Keating consumed with bitterness
The end of the friendship between Bob Hawke and Paul Keating came before the tax summit in 1985.
IT SEEMS that former prime minister Bob Hawke and treasurer Paul Keating will never be reconciled, with the two still at odds over events from nearly 30 years ago.
The seed for their falling out was sown in the 1985 tax summit, when Hawke dumped Keating's preferred option for tax reform.
Today Hawke is willing to give Keating credit for his work on taxation. But Keating remains bitter. Speaking on the ABC's 7.30 last Tuesday after the release of cabinet papers from that time, Hawke said he had to tell Keating that the consumption tax just wasn't going to be on. He said Keating was disappointed ''but to his great credit he came back and he got together a package of significant economic reform both in extending it to areas like capital gains and reducing rates … He deserved a lot of credit for that.''
Best of friends - Paul Keating and Bob Hawke in the 1980s. Photo: Wayne Ludbey
Keating was not so gracious. ''Basically Bob left me swinging,'' he said on the same program. ''So, I then went on to build the big tax package of September '85 - what is the basis of today's tax system.''
Keating also believes the tax summit, which was announced during the 1984 election campaign, was a disaster for Labor. During that campaign, Hawke found out his daughter was a heroin user. Hawke acknowledges today he was in poor shape at that time.
But he never believed that the tax summit was a mistake. In his memoirs he says he was aware that opposition leader Andrew Peacock was stirring up fears about Labor's likely moves on tax and he needed to kill off tax as an election issue, while at the same time making reform possible after the election. He says he took a Perth radio interview opportunity to float the summit idea.
Keating claims Hawke's poor performance lasted for most of the 1980s. He told 7.30 that Hawke was certainly down through 1984, 1985 and 1986 and that ''the '87 election was only marginally better than the '84 election in terms of his management of it''.
But the fact is that Hawke led Labor to victory in 1984 and he did it again in 1987. So it's hard to see Hawke's personal performance, or the tax summit announcement, as the disasters Keating claims.
Keating frequently bags those who do not have the courage of their convictions.
He makes out that he, and he alone, consistently battles for the policies that are in the country's best interests. Hence, he would have proceeded with the consumption tax in 1985, despite the opposition that was evident at the summit. In making the case he conveniently forgets that he won the 1993 election by campaigning against John Hewson's consumption tax - a tax much the same as the one Keating had advocated.
Students of politics can learn much from the way Hawke handled the tax-reform challenge in the mid-1980s.
Knowing that major changes are always difficult for the public to swallow, he repeatedly stated that any package the government implemented would have to have broad community support.
Keating was given the job of winning that support. He quickly found a willing band of followers in the Canberra Press Gallery. Only a tiny minority were sceptics.
In the week before the summit, I wrote in The Canberra Times: ''The question is no longer whether the government's preferred tax package will be accepted but when and how the government can dump it.'' Only Niki Savva, then writing for the Melbourne Sun, took a similar position. But the outcome should have been obvious to all.
On the weekend before the summit, the Labor Party's Victorian conference voted to reject the package. In doing so it joined most other state branches of the party. NSW Labor premier Neville Wran expressed serious reservations, as did the secretary of the NSW Labor Council, John MacBean, a member of Keating's own Right faction. Without the support of his own side of politics Keating had no chance of getting his package up.
In the end no significant player at the summit supported it. Premiers rejected it, business leaders were not supportive, the welfare lobby opposed it and the union movement did not want it.
Keating blamed staffers in Hawke's office for the decision to dump the consumption tax but anyone with half a political brain could see it was just not on, at that time. It took another 15 years for the Howard government to bring it in.
This raises another of Keating's claims - that his tax reforms were the basis of today's tax system.
To repeat, Howard and his treasurer, Peter Costello, brought in the goods and services tax that Keating saw as the major component of his tax package. But what of the other measures in the package Keating finally brought in - the fringe benefits tax, the capital gains tax and abolition of entertainment deductions?
Where did Keating stand on these measures? His memory clearly does not go back to the early 1980s when capital gains taxes were being debated by the Labor Party. He does not recall that in November 1981 he led the attack against the proposal for a general capital gains tax put to the party's parliamentary economic committee by then shadow treasurer Ralph Willis.
Nor does he remember that he told the ALP National Conference on July 6, 1982, that those who favoured such a tax wanted Labor to commit ''political hara-kiri''. Hawke, it should be noted, argued in favour of the capital gains tax at the 1982 conference, saying it could be sold to the electorate.
With the carbon tax scare campaign fresh in our memories, both sides of politics today reject any suggestion they will raise the GST rate. If the peripheral carbon tax generates such heat, advocating an increase in a real tax on everything could be political suicide. Perhaps one of the leaders should suggest a post-election tax summit.