The Money Men by Chris Bowen (i wanna iguana read aloud .TXT) 📗

argue for Option C at the tax summit. However, it was Cabinet approval without a majority of support in the Cabinet. Hawke summarised the Cabinet position as backing Keating’s position, even though only Hawke, Button, Gareth Evans, Kim Beazley and Susan Ryan had actually expressed support for it. Tellingly, senior ministers who could normally be relied on to support modernising economic reforms, such as Hayden, Peter Walsh, Willis and John Dawkins, were all opposed to Keating’s options. Edwards captures the denouement of days of exhausting Cabinet deliberation as to which option to support:

Even after four days, the resistance was so strong that the equally exhausted, equally stubborn [left-wing minister Stewart] West could still say across the table to Keating that he didn’t have a Cabinet majority for Option C … and Keating could only reply that he might not have a majority but he had to leave right then to take the White Paper to the printer and West did not have a majority to stop him.30

Hence, Keating entered the tax summit authorised and determined to argue for the most radical of reforms. He had also worked hard to convince the ACTU of the merits of his proposals. The politics of introducing a consumption tax were exceedingly difficult for the ACTU, but its leaders in Bill Kelty and Simon Crean were prepared to contemplate the possibility.

It was not the ACTU or the welfare lobby that scuttled Keating’s plans on day one of the 1985 tax summit. It was the business community, represented by the Business Council of Australia (BCA), which bowed to the narrow interests of its members, who were opposed to the introduction of the fringe benefits tax and the abolition of the tax deductibility of entertainment expenses, and spoke against radical reform. The first speech of the summit was by BCA chairman Bob White, whose arguments came as a surprise to many in the room—including Keating, who had put so much energy into garnering the support of the ACTU that he had taken the support of the business community for granted.

The ACTU was understandably perplexed by the BCA’s position, and it could see little purpose in arguing for difficult taxation reforms if the business community was itself not doing so. Hawke, sensing defeat, visited the ACTU delegation in their hotel room and agreed with them that Option C was dead. Keating discovered his prime minister’s change of heart when he read about it in the next day’s newspapers.

Keating had staked a huge amount on total victory, rejecting the suggestion from NSW Labor premier Neville Wran that a consumption tax be levied on everything except food. It was a gamble he lost. Keating, however, didn’t contemplate resignation (despite having hinted at it and despite it being speculated upon in the media; tellingly, the Australian dollar plummeted on rumours of his intended resignation). Instead, he did two things: firstly, he claimed a (partially justifiable) victory because of the adoption of the still-radical Option A, and secondly, he built a more durable coalition for economic reform that included the ACTU and key Cabinet ministers who had not backed his judgement.

Keating’s relationship with Hawke was badly damaged by the events at the tax summit. Hawke had backed Keating against the majority of his Cabinet but had then flown the white flag of surrender long before Keating would have hoisted it. As Edwards observes, the tax summit was ‘an episode that snapped the collegial bond of trust between the Prime Minister and Treasurer and put in place a harder, more enduring, but wholly mercenary relationship of mutual advantage’.31

However, his defeat at the summit, somewhat ironically, did allow Keating to forge important allegiances that would later be the key to his successful implementation of economic reforms, and his eventual assault on the office of prime minister. Keating had not traditionally been close to the ACTU. The peak union body had been disappointed when former employee Willis was replaced as shadow treasurer by Keating. Keating, in turn, had been sceptical about the efficacy of the Accord that Willis and the ACTU had negotiated. But although the ACTU had helped scuttle his beloved Option C, Keating and Kelty had developed a degree of trust and admiration for each other.

During the negotiations around the tax summit, Keating had repeatedly told the ACTU delegation that tax reform was not a ‘magic pudding’ that produced economic winners without pain. There would have to be losers to create winners and to promote the greater economic good, Keating had explained. After his defeat on Option C, the ACTU delegation visited Keating to console him. They bore a copy of Norman Lindsay’s The Magic Pudding, which each member of the ACTU executive had signed, alongside a moving inscription: ‘with our respect for your efforts in tax reform and the promotion of greater equity for Australians’. It would be one of Keating’s most treasured possessions.

Keating also noted that ministers who should have been naturally inclined to support economic reform, like Walsh, Hayden and Dawkins, had not supported his package. Of these, Dawkins was the most important because he was the youngest and was likely to have the longest future in the Cabinet. Keating decided to seek him out and get to know him better, with a view to forging a long-lasting coalition within the Cabinet in favour of economic reform. Dawkins accordingly became a key supporter in future economic battles, as well as in Keating’s eventual leadership tussle with Hawke.

In the end, Keating produced a substantial tax-reform package. Even though it fell far short of his ambitions, it still scared the Cabinet and the Caucus. ‘You couldn’t sell ice-cream in the Gobi Desert,’ he told Cabinet colleagues who were nervous that the government couldn’t make a case for the capital gains and fringe benefits taxes—the revenue generated from the new taxes was enough to reduce the top marginal tax rate from 60 per cent to 49 per cent. In September 1985, Keating introduced the detailed elements of the final package in the House