SYDNEY- The federal government will scrap its $1000 rebate for householders putting insulation in their ceilings, finally dumping the last vestige of its controversial home insulation scheme so it can devote its remaining funds to fixing tens of thousands of botched installations.

Cabinet decided to abandon the insulation rebate yesterday despite the promise of the Prime Minister in February that it would be available from June as part of a new renewable energy bonus scheme.

Ministers are understood to have decided the government's top priority should be assuring the safety of homes which have already had insulation installed rather than installing more.

A government source told the Herald the Commonwealth had still not been able to estimate the cost of inspecting and repairing faulty installations among the more than 1 million homes insulated under the old scheme.

There are concerns the cost could run into hundreds of millions of dollars.

But the government has decided to continue paying rebates of $1000 to homeowners installing solar hot water systems on their roofs and $600 for installation of heat pump systems under the new renewable energy bonus scheme.

The government has already spent $1.5 billion of the $2.45 billion originally budgeted for the scheme on installing insulation into 1.1 million households.

But it was forced to suspend the program in February after revelations of shonky installations, house fires, the deaths of four workers putting insulation into ceilings, and possible fraud by installers.

To read full Sydney Morning Herald story — Go Here Now.