Large-scale taxpayer subsidising of home insulation would
seem an unlikely policy for a right-of-centre political
But that is what pragmatic National did and, by and large,
Prime Minister John Key and his colleagues will be pleased
with the outcome.
In the first seven and a-half months of the scheme, 27,000
houses were retrofitted with insulation, about 3500 of these
with subsidised heating and another 3000 with heating alone.
The ambitious aim of reaching 188,500 homes over four years
at a $347 million cost is on target.
That target is about 20% of the 900,000 houses said to have
Through the scheme, people will be saving money, less heat
will be disappearing through ceilings and floors and homes
will be more comfortable and healthier.
Because residential use accounts for 33% of electricity use
and 13% of energy consumption, a dent can be made in national
The need for extra generation is postponed, greenhouse gas
emissions are reduced and pressure on health services is
Extra jobs have been created and economic stimulus provided.
It has been argued the scheme would be "captured" by the
middle class, with those most in need missing out.
These critics are correct to some degree, because the poor
often lack sufficient money or motivation to take part.
But all those wider benefits still apply for every home
insulated, whatever the financial wherewithal of the
Anyway, statistics from the Energy Efficiency Conservation
Authority (EECA) show a higher number of "lower income" homes
being fitted, about three for every two "general income"
Rental properties are also eligible, and the weighting
towards houses with "low income" tenants is more than three
Those with community services cards receive much higher
subsidies (60% rather than 33%), and that support can
sometimes be topped through local schemes.
A serious issue has, however, arisen from the low quality of
some of the installing, a disconcerting example of the
standards of some New Zealand workmanship.
Of 570 houses checked in the first round of audits, EECA
found problems with 359.
Although half the matters were minor, like missing labels or
product information, 17 were fire risks (most commonly heat
sources like down lights and extractor fans covered by
Many other homes had deficiencies such as gaps in the
EECA has stepped up its random checks from 5% to 10% of
It has been withholding subsidy payments and imposing
auditing costs on installers who fail standards, and it has
introduced a three strikes and "you're out" policy to ban
repeat offenders from the scheme.
As of last week, no installer had received the full three
Retrofit numbers in Otago total about 1500 so far, close to
5% of the national total, and EECA reports no marked regional
differences in the quality of the work and the proportion of
The insulation subsidies, at up to $1300 towards the cost of
insulation in pre-2000 homes, are a hefty helping hand that
has created its own problems.
Reports have emerged from Auckland that non-approved heating
and insulation businesses are being forced to lay off staff
as the select subsidised firms - only 60 across the country -
retain healthy margins while undercutting prices using the
Compounding difficulties is a perception that EECA approval
was being seen as a "badge of quality".
As any free-market advocate worthy of that label predicts,
subsidies cause distortions and unintended consequences, and
this has occurred.
At least, the scheme has been well enough set up to avoid the
quality and safety debacle that has taken place in Australia.
Dodgy work and and a badly thought-out scheme there have been
blamed for about 90 fires and the electrocution of four
The home insulation scheme shows that subsidies, even
allowing for a drain on the taxpayers, can have a useful
But governments should be warned and wary when a cause as
worthy as home insulation, and one introduced with relative
care and skill, throws up various difficulties.
It is all too easy for both Labour and National to see this
type of Government "action" as the way to be seen to be
solving problems and dealing with issues.