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Pink Batts Scheme – What Went Wrong?

Pink batts installed in a roof during the Pink Batts Scheme.

Actually, the Pink Batts Scheme (also nick-named the pink batts debacle or even the pink batts disaster) was never really just about Pink Batts. The scheme it refers to was the Home Insulation Program –  a key component of the Australian Government’s Home Energy Efficiency Program. The story of the scheme – or at least the key events we know and remember from it – is eyebrow raising to say the least. Millions in profits were made by some, while established businesses were rocketed into overdrive before being brought to their knees almost overnight.

So, what exactly was the “Pink Batts Scheme” and how did it go so wrong?

Backdrop: The 2008 Global Financial Crisis

Australia, like much of the world, felt the ripples of the Global Financial Crisis in 2008. In response, the Rudd Labor government of the day devised the Energy Efficient Homes Package, aiming at stimulating the economy. The Pink Batts Scheme was part of this package – a well-intentioned plan that would ultimately unfold into a tragic tale of unintended consequences.

In February 2009,  as the Global Financial Crisis continued casting its long shadow, Prime Minister Kevin Rudd introduced the Energy Efficient Homes Package, of which ceiling insulation was a key component.

The Insulation Scheme is Announced

The Home Insulation Program, came about to boost the construction industry, create more jobs and make Australian homes more energy efficient. It was thrown into the mix as a way to tackle economic challenges during a broader stimulus plan. Reflective foil insulation would also play a part in the scheme, due to its effectiveness in reflecting radiant heat. (Foil insulation is particularly useful in areas with high sun exposure).

Specifically, the scheme’s intention was to boost the insulation industry by subsidising the installation of insulation in homes. The Rudd government planned to insulate two million homes in two and a half years, at at cost of around $2.45 billion. This would result in huge business growth and employment opportunities, not least in the insulation and construction fields.

Installer checks his phone and realises his insulation business in growing rapidly because of the Pink Batts Scheme.
In the beginning phase of the scheme, businesses grew rapidly and the unemployed found jobs.

The Pink Batts Scheme Goes into Overdrive

As the Pink Batts Scheme gained traction, there was a strong push for quick implementation. The initial excitement, fueled by the aim to boost the economy, led to a speedy nationwide rollout. With no requirements for installer certification or even formal safety training of any sort, new installers flooded into the market. Every man and his trailer was now a potential insulation business, combing the streets and knocking on doors with a cheery offer of “free insulation” to the surprised residents. Many able bodied homeowners also rushed to install their own insulation at the best of their ability in order to cash in on the government rebate.

Supply Crunch – Rationing OF INSULATION

The unprecedented surge in demand for insulation led to a challenge which could easily have been foreseen and likely prevented, had the scheme been rolled out more slowly and with a few more checks and balances in place – a historic supply crunch. The sudden spike in demand for insulation materials resulted in industry wide shortages. As any insulation supplier knows, Pink Batts insulation (and other brands of glasswool insulation) require a lot of storage space, and once the incoming stock supply tap was turned off, it didn’t take long before the insulation stockpiles across the nation began to feel the pinch. With the local production lines running at and beyond their production capacity, many insulation businesses turned to overseas, directly importing shipping containers of insulation (at times of questionable quality) to their door. This was the wild-west days of insulation, but the dramas were soon to take an even more tragic turn.

Pink Batts Scheme Blamed for Tragic Loss of Life

Between October 2009 and February 2010, four workers aged between 16 and 25 tragically lost their lives in separate incidents. Matthew Fuller and Mitchell Sweeney were electrocuted while installing foil-lined insulation, where metal staples unintentionally touched live electrical wiring. Sweeney, an experienced installer, had continued using metal staples despite safety regulations requiring plastic ones after Fuller’s death.

Ruben Barnes, a 16-year-old apprentice carpenter, was electrocuted during fibreglass insulation installation due to contact with a metal ceiling batten carrying live electrical wiring. Lacking specific safety training, Barnes purportedly relied on his carpentry experience.

In another incident, 19-year-old Marcus Wilson died after suffering complications related to hyperthermia while working in extreme summer heat. Despite some insulation training, Wilson had limited experience and was filling in for a friend.

Apart from these four tragic deaths, severe third-degree burns and multiple ‘near misses’ occurred to various installers due to the use of staple guns while the electricity being live, and 94 house fires were also reported.

Electrical cables in the roof of a house, where people are installing Pink Batts insulation.
Live electrical cables are a safety hazard for installers working in the roof space.

Pink Batts Scheme Cancelled

In response to the tragic incidents associated with the Pink Batts Scheme and the media pressure which followed the Commonwealth Government took radical action. On February 9, 2010, the use of foil insulation was promptly suspended from the program. Ten days later, recognising the need for a comprehensive reassessment, the entire Home Insulation Program was halted in its tracks. At the time, 1.1 million homes had been insulated (some very poorly), with $1.4 billion approved for payment.

The abrupt halting of the Pink Batts Scheme sent shockwaves throughout the Australian insulation industry. With the demand tap turn off, and an entire industry in overdrive to manufacture, import and stock up on insulation, the impact was almost instantaneous. Prior to the scheme, there were an estimated 200 businesses in Australia engaged in retrofit insulation installation. A year later, this number had climbed to a staggering 8,300 businesses registered under the scheme.  While many of these new installation businesses no doubt packed up and went back to what they had been doing before, companies which had invested heavily in the scheme clung anxiously in the hope that a new and improved scheme would again breath life into an industry which appeared to be on the brink of collapse.

At the time of the February 19 announcement, the government had stated its plan to replace the scheme with a new “Renewable Energy Bonus Scheme”, the insulation component of which would commence 1 June 2010. However, this was not to be…

The Final Nail in the Coffin

With an increasingly acute awareness that things were not going to plan, physical roof inspection audits were ramped up. As of March 2010, over 13,000 roofs had been inspected, of which almost 30% were found to contain concerns relating to safety and/or quality workmanship. The system appeared to be broken.

The final nail in the coffin for the ill-fated pink batts scheme came on the 22nd of April 2010, over 2 months since the scheme was initially halted. On this day, we heard the Federal Government announcement that it would abandon the scheme which had been planned to replace the Home Insulation Program. The Pink Batts Scheme was over for good.

A Pink Batt lies between to ceiling joists after the Scheme was cancelled.
On 22 April 2010 the Pink Batts Scheme was cancelled for good.

Royal Commission is Announced

In an apparent response to the controversies and concerns surrounding the Pink Batts Scheme, the recently elected Coalition Government lead by then Prime Minister Tony Abbot announced that a Royal Commission into the Home Insulation Program would be taking place. This inquiry, overseen by Commissioner Ian Hanger, aimed to unravel the complexities of the program’s development and implementation.

Some Findings of The Royal Commission

Commencing on December 12, 2013, and concluding with the submission of the report to the Governor-General on September 1, 2014, the Royal Commission investigated the processes, decision-making and risk management related to the Home Insulation Program. It examined whether the government received advice or warnings and how it responded to them during the program’s establishment and implementation.

The Terms of Reference covered various areas, including how the program affected families and pre-existing businesses, possible actions to prevent failures, and a comprehensive examination of all relevant matters throughout the program.

The Royal Commission issued summonses, conducted over 37 days of public hearings, and read voluminous documents to understand all the program’s details. Witnesses, like former Prime Minister Kevin Rudd, Peter Garrett and Greg Combet, shared their side of the story into how decisions were made, how risks were assessed and the challenges faced during the program. The inquiry found big problems in how the program was managed. The Auditor-General pointed out issues with risk assessment and oversight. There were allegations of fraud, leading to investigations by the Australian Federal Police and the commission exposed threats and concerns raised by experts regarding safety issues. Allegations included thousands of claims by homeowners that no insulation had been installed at all.

The final report from the Royal Commission, presented to Parliament on September 1, 2014, pointed out seven major problems that played a part in the tragic deaths connected to the Pink Batts Scheme. These issues are summarised below:

7 Fundamental Issues with the Pink Batts Scheme

  1. There was an inevitable conflict between the two key aims of the scheme (insulating homes and boosting the economy) and speed was prioritised over careful planning;
  2. The Department of the Environment ill-equipped to manage a program of such a size and complexity;
  3. The Australian Government failed to recognise and manage the risk of harm to installers until it was too late;
  4. A product was permitted to be used under the scheme which was “manifestly unsuitable”;
  5. Training requirements were relaxed and the term ‘supervision’ wasn’t specifically defined;
  6. There was no robust audit and compliance scheme;
  7. The Australian Government never made it clear to the States, Territories and employers what was specifically expected of them in regards to regulating the OHS arrangements around the scheme.

Overall, the Commission found, it was “poorly planned and poorly implemented”. 

In response to the deaths of the Queensland men, the QLD Government outlined new requirements, contained in the Electrical Safety (Installation of Ceiling Insulation) Notice 2010.

As of March 9, 2010, Queensland insulation contractors intending to install electrically conductive ceiling insulation (excluding metal foil batts) must organise an electrical safety inspection and test the electrical setup connected to the ceiling space in the building. Notably, these two steps must be done by a qualified electrician. This has greatly improved the safety of conductive ceiling insulation installations.

Judge dismisses the Pink Batts class action with a gavel.

Compensation and Class Action

After the Pink Batts Scheme was abandoned, the government made efforts to compensate the businesses that had suffered losses as a result of the scheme. The 2015 Abbott government implemented an industry payment scheme that year, however only registered installers were eligible for payouts, excluding manufacturers and deregistered companies from the benefits. ABC News published an article in 2016 that around $13 million was distributed to 92 businesses, which did align with the Royal Commission’s advice. 

The Coalition Government’s payment scheme was called out as ‘seriously lacking’, prompting the plaintiffs to go after more than $120 million in damages. In May 2016, McLaughlin & Riordan, in collaboration with ACA Lawyers, initiated a class action in the Supreme Court of Victoria. This legal action represented manufacturers, installers and distributors whose businesses collapsed due to the sudden ending of the Home Insulation Program. Participation was restricted to businesses that were both legitimate and compliant. Any business discovered to have been dishonest under the HIP was not included.

Ultimately the Supreme Court of Victoria dismissed a $150-million class action by customers (i.e. insulation businesses) linked to the flop of the Commonwealth pink batts insulation scheme. Justice John Dixon wrote in his decision, “I have determined that the defendant did not owe the duty of care alleged against it, and that the causes of action in negligence and negligent misrepresentation fail.”

Despite the above ruling, the Home Insulation Program, aka. the Pink Batts Scheme, remains a costly lesson on how not to roll out a stimulus program of that kind. And for businesses, it’s a reminder that even the most promising government initiatives are subject to the ever changing political environment of the day, and business risks must be weighed accordingly.