SubscribeWe’ve been subjected to much hyperbole and outrageous overstatements regarding the federal governments home insulation scheme. The press have piled on, enjoying the chance to give Rudd a kicking they’ve been denied over 2 carefully media managed years. The opposition’s (normally sensible) Senator Simon Birmingham on the morning of the release of the Counter-Terrorism White paper declared that instead of terrorism “The greatest threat to the safety of many Australian families over the last 12 months has been the home insulation program”. But this claim by Peter Costello, (though one echoed already around the press/blogs) takes the cake for ludicrousness:
But let us draw an additional lesson from this sorry episode. Both sides of politics are now flirting with the idea that the Commonwealth should take over and run public hospitals.
Bear this in mind. The Federal Government could not run a home insulation program. Do you think it can run every hospital and hospital department in the country?
The logic behind this argument is akin to saying if you have spent your entire life walking around and just once trip and skin your knee, you can no longer claim to be able to walk, let alone run. It’s one thing for libertarians to make such a claim (and Gittin’s is right they’ve attacked the spending but utterly ignored the failure of the private home insulation sector to do a safe/competent job when unregulated) but for a former Treasurer whose government oversaw mis-administration after mis-administration to claim this means all current & future governments should shy from service delivery is utterly laughable.
Did the many failures from 1996-2007 of program implementation and administration mean the Howard Government should have run no programs? Of course not. Costello did not resign when he lost $5 billion in foreign currency swaps, he learnt the specific lessons from it and the RBA shifted policy. I’m all for specific skepticism about governments ability, but there is no logic to claim that one failed scheme (financial incentives for private service deliver) in one specific policy area (environment) means an inability to run a completely different scheme (federal funding/public service delivery) in a completely different area(health). Conservatives and small government advocates do themselves no favours by making such child like use of inductive reasoning (ie that government failed here therefore government will always fail everywhere).
This is especially when we remember that the primary error, the specific cause that lead to the deaths, that lead to the fires, and that lead to people being swindled, were caused by individuals who either were untrained or unscrupulous. The Government’s error was to trust them too much. That didn’t happen in the ACT where higher standards were demanded and hence no foil insulation installed. This was a case of too little regulation*, not too much, but small government advocates (of which Costello was all talk no action) don’t mind twisting evidence to suit their ideology. Shame the media (save Crikey) are so willing to let such fallacies go unchallenged.
*I would be making the same error as I pin on Costello if I were to claim this case is evidence we always need more regulation everywhere, as some surely are taking out of this case. Rather I think it’s real meaning is simply that Garrett wasn’t as across the detail as he should have been, that the environment dept needs an elevation in skills and oversight, and that the fed’s shouldn’t have trusted the States as much as they did. Minor stuff for what was a minor issue.
Sinclair Davidson
/ March 3, 2010Gittins’ argument is not correct. In February last year, in my written submission to the Senate, I pointed out that there were problems with the home insulation program. To be sure I didn’t predict deaths but the program itself was problematic.
Questions that I said needed answering included:
Andrew Carr
/ March 3, 2010Hi Sinclair
I think Gittins overdid it (your blog i noticed mentions the home insulation scheme at least 5 times in the fortnight before his piece), however the failures that has been focused on, and that caused the deaths and fires were due to government not holding the private sector to appropriate standards.
There were also administrative failures (the Rudd government seems to consistently set its incentives way too high) which is why I think Garrett ought to have resigned, but this was as much a failure of the private as well as the public spheres in terms of the deaths and bad installs.
As I said above, I haven’t seen any libertarians discussing why the private sector did such a dodgy job. Now I’m sure you could cite long term issues (Govt regulations taking away culture of private responsibility/market pressures for quality), but the lesson a government who wants to implement a program of private service delivery (and there will always be a next time) will take from this is surely more regulation and oversight, not less. Maybe that will save lives in the future, maybe it will just mean more waste and inefficiencies, no one has come out of this scheme looking good.
Sinclair Davidson
/ March 3, 2010Andrew – there is a well known problem in economics that revolves around the market for lemons. Basically how do you know that a trading partner is performing their part of the bargain? One why to know is to examine their reputation. New entrants to a market have no reputation so some other technique is required. Say physical inspection, for example. Now we know in the insulation case that a lot of new entrants came into the market – that was the policy design. So how did the government attempt to deal with the lemons problem (a well known poblem in economics)? Well they didn’t. They simply handed over cash and expected their trading partners to be honest and do a proper job. Private sector operaters don’t do that. You never just hand over cash, you investigate to ensure that the other party has performed. You inspect the goods. That is the fundamental problem – there was no audit function.
Andrew Carr
/ March 4, 2010I entirely agree that better quality control was needed. Higher standards of prior training (say min 5 years) and material use (in the ACT for instance foil insulations are already banned).
When a government doesn’t have the time to investigate everyone it hires (and given the amount it will hire that’s the case in many of these small outsourcing efforts) then it needs to set a high regulation level to ensure that the only firms who meet its requirements are competent & that they will be held to that.
Samuel J
/ March 5, 2010Andrew – your link on mis-administration is wrong (it is about the politicisation of the public service, something the Rudd government has enhanced).
The point about the insulation scheme is that it is one of the worst examples of misadministration in the history of the Commonwealth. The policy was poorly designed – fancy not having any price signals to consumers – and badly implemented. So Costello was right in the analogy – governments are often failing and when people stress market failure they tend to neglect government failure.
As an aside – is the politicisation of the public service necessarily bad? Or is it just an assertion it is worse than an apolitical public service? I’ve never seen it proven that an apolitical public service is superior.
Surely you don’t think the foreign currency issue was Costello’s fault? It was a combination of errors of judgement of Treasury and the RBA.
Andrew Carr
/ March 6, 2010G’day Samuel. I used the link as it was a quick list of some major faults, surely you’d agree that the cases of Cornelia Rau and Vivian Solon were mis-administration (indeed Immigration’s faults were legion). As was DFAT missing the AWB bribes & the IT outsourcing under Fahey (which they reversed as soon as it affected them). And I’m not even mentioning the many budgetary failures under Defence (but then no one can really get a handle on defence). This happens in the same way thousands of businesses make mistakes and go under, and we don’t notice. We rightly hold government to a higher standard, but when you only ever focus on one area your perspective on the skills required tends to get out of whack (the same way those who only ever watch professional sport tend to be amazed how hard it is when they pick up a bat for the first time and try to slog it Ponting style out of the ground)
It is hardly one of the worst examples of mis-administration in our history. The actual cost to taxpayers and the public is minuscule. as for price signals, it was a rebate system. That is a price signal, which while I agree the rebates were too high (as I mentioned above the Rudd government tends to underestimate public demand for environmentally friendly technology/services), it still only enticed part of the population to engage it.
Secondly, anacdotes aside, I’m not sure Rudd has continued the politicisation of the public service. He has also cut the number of staffers, the size of government advertising and kept on most dept secretaries in an orderly way from Howard. So while there’s stories from some areas, and he clearly runs his own department strongly (PM&C may be different to all others in this sense) it’s not clear the intimidation and bias seen under the Coalition remains at lower levels (which is where i think there is a problem, at the dep sec level i think they almost need to be slightly partisan to be able to do the job). One of the reasons Howard politicised the Public Service is due to the conservative (though libertarian shared) distrust and dislike of the public service. So he felt he HAD to install his own people (wrongly i think), whilst Rudd and Labor dont have the same hostility (though you’d be surprised how many liberal voters there are in the federal public service)
Cheers for your comments.
As for currency swaps, I don’t think you can claim Garrett is responsible for a scheme his department ran (utilising competency standards set by the states) while absolving Costello of his own departments policy and actions.