter – that childcare centre will be full, so therefore people will think that all childcare centres are full.

So why did the Government announce this back down? (And I don’t mean today – because I doubt the NRL would have let the Government know what it was about to do with the Strom – why would they? There’s no Government issues at play) Why announce this now prior to the election? If you want to be cynical the Government could have let it slide – say they’re in the process of building them etc etc, and then dump it after the election – breaking a promise of a previous election is not going to hurt as much as breaking a promise of the most recent one.

I’m glad the Government did announce it today – it is the honest thing to do, but why today? My thoughts are that the savings from this will be used in the Budget, and the Government wants to get this out as early as possible before calling the election.

And yeah, that may be a good strategy, but they will take a hit on this. It was a big policy – not as big as the 50% childcare rebate – which they has introduced and has been fantastic – but it is still a big one, and Abbott will make lots of hay with this (and so will Liberal Party election adverts). The Government obviously knows this, and so would have made the decision with much loathing, it will be interesting to see if the political cost is worth it.

***

Of less political cost is the cancellation of the insulation scheme. The decision was made on the basis of the report into the Home Insulation Plan (HIP) undertaken by Allan Hawke. Before reading the Report I was thinking that it was going to absolutely bucket the Government. Instead it actually gives a pretty solid report for the Government:

It summarises its conclusion:

Any objective assessment of the HIP will conclude that, despite the safety, quality and compliance concerns, there were solid achievements against the program objectives. At the time the program closed on 19 February 2010, over one million homes had been insulated. Many low income households participated, with the prospect of significant savings on energy bills in years to come.

A very good outcome.

It deals with concerns about worker safety:

At its peak (in November 2009), the program had registered over 10,000 installers employing thousands of largely low-skilled workers.  For the first time there was a national focus on safety standards in the industry and quality standards for materials and their installation. In line with concerns expressed by industry and state and territory authorities at the start of the program, the installer register required minimum standards from installers and the guidelines required that insulation be installed appropriately.

A national training program for ceiling insulation installers was in place and had provided training to over 3700 people. Installers on the register were provided with safety information and warnings during the program, including in the original training materials.

Innovative, cross-government approaches were adopted. The partnership with Medicare has proved highly successful and can be a model for the future where government programs have a similar need for high transaction turnover and speedy and effective delivery.

Which to be honest sounds pretty damn good to me.

The issue of dodgy insulators also finds very little blame place don the Government:

There were concerns regarding poor quality workmanship and materials and disturbing claims about the high level of fraud perpetrated by unscrupulous operators. Despite some safeguards against fraud, no one foresaw the possible extent of potential malfeasance which was simply alarming – a classic example of why governments need to regulate markets to ensure their proper functioning.

The associated political wrangling has overshadowed the duty of care of employers, which, put simply, is a requirement that they do everything reasonably practicable to ensure a safe working environment. While determining the causes of deaths and serious safety hazards and any liability for these is a matter for coroners and work safety agencies, clearly there would seem to have been some unsafe work practices by employers operating under the HIP.

That is forget the media hype, if you look at the facts, the reason for unsafe practices is the fault of the employers not the HIP guidelines or the program itself, but it does highlight that Government should regulate industries (and this was one industry that was not regulated prior to the HIP coming into place – in fact it is now regulated because of the HIP).

That’s not to say it’s all roses, it does suggest the Department could have monitored compliance better – saying it lagged behind the program and pointed out that far too few audit checks were undertaken in the early months.

With regards the overriding aim of the HIP – namely to provide economic stimulus, the report had this to say:

There is little doubt that the stimulus component had the desired effect. Of the $2.45 billion dedicated to the HIP, $1.5 billion has been spent and claims in the order of $100 million may still be outstanding.

It then has a bit of a dig at the media:

It may be a peculiar Australian trait to bank or play down good news while examining the entrails of shortcomings in minute detail. Such is the case here, as the success of measures to deal with the global financial crisis risk having some shine taken off them by the so called HIP bungle. Bungle is actually a furphy because the many positive outcomes (already and potentially) flowing from the HIP serve to address long standing problems besetting the industry. The lessons learned from the fires and tragedy of the four deaths should lead to much safer work practices across Australia. The program has highlighted considerable gaps in the regulatory framework and an Australian regulatory system for the insulation industry building on the South Australian model will also represent a significant way forward.

On the issue of if the Department were concerned about fires, the Report found (and this is something I haven’t seen reported anywhere):

DEWHA worked closely with state and territory emergency services where a fire was confirmed to be at the same address as an installation claimed under HIP. In these cases DEWHA took immediate action to de-register the installer, unless the installer could ‘show cause’. Responsibility for investigation of causes of fires, and any action following the outcomes of investigations, remains with state and territory agencies. Typically, these investigations take a number of weeks or months, and the results are not particularly timely. DEWHA remained in contact with emergency services if there was further follow up action required against an installer (e.g. where an installer had been able to show cause, and had stayed on the register, but where the subsequent fire services investigation had revealed further evidence that was actionable by DEWHA through de-registration).

So the Department was taking action to get rid of dodgy companies, and was working with fire authorities. Interesting don’t you think?

How about complaints to the Department?

DEWHA kept records of complaints (and compliments) made through their call centres or via correspondence. Up to the end of February 2010, DEWHA had received 8290 complaints, which out of over 1.2 million installations carried out, represents a rate of only 0.68 per cent. This is a slight increase from earlier in the program, with, for example, complaints at less than 0.5 per cent in September 2009.

You would have to be an absurdly hard taskmaster to suggest that 0.68% was a high figure of complaints. But of course the media and the Opposition focuses on the raw figure of 8,290 – that’s a lot of complaints, but not of course if you consider it within the 1.2 million instillations – but of course that would require maths to do that. Far easier just to say 8,290 complaints – why that’s over a thousand a month!

Now to the issue of fraud, how did the scheme go there?

Complaints, compliance and audit processes were able to identify many potential fraud issues as they arose. In particular, the letters sent to households after installers made claims were able to identify cases of “phantom installations” where an installer had claimed for a non-existent house or work not carried out. While media reports made much of these instances, the fact that they were identified shows that the compliance mechanisms were having some impact. Where such cases were identified, targeted audits of the relevant installers work could then be carried out to determine if there was a pattern of inappropriate behaviour. Overall, only 0.5 per cent of roof inspections (including these targeted roof inspections) found evidence suggesting fraudulent behaviour, which was subject to further investigation and action by DEWHA.

0.5% – again less than 1 percent, hardly damming.  

Again it wasn't all roses, on the issue of inspection of rooves and quality of workmanship the report found:

Over 14,600 roof inspections have been undertaken, and 1000 targeted audits of electrical safety issues in Queensland have also been carried out as at the end of the program.

The results of roof inspections have shown significant levels of work that did not fully meet quality and safety standards (16 per cent of inspections revealing quality issues and 7.6 per cent of inspections revealing safety issues). Values for targeted inspections were higher as these were based on installers who had issues revealed through other intelligence.

Now 7.6 per cent sound bad, but the Report has a word of warning to those ready to jump to conclusions:

While the figures are alarming, some perspective needs to be borne in mind, in that the figures represent all installations that failed to meet any of the criteria. For example, in relation to quality, this could include small gaps in coverage of insulation.

So it does NOT mean that 7.6 per cent of the rooves were going to catch fire, just that they did not meet the quality criteria which only exists because it was introduced by the Government (remember no such national quality standards existed prior to this program)

With regard the issue of fires, the Report found this:

Of the 1000 targeted inspections of foil insulation in Queensland, 3 per cent of installations showed an electrical safety risk related to insulation.

Three percent? Geez, three percent of insulation is due to dodgy work done by workers under this scheme!! Err no, not quite:

Significant numbers of these households were found to have pre-existing electrical safety issues. The identification (and highlighting) of pre-existing electrical safety issues in roofs has been one (however unfortunate) positive outcome of the HIP. Initiatives to install electrical safety switches (which was already a focus of the Queensland Government), including as one of the options for householders with foil insulation, should result in improved electrical safety.

A bit of an “every cloud has a silver lining”, as the sheer numbers of the instillations under this scheme highlighted that much of the electrical work in QLD rooves was sub-par. Interestingly this was one thing noted back in March by Possum at Crikey:

With all the outrage against the insulation program causing electrocutions and fires, something that seems to have been missed in all the hoo har is that nearly all of these problems appear to be originating from poor, sub-standard and pre-existing electrical work. Afterall, insulation doesn’t spontaneously combust.

So given all this, why did the Government scrap the scheme? As far as I can gather, it was purely political, and the hint is in the report conclusion:

A stronger management structure, earlier implementation of the audit and compliance program, and better targeting of compliance effort early in the program could have mitigated the risks to more acceptable levels, but never to zero.

The only way the Government could guarantee zero risk was to scrap the scheme, and knowing the media and opposition has no care of mathematics and percentages, they took the only political option and scrapped the scheme.

There is also an ironic side effect of the increased safety and compliance procedures now in place:

There is now a much lower number of people and businesses capable of providing assurances that they can operate safely and with integrity in the insulation industry. Given the size of the inspection and rectification program that the Government has embarked on, many of the reputable players will be required to implement inspection and rectification measures.

That is because the Government has introduced such stringent regulations of the industry, there now aren't enough companies around to roll out the insulation in the time the Government wants it done.

Thus in a very real sense, the Government ensured the industry was too safe to carry out its own program.