Greg Combet (Charlton, Australian Labor Party, Minister Assisting the Minister for Climate Change) Share this | Hansard source

In stating this, it is important that I emphasise once more that the available evidence indicates that a large majority of home insulation installations have been completed in compliance with the program. Of course, there are many legitimate and reputable companies that operate in the industry and did so under the program as well.

I wish now to address one of the principal priorities of my work, and that is to assure householders that the government is acting to mitigate safety and fire risks.

There has been widespread anecdotal reporting of problems associated with the installation of insulation in homes, centred upon safety and fire hazards. As of this morning, I am advised that 105 fires, including smouldering or smoking insulation, have been formally linked to installations under the program. It is important to note that historically, prior to commencement of the program, there were on average some 80 to 85 fires per year associated with insulation. The government’s approach to the safety and fire hazard issues is informed by the fact that there are two distinct categories of insulation that need to be considered—foil insulation, and other insulation products.

Significant risks have been identified in relation to the installation of foil insulation, a metal product which is in fact highly conductive. I have been advised that foil insulation has been installed in approximately 50,300 homes, the vast majority in Queensland and northern New South Wales. Approximately 85 per cent of these installations are in Queensland.

Because of its conductivity, and its proximity to electrical wiring, it is now held that horizontally laid foil insulation on the ceiling joists is unsafe. Two of the four fatalities, both apparently as a result of electrocution, have been associated with the installation of foil laid horizontally in ceiling spaces. I am advised that foil insulation products, if used and installed correctly, are safe and effective products and that they will, of course, continue to be widely used in the construction industry. Foil product is most commonly used as insulation lining around external walls and roofs, inside the wall cladding and roof cladding during home construction. But the installation of horizontally laid foil across ceiling joists under the program is a safety issue that the government is determined to address.

An initial inspection of around 1,000 homes fitted with foil insulation has found that three per cent had electrical safety risks associated with the installation of foil, including 15 homes with ‘live’ foil. Around five per cent had fire safety risks. The safety inspections revealed that 20 per cent of homes were found to have pre-existing electrical safety risks that were not related to the insulation. Thirty-three per cent of foil installations involved the use of metal staples after this practice had been prohibited under the program.

The government has committed to conducting electrical safety inspections in homes in which foil insulation has been installed under the program. The current interim arrangements enable a householder to arrange for a licensed electrician to conduct an electrical safety test, with the cost to be reimbursed by the government. These arrangements will be replaced in the near future with a program of foil safety inspections funded directly by the government. Householders will be contacted initially by letter and then by telephone to make a booking for a licensed electrician to conduct an inspection. However, the advice that the government has received indicates that the electrical safety inspection, if it finds no risk, will only certify that there is no electrical safety risk on the date of the inspection. The residual risk arises from the potential for foil insulation laid in proximity to electrical wiring to become live at a subsequent point in time through degradation of wiring by ageing, heat exposure and moisture, vermin damage, or by damage caused by tradespeople or householders entering the ceiling space. This is an unacceptable risk.

The Electrical Safety Office in Queensland is recommending that horizontally laid foil insulation be removed or, alternatively, that safety switches be installed in household electrical circuits. On 23 February this year the ESO issued a safety alert on managing foil ceiling insulation risks which included the following statement:

The Electrical Safety Office considers that the safe removal of foil from the ceiling space provides the greatest level of electrical safety. Alternatively, householders should consider the installation of safety switches for all final sub-circuits and sub-mains located in the ceiling space by a licensed electrical contractor.

This specific ESO advice postdates the termination of the program and was not therefore available to the previous minister, Peter Garrett, during the operation of the program. As a consequence of this and similar advice recently received from organisations including Master Electricians Australia and the National Electrical Contractors Association, the government is as a matter of urgency preparing a plan for the safe removal of foil insulation or alternatively the installation of safety switches. In the meantime the government will continue with its commitment to electrical safety inspections. An announcement concerning the further measures to deal with foil insulation will be made as soon as possible.

The removal of foil insulation may be the most appropriate safety measure in houses where electrical wiring is old, degraded or damaged, or cannot be inspected because a blanket of insulation has been laid over the wiring. If the wiring is visible and in good condition and the insulation is installed correctly, safety switches may be a safe alternative. We are currently seeking the input of industry bodies and regulators in relation to these and other issues associated with foil insulation. The Australian government will fund the foil removal or safety switch installation program.

In relation to the more than one million households which have been installed with non-foil insulation products, the government is committed to a large-scale home inspection program to identify and mitigate risks. Non-foil products include glasswool batts, polyester and cellulose products.

Although the Home Insulation Program has been terminated, a number of risk mitigation measures previously initiated remain in place. This includes an inspection regime which has so far completed approximately 15,000 roof inspections and over 1,000 desktop audits. I am advised the analysis done on inspections completed to date have shown:

• 66 per cent of installations were fully compliant;
• 7.6 per cent had fire safety hazards;
• 16 per cent had other quality issues including non-compliant insulation product and incomplete installations;
• 0.5 per cent involved potential fraud; and
• 9.5 per cent were unable to be completed for various reasons.

I am advised that caution must be exercised in extrapolating the results of this sample, as it may not be representative of all homes insulated under the program. That is because the inspections to date have to some degree targeted installations by firms with a poor compliance record. However, on the basis of these results, the potential for safety and fire hazards, I can confirm that the government will inspect a minimum of 150,000 homes installed with non-foil insulation under the program. Taken in addition to the inspections of foil insulation, this means that a minimum of 200,000 homes will be inspected. As minister, I am working with the Department on the development of this inspection program as a matter of very high priority.

The proposed inspection program will involve a targeted, risk-based audit and inspection approach. If a risk assessment indicates that additional homes should be inspected, further inspections will be undertaken. However, there can be no guarantee that all risk will be eliminated. The inspection of houses installed with insulation by companies with known non-compliance problems will be a priority. In developing the inspection program, the involvement of longstanding, reputable firms with strong brands, who are prepared to stand behind their products, and the quality of their installation, will be a foundation for the restoration of confidence. The inspection program will be overseen by a newly established Home Insulation Program Review Office within the Department of Climate Change and Energy Efficiency.

The scale of the task to inspect a minimum of 150,000 homes with non-foil insulation is immense, but it must be undertaken. As I stated earlier, the Australian government will continue household inspections if necessary. Some further time is needed to develop and implement the inspection program, and to build into it appropriate safety and risk mitigation measures. The government will announce the program once this work is completed. To ensure industry and regulatory involvement in the design and implementation of the foil and non-foil inspection and risk mitigation programs the government has appointed an advisory panel comprising a number of industry, employee and regulatory representatives. They include:

• Dr Ron Silberberg, ex-Managing Director of the Housing Industry Association;
• Mr Peter Tighe, National Secretary of the Electrical Trades Union; and
• Mr Tony Arnel, Victoria’s Building and Plumbing Commissioner and Chair of the Green Building Council of Australia.

In addition to the minimum 150,000 non-foil inspections that will be undertaken, I want to emphasise that householders with concerns are able to contact the safety hotline on 131792, which is already operational. Until the new inspection program is in place, the current arrangements enable householders who have safety concerns to ring and request a safety inspection, which will be carried out as soon as possible. In relation to callers with other concerns, names and details are taken and they will be contacted once the new inspection program is finalised. The scale of the task at hand has presented some operational difficulties at times for the hotline. But all efforts are being made to ensure that up-to-date and accurate information is available to callers in a prompt manner.

The second major issue surrounding the program has been the impact it has had on the industry and workers. The government acknowledges the impact that the program’s termination has had on the industry, and we are committed to helping industry and employees manage the challenges over the coming months. While the program has ended earlier than anticipated, it is important to recognise that it would have concluded in some months time when the limit of allocated funds was reached. Industry adjustment was always therefore due to occur at the conclusion of the program, as demand returned to pre-existing levels. The decision to terminate the program prematurely has been influenced by the conduct of a number of unscrupulous operators. Their behaviour has resulted in widespread harm to legitimate businesses and the redundancy of many employees. For the hardships caused, for the loss of value of legitimate businesses, for the extent of safety and fire hazards, for the loss of consumer confidence and for the failure of duties of care and regulatory compliance, the government attributes a burden of responsibility to the minority of companies in the program that cut corners to achieve a quick buck.

On 24 February 2010, the Prime Minister announced a $41.2 million industry assistance package for insulation workers. The government’s commitment is that displaced workers will receive either:

• support to retain their current job until the new Renewable Energy Bonus Scheme begins; or
• assistance to find alternative jobs; or
• a relevant training place where appropriate employment opportunities are not available.

The government is currently examining other mechanisms which may be of assistance to insulation manufacturing and installation firms. However, the best assistance government can provide is to help restabilise consumer confidence and a return to normal business activity levels and stability in a timely way. This objective is central to my approach in working with the longstanding reputable industry participants.

As I have previously outlined, the low barriers to entry to the insulation installation market, in combination with the extraordinary demand created by the program, led to the registration of many thousands of new installation companies. Despite the measures put in place to ensure companies met and complied with program requirements and their broader regulatory obligations, some unscrupulous operators became involved. One consequence was the potential for noncompliance with program guidelines and relevant legislation and regulations, including occupational health and safety laws. Claims have been made not only of non-compliant and potentially hazardous insulation installations but also of fraud.

It was initially estimated that approximately 90,000 installations would occur each month after the launch of the program on 1 July 2009. In fact, by November 2009 demand had reached almost 180,000 installations that month—almost double the anticipated monthly demand. On average, 4,566 claims were received per day since 1 July 2009. The level of demand created significant difficulties not only for the administration of the program but also for the management of audit and compliance. During the program design process, potential risks were canvassed in the Minter Ellison report received by the department in April 2009. Attached to each of the risks identified in the report were proposed mitigation actions. The risk register tracked these actions. I am advised that this information, along with other inputs, informed the overall program design. Notwithstanding the best endeavours of those responsible for the program design, the behaviour of unscrupulous operators led to the realisation of a number of these risks in the delivery of the program—most notably concerning the quality of installations and fraud.

In light of this experience it is appropriate that, with respect to the design and administration of the Home Insulation Program, the government has appointed former senior public servant Dr Allan Hawke to conduct an independent review. This review, to be completed prior to the end of March, will advise the government of the lessons to be learnt in the design and administration of the Home Insulation Program. Apart from the administration and design issues there are other issues related to the program that need to be addressed. One obvious issue concerns safety for both households and employees and how it was dealt with.

The government, through former Minister Garrett and the department, took a number of important steps to mitigate safety risks. Program requirements built upon the pre-existing frameworks for standards, quality, safety, training and consumer protection. These were added to by Minister Garrett and the department from time to time in response to experience. From the outset, products installed under the program were required to comply with the Building Code of Australia and the Australian Standards. A national compliance and audit program was put in place. Specific installer training was developed, incorporating workplace health and safety components. These training materials were developed in conjunction with industry, professional associations and installers.

Following some serious workplace safety incidents, the training program was enhanced with more information on site risk assessments, the identification and control of electrical and other hazards and assistance for workers with lower literacy levels. A new unit of competency specific to residential ceiling insulation was also developed. The first approved list of products that met Australian standards for insulation was promulgated. The government announced additional safety precautions on 1 November 2009. These included:

• a ban on metal fasteners for foil insulation such as metal staples or nails;
• mandatory installation of covers over downlights and other ceiling appliances, which although commonly used, are not compulsory under the Australian Standards; and
• a targeted electrical safety inspection program of Queensland homes with foil insulation installed under the program.

In addition, from 1 December 2009, a mandatory formal risk assessment for every installation was required before any work could commence. Minimum training requirements announced in December further strengthened the requirements of installation firms. On 9 February this year, following safety concerns, the use of foil insulation was suspended under the program. This was largely because there was evidence that measures to prohibit the use of metal fasteners for foil insulation in November last year were not complied with.

In relation to foil insulation safety concerns, interim arrangements were put in place so that any householder with immediate safety concerns could engage a licensed electrician to conduct a safety inspection and undertake any necessary rectification work. A more stringent set of registration requirements for the overall program was put in place, with effect from 12 February. The number of registered installers then fell to approximately 2,500, with approximately a further 950 firms partially fulfilling the requirements. At the peak of activity more than 10,000 firms had been registered.

Despite the intent of changes to strengthen safety under the program, the government made the decision to close the program on 19 February due to the risk of further poor quality installations leading to safety concerns. Household safety and risk mitigation will be addressed through the foil and non-foil insulation inspection programs for households that I have already outlined.

Beyond these safety issues, it is also apparent that fraud has been committed. This was one of the risks identified during program design. Steps taken to mitigate this risk included the following:

• Every insulation installer that was registered to be part of the Home Insulation Program had to comply with the rules of the program.
• These included requirements that an installer must get a work order form signed by the householder following installation of insulation. This form was to be produced on request.
• Every installation was also followed up with a letter from the department to the householders confirming the installation.
• In addition, the government had a program of targeted and random audits including ceiling inspections, desktop audits, field audits and business profiling.

Since the termination of the program, the department’s compliance activities are continuing. The department will continue to work closely with the Australian Federal Police, as well as state and territory police. I am advised that three cases of alleged fraud have been referred to the Australian Federal Police. As minister, I am disgusted that any fraud may have been committed by firms under the program. I will ensure that investigation of fraud is appropriately and diligently pursued.

I wrote to the Auditor-General on 3 March requesting that he consider the commencement of an audit of the Home Insulation Program as a matter of priority. The Auditor-General has agreed to conduct an audit. I have also taken advice from the department as to the appropriate way to evaluate the scope for fraud that may have occurred, and to identify cases so that such matters may be referred to the AFP or other relevant authorities. The department has advised me of its intention to appoint a firm to conduct a forensic audit of the program for this purpose. The department has moved to conduct a new fraud risk assessment and to move additional staff and resources into audit and compliance work.

In what have been termed phantom installations, fraud could have been committed by registered installers claiming payment for installations not actually undertaken. In the seven days following the termination of the program, I am advised approximately 107,000 claims were submitted. Many of these remain to be processed. However payments will not be made until the department is satisfied that actual work has been completed. This will unfortunately cause cash flow pressures for legitimate businesses, but is important if further fraudulent conduct is to be prevented. Legitimate claims will be processed as soon as possible and I am advised that further staff are being employed to help process these claims. Any householder who believes that they may have been a victim of fraud should contact the Energy Efficient Homes Package Hotline on 1800 808 571.

As an example of the nature of the compliance issues being dealt with by the department, one company in northern New South Wales which has claimed $9.6 million under the program is being investigated in relation to over 100 complaints concerning electrification of foil insulation, dangerous electrical practices, damage to ceilings and roof coverings as well as phantom installations. I am advised that all payments to this company have been suspended and action is being taken to rectify safety matters and to reclaim government funds.

All installers registered at any time under the program are warned that they must retain all records of all installations and claims, including the worksheets. As minister, let me assure all those who may have participated in non-compliant or fraudulent behaviour in connection with the Home Insulation Program that we will track you down. The Australian government will not tolerate this conduct, and we will work with all relevant authorities to investigate and prosecute individuals and companies that have engaged in such behaviour. They will be pursued with rigour.

As the government has already announced, a new Renewable Energy Bonus Scheme will replace the Home Insulation Program. Under the Renewable Energy Bonus Scheme, households will be able to receive a rebate for the installation of ceiling insulation or a solar hot water system or a heat pump. $1,000 rebates will be available for ceiling insulation and solar hot water systems, and $600 rebates for heat pump systems. The new rebates for solar hot water systems and heat pumps are already available for systems installed after 19 February 2010.

It is intended that the insulation component of the scheme will be ready for commencement by 1 June 2010. However, I want to emphasise that, notwithstanding this intention, the design of the insulation component of the scheme will be informed by the lessons of the Home Insulation Program. I am determined that these lessons be properly applied, and will take the necessary time to do so.

The new scheme at the very least will institute several key changes. Firstly, householders will arrange for quotes for insulation to be installed, make the payment directly to the installer upon completion of the work, and then claim a rebate of up to $1,000 directly through the Medicare system. Householders will incur any cost in excess of $1,000. Secondly, a new registration scheme will be introduced requiring installers to reregister, pay a cash bond, show evidence of meeting the training and skills requirements, provide certified quality assurance for the insulation product and the installation, and occupational health and safety plans. Finally, a strengthened compliance regime will be developed in concert with state and territory occupational health and safety and fair trading authorities.

In designing this program, as I have already indicated, the government’s key priority is safety for households and workers. The government will be taking advice from industry and experts on the design of the scheme. The panel of experts advising on the inspection program comprising Messrs Silberberg, Tighe and Arnel has also been commissioned to advise on the proposed implementation arrangements for the scheme. They will provide an interim report to government later this month. The design of the scheme will also be informed by the findings of the Hawke Review into the Home Insulation Program which, as I announced, will consider issues around design, delivery and administration.

It is my intention to engage very closely with industry, unions and regulators to ensure that risks are managed in the best possible way. Advice will also be sought so that the audit and compliance systems attached to the new scheme are significantly strengthened.

Full details of the scheme, including registration requirements for installers, will be released in due course. It is important to stress that in designing the scheme the government will focus carefully of course on the safety of households and installers, and appropriate risk mitigation. The rebuilding of consumer and industry confidence will be essential to the success of the new scheme, and this can only be achieved through the close cooperation of the government and the longstanding, reputable manufacturers and installers that are prepared to stand behind their product.

In conclusion I would like to restate the principal decisions that the government has taken to date to address the issues associated with the wind-up of the Home Insulation Program. Firstly, the 50,000 households that have had foil insulation installed horizontally in the ceiling space under the program will continue to be the subject of electrical safety inspections.

Secondly, this program of inspections will be replaced as soon as possible with a program for the removal of the foil or alternatively for the installation of safety switches for all 50,000 households. Individual households will be able to make the choice of foil insulation removal or, alternatively, the installation of safety switches, on the advice of a licensed electrician. Details of this plan will be announced as soon as possible.

Thirdly, a minimum of 150,000 households that have had non-foil insulation installed will also be the subject of a large-scale safety inspection program. Inspections will be targeted according to an assessment of risk. In combination with the foil insulation inspections, this means that a minimum of 200,000 homes will be inspected. If a risk assessment identifies that additional homes should be inspected, further inspections will be undertaken.

Fourthly, until the new inspection program is in place, the current arrangements enable householders who have safety concerns to ring and request a safety inspection, which will be carried out as soon as possible. In relation to callers with other concerns, names and details are taken and they will be contacted once the new inspection program is finalised.

Fifthly, a panel comprising Dr Ron Silberberg, Mr Peter Tighe and Mr Tony Arnel will advise the government in relation to the foil and non-foil inspection and remediation programs, as well as the design of the Renewable Energy Bonus Scheme.

Sixthly, workers in the insulation manufacturing and installation industry who have been displaced will have jobs services packages available to them. Assistance is being provided to businesses to retain and retrain workers.

Seventhly, Dr Allan Hawke has been appointed to conduct a review of the design and administration of the program and will report to the government before the end of March.

Eighthly, the Auditor-General has agreed to conduct an audit of the program.

Ninthly, the Department of Climate Change and Energy Efficiency has consulted the Australian Federal Police concerning potential fraudulent conduct. The department will appoint a firm to conduct a forensic audit of the program as a basis for identifying cases of fraud.

Tenthly, the government has committed to work with police and other relevant authorities in all jurisdictions to deal with cases of noncompliance and fraud.

Finally, the government has also committed of course to cooperate in any appropriate way with the coronial inquiries into the deaths of Matthew Fuller, Rueben Barnes, Marcus Wilson and Mitchell Sweeney. Their deaths are a tragedy, and I once again extend my sincere sympathies to the families and friends of these young men.

I ask leave of the House to move a motion to enable the member for Flinders to speak for 37 minutes.

Leave granted.

I move:

That so much of the standing orders be suspended as would prevent the member for Flinders speaking for a period not exceeding 37 minutes.

Question agreed to.

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