Costello recalls his golden age

THE crisp, selective and truncated view of history offered by Peter Costello raises the pivotal issue for Malcolm Turnbull: What is the strategic position of the Liberal Party in the age of Kevin Rudd? What does the Liberal Party stand for after John Howard?

The truth is, nobody has a clue. Turnbull was sensible to invoke the Liberal Party traditions of opportunity and fairness after he became leader. Each leader, however, interprets the conservative tradition in his own manner.

The near-consensus view that Turnbull is a sharp departure from the Howard era fails to answer the riddle. Howard's model won four elections and lost one. What on earth will his successors make of the party he left?

The Costello Memoirs (Melbourne University Press, $54.99) are the exact opposite of what has been presented by the media. They tell of a unified Coalition government, of astonishing professional concord between its two senior figures, Howard and Costello, on strategy, economic policy, social issues, the GST, the Tampa asylum-seeker stand-off, national security, Iraq and federalism.

It is because Costello documents each of his disagreements with Howard that the broad picture is obvious: their differences are the exception to the rule. Sometimes they are marginal: witness Howard's reluctance to cut the top marginal tax rates, his scepticism about Costello's 1997 savings rebate, his preference in 2001 to abolish indexation of petrol excise.

Sometimes their differences are fundamental or symbolic: witness their split over Aboriginal reconciliation, ratification of the Kyoto Protocol and whether Australia should become a republic. These are the issues where a transition to Costello would have made a significant difference in giving the Liberals a modernist profile.

Costello's memoir is the opposite of The Latham Diaries, free of gratuitous criticism and devoid of personal vitriol. Even towards Howard, while Costello mounts a sustained case for a leadership transition, his comments are restrained. He judges Howard as "second only to Menzies in the Liberal Party".

His father-in-law collaborator, Peter Coleman, by contrast, strains at the leash to unload on Howard, talking in his preface about betrayal and asking: "Should Costello have resigned in protest?" The family seems more agitated than Costello.

Most of this book is about the success of the Howard project. This should guarantee poor reviews, as distinct from a dishonest anti-Liberal diatribe that would win Costello certain applause for moral bravery.

Costello accords himself a central role in Howard's success. He says, rightly, that economic policy was the main achievement. But Costello, as deputy leader, invests himself with a deeper role: as strategic guarantor of the Howard government's leadership stability over four terms.

This began on the night of December 13, 1994, when three men - Howard, Alexander Downer and Costello - met at the Adelaide Club. They reached an agreement "frankly and openly" that delivered Howard the Liberal leadership in 1995 without blood or rancour.

According to Costello, they agreed Downer would be given a final chance as leader. If his position had not improved by Australia Day, he would resign, and in this situation "I would not run against Howard but would continue as deputy leader so that Howard could be anointed unopposed. Howard and I would both pay tribute to Downer. He would become foreign minister in a Coalition government."

The legacy of this compact lasted 12 years. Howard, Costello and Downer became the rock upon which a new conservative era was founded. For Costello, the 1996 election victory depended on "an orderly transition".

He says Downer was treated with respect, Howard achieved his ambition and Costello "brokered an arrangement to put the party on its best footing".

Note that Costello believes he brokered the deal. The leadership parable in his book rests on this tale of political morality: managed transitions are the key to victory and Costello, from this moment, expected Howard to display towards him the same discretion in the party's cause that he had displayed towards Howard. He would be disappointed.

The situation was replete with ironies. Howard and Downer later became close friends but friendship eluded Howard and Costello. He repeats the story of Howard's statement made in late 1994 that he would resign in the second term in Costello's favour.

So why didn't Costello press the issue in 2000 during the second term? He says: "A change of leadership in the midst of the implementation of the GST was out of the question." Costello saw that Howard could not walk out "on this very difficult tax reform". As for Costello, "weighed down with the GST I was in no position to force the issue, nor did I want to. I thought we would be lucky to get through the GST and win the 2001 election."

It is a sensible judgment. Promises in politics cannot be absolute. Their delivery is a function of events and realities. Costello's flaw was his total inability to turn political events in favour of his own leadership.

This dilemma was captured in the little known February 25, 2003, Howard-Costello leadership discussion during the third term. Australia was on the eve of war. Howard told Costello he had not yet decided whether to stay or resign. The time to leave would be the next December-January. His family's view was mixed. "I would prefer an announcement in July (2003)," Costello said. Howard said: "If Iraq goes well, the party would see me as a vote winner and want me to stay on. But if Iraq goes badly, it would want me to go." Costello told Howard that "one of the reasons why the party is doing so well is that there is no one working against you and no undermining". He was right. Howard pocketed the benefit from Costello's loyalty.

Early in the fourth term Costello saw Howard in Sydney on May 2, 2005, when he says Howard "told me that the party would want a change before the next election". Really. It is a remarkable claim, but Costello does not quote Howard's words. They discussed how much time the new leader would need before an election, Howard saying 12 to 15 months and Costello 18 to 24 months.

Costello is persuasive in showing Howard's failure to plan a smooth transition, yet Costello, confronted with this failure, was unwilling to take any initiative, unlike Kevin Rudd or Malcolm Turnbull, the two incumbents.

Despite their differences of generation and temperament, the book shows the Liberal Party philosophy of the Howard era was essentially a shared Howard-Costello position. On October12, 1993, with the party demoralised, Costello said: "I believe there is a group of blue-collar voters that is open to switching from Labor. At a time when the Labor Party is increasingly the preserve of academics, teachers, social workers, university-educated union careerists and preoccupied with the concerns of various 'liberation' movements - gay liberation, black liberation, women's liberation - and environmentalism that will cost some of these supporters their jobs, they must be coming to the realisation that Labor is no longer their party."

This was Howard's strategy and these could have been Howard's words. From this diagnosis, Costello said the Liberal Party should propound the values of "individual dignity, self-reliance, national sovereignty, personal liberty, a fair go". Again, this was Howard's position.

One of Howard's under-rated achievements was to keep his government united after the Liberal Party's ruptures of the previous 12 years. Costello's role in this unity was critical. So was that of other senior ministers, Downer, Peter Reith, Nick Minchin and Robert Hill. The cabinet accepted Howard's model: economic reform, social conservatism, the fair go, national security vigilance, an assertive nationalism and an even more assertive sovereignty, notably at the border.

As the successor, Costello was loyal to Howard's model yet keen for its adaptation.

In 1999 Costello declared for the republic. In cabinet in 2000 he argued that the entire cabinet should walk across the Sydney Harbour Bridge together in the cause of reconciliation. He said this would be a "knockout statement" that would remove the "bad blood" Howard had caused in 1997.

But Howard and most of cabinet rebuffed him. Costello would have ratified the Kyoto Protocol immediately if he had become prime minister before the 2007 election.

Such changes would have transformed the government's image. They involved a significant modernisation beyond the Howard model. That the Liberal Party accepted the apology to Aborigines and Kyoto ratification within weeks of its election defeat proves Costello was correct.

In the end the Howard model was exhausted and the party failed to devise any means of renewal. But this problem transcends Costello's list of republic, Kyoto and apology. His book is conspicuously weak in confronting the Howard government's final-term policy failures. Having made much of his early feats on industrial reform, Costello has nothing of substance or insight to offer on Work Choices. What responsibility does he accept? Was this a failure of policy or tactics? Costello says little about management of the post-2003 terms of trade boom and strangulation of the government by relentless interest-rate increases. How much of this was his own miscalculation?

Turnbull is largely divorced from the Howard era. Coming into parliament only at the 2004 election, Turnbull was not present for the difficult Howard-Costello decisions that framed a successful government. Indeed, he was present only for the failed final term.

The intriguing test is where Turnbull takes the party. How will he reinterpret Liberal beliefs? How will he unite the conservative and liberal traditions in the one party?

The first sign came with Turnbull wanting to put the republic on ice during the life of the Queen. This dovetails with Costello's warning that the Liberal Party would regret the defeat of the 1999 referendum that Howard put but opposed. For Costello, the Howard government should have seized this chance to decide the sort of republic Australia would become.

The problem the Liberals face now is they are split over the issue. The trend towards a more radical model is sure to inflame their rank and file.

Costello offers some nice anecdotes about the joys of politics. He recalls the play Two Brothers, performed by the Melbourne Theatre Company, written by Hannie Rayson and supported by Australia Council funds he had approved as treasurer. In the play, Costello says, "evil is personified by the brother who is a senior minister in the federal government. He is also a liar and an adulterer whose wife is a dizzy snobbish blonde and whose dead child was a drug addict. The playwright claimed that I was the inspiration for the character. In the play the minister orders the navy to let hundreds of illegal asylum-seekers drown rather than rescue them at sea. It turns out the minister is a mass murderer too."

The play was an obvious reference to the SIEV X that sank with more than 350 deaths. As Costello says, the idea that the Australian government knowingly let these people drown is without foundation. "My daughter Madeleine was taken with her secondary school class to see it," he writes. "One can imagine the lesson in class the next day: 'Your father is a mass murderer. Discuss."'