Howard forges on as power row erupts

John Howard and Peter Costello

CANBERRA - Simmering tensions between Prime Minister John Howard and Treasurer Peter Costello erupted into the open yesterday as the two men gave conflicting accounts of a deal over leadership of the Liberal Party.

Former Defence Minister Ian McLachlan confirmed at the weekend that he had been present at a meeting between the two men in December 1994, and had witnessed and noted in writing Howard's promise to hand power to Costello after two terms.

The meeting took place during Howard's bid to regain party leadership, when he was unsure of his level of support and wanted to avoid a head-on clash with Costello, his heir apparent for the past decade.

Howard said emphatically yesterday that there had been no deal.

But Costello said McLachlan's statement was true and that Howard had promised to serve only two terms.

Howard has since won four elections and has been Prime Minister for longer than any other leader except Liberal titan Sir Robert Menzies, who held office for 17 years.

He has been almost invulnerable because of his successive victories, managed through a combination of good management, good luck and the continued disarray of Labor.

But there has been underlying tension from the Costello camp over Howard's refusal to indicate a departure date, other than to say he will stay as long as his party wants him.

Speculation that he will step down before the end of the year to allow Costello a good lead-in to next year's election has been growing.

Commentators point to indications including Howard's decision to refurbish his Sydney home and suggestions by close associates that a decision was likely by November.

Howard has also been having serious difficulties within the Government, which has been sliding in the polls in a trend accelerated by anger over new industrial laws.

A Newspoll in the Australian showed that while he remained far ahead of Labor leader Kim Beazley as preferred PM, Howard's popularity has slumped from a mid-June high of 50 per cent to 43 per cent. Newspoll also said that Labor held an election-winning lead of 53 per cent to 47 per cent in the two-party voting system.

Costello's statement that Howard reneged on a leadership deal adds a new and potentially explosive mix.

McLachlan, a close Howard ally, confirmed to the Sunday-Telegraph that he had been at, and took notes of, a meeting between Howard and Costello when Howard gave his undertaking to serve only two terms.

McLachlan said that he thought that, after more than 11 years, "it was reasonable that the truth was known by those that wish to know it".

Howard yesterday denied McLachlan's account and said that no deal had been made.

"There were lots of discussions at that time, including one at which Mr McLachlan was present," he said.

"That did not involve the condition of a deal. I think everybody should take a reality check.

"The leadership of the Liberal Party is determined by the more than 100 men and women who make up the parliamentary Liberal Party.

"The leadership is not determined by John Howard or Peter Costello."

Costello said that McLachlan's account was accurate and that Howard had said he would pass on the leadership after serving 1 1/2 terms as Prime Minister.

He said he had not sought an undertaking, but that Howard had asked him not to stand for party leadership in the tumult that followed Foreign Minister Alexander Downer's brief period as Opposition leader, because he did not want to face a party-room vote.

"He told me that he intended to do 1 1/2 terms as Prime Minister and then would hand over," Costello said. "I did not seek that undertaking - he volunteered, and I took him at his word.

"Obviously that did not happen.

"I continued to work for the Government to the best of my ability in the interests of the Australian public."

Labor, which suffered heavily when it was found that former Prime Minister Bob Hawke had broken a similar deal with his heir-apparent, former Treasurer Paul Keating, has leapt on the row.

Opposition leader Beazley described Howard's undertaking as a grubby deal that was against the national interest.

"The prime ministership of this country is not there to be traded between individuals," he said.

John Howard

* Age: 67
* Entered Parliament: 1974
* Treasurer: 1977-83
* Opposition Leader: 1985-89, 1995-96
* Prime Minister: 1996

Peter Costello

* Age: 48
* Entered Parliament: 1990
* Shadow Treasurer: 1994-96
* Deputy Liberal Leader: 1994
* Treasurer: 1996