Howard crushes Costello's hopes

John Howard

CANBERRA - Prime Minister John Howard announced yesterday that he would remain as leader of the Liberal Party, finally crushing the hopes of Treasurer and heir-apparent Peter Costello of taking the Government into next year's election.

The blow was delivered in a phone call from Howard to Costello on Sunday night and confirmed to Liberal MPs in a faxed letter yesterday, ending months of speculation and back-room manoeuvring.

Despite clear disappointment, Costello confirmed that he would stay on as Treasurer and Liberal deputy leader, continuing one of the longest and most successful pairings in Australian political history.

The decision reflects Howard's paramountcy and will allow the Government to put its recent leadership crisis well behind it by the time the Prime Minister goes to the polls against Kim Beazley, the twice-defeated Leader of the Labor Opposition late next year.

Costello's long-simmering frustration at Howard's refusal to announce his future broke into the open last month when a former defence minister, Ian McLachlan, said that before he became Liberal leader in 1995 Howard had promised Costello that he would serve only two terms as prime minister.

Although McLachlan had made notes of the meeting at which the agreement was made, and further confirmation from Costello, Howard denied any such undertaking.

Despite fury at both Howard's denial and the continued frustration of his ambition to become Liberal Leader, Costello did not have the numbers to mount a successful challenge and decided against resigning as Treasurer to foment rebellion from the back benches.

The lack of support for a Costello challenge was confirmed by both men yesterday, as Howard toured Queensland farms ravaged last March by Cyclone Larry, and Costello conceded defeat in Melbourne.

In his letter to Liberal MPs Howard said he had taken soundings within the parliamentary party to determine whether it still wanted him as leader.

"My soundings tell me that the strong view of the party is that the current leadership team, with me as leader and Peter Costello as deputy leader, should remain in place through to the next election," the letter said.

Costello said he had taken similar soundings, with similar results.

"My consultation with my colleagues - and I think this is backed by public opinion - leads me to believe that they would want me to continue to work as I have in the past as deputy leader and Treasurer," he said.

"And so I have decided that I will continue to work for the re-election of the Government as the deputy leader and the Treasurer."

Opinion polls have consistently shown that Howard is by far both the preferred Liberal leader and prime minister, well ahead of both Costello and Beazley.

But his Government is struggling against a number of unpopular policies and had expected to suffer further from the leadership crisis.

Surprisingly, a Morgan poll last month showed that voters respected the strong stand taken by Howard when the leadership crisis broke, turning back reverses and returning to a slender 52 per cent to 48 per cent two-party preferred lead over Labor.

Other indicators show Howard still has a tough job ahead of him, with the most recent Newspoll finding Labor leading the Government by a mirror-image 52 per cent to 48 per cent.

Yesterday the Centrebet internet betting agency said it had cut its odds on a Government victory in the next election following Howard's decision to remain in office - showing it believes a win is now more likely. Centrebet, whose odds have been an accurate indicator of previous election outcomes, said the Government was now A$1.57 to beat Labor, in from A$1.69.

Government backbenchers welcomed Howard's announcement, with clear relief that the crisis had passed and the 12-year leadership pairing remained intact.

Costello also expressed relief. "The good thing is that we all know where we stand. It allows us all to plan accordingly."

Costello said he remained in politics for the long haul. "I will work for the re-election of the Coalition Government, for the election of all our candidates and for the re-election of John Howard as Prime Minister."

Howard said Costello had been very supportive of his decision and that they were determined to fight the next election with all the right people in the right positions.

In his letter to MPs Howard said the next election would be hard to win.

"A crucial element will be Peter Costello's contribution, not only as deputy leader but also as Treasurer, where his work over the past decade has been so important to our success," he said.

But he added: "Just as the party now wants me to continue as leader I accept that it has a perfect right to change its mind if it judges that to be to the party's benefit. If that were to occur, I would not ignore the party's shift in sentiment."