Tiberius with a Telephone

by Patrick Mullins

  They were suspicious answers, and they prompted further questions.81 As the issue grew in prominence throughout 1967, the government’s inability to command a majority in the Senate became increasingly uncomfortable. Late in September, there were fourteen questions without notice about the VIP fleet in one day.82 Another sign of the government’s weakness came when the president of the Senate, Sir Alister McMullin (Liberal, New South Wales), tried to proceed with further business and was thwarted when a dissent from his ruling was carried.83 The next day, 27 September, the Senate leader of the opposition, Labor’s Lionel Murphy, gave notice that he would call for all material relevant to the VIP flights to be tabled in the Senate.84 On 5 October, following an ineffectual statement by Holt in the House, the Senate voted to compel the government to table the relevant papers.85

  Holt was angry and embarrassed. On 12 October, the cabinet decided it would ‘resist’ the Senate’s demands.86 Nonetheless, four days later, Holt reshuffled the ministry and demoted Sir Denham Henty, the government leader in the Senate, who had announced that he was not seeking re-election in the November poll. Holt had recognised the need for a stronger hand in the now-restless chamber, and thus effected the elevation of the Liberal senator from Victoria and minister for education and science, John Gorton, to the Senate leadership.

  Wiry and laconic, a loner by temperament and impulsive by instinct, with a charmingly battered face and raffish appearance, Gorton, born in 1911, was the illegitimate son of a Roman Catholic barmaid and a bigamist Englishman who tried to grow oranges near Kangaroo Lake, Victoria. His mother’s contraction of tuberculosis when he was a boy resulted in their separation. When she died in 1920, Gorton’s father could not bear to remain in the country house where the burgeoning family had been living. He handed his grieving son to a woman that Gorton, for much of his life, believed was his paternal aunt — but who was, in fact, his father’s first wife, Kathleen Gorton, who had refused to divorce him. In her cool care, the young John Gorton also met his sister, Ruth, with whom he got along, but little more. He attended Geelong Grammar, gained second-class honours in history, politics, and economics at Oxford, and flew Spitfires and Hurricanes during World War II. While attacking Japanese bombers near Singapore in 1942, Gorton crash-landed after an engine failure, and emerged from the wreckage with his face wreathed in wounds that accounted for his rough appearance. A Japanese submarine torpedo then sank the ship on which Gorton was convalescing; the survivors were picked up by a passing corvette late the next day.

  All this meant that Gorton had to develop a tough, self-sufficient exterior. With little time for pomp and waffle, he prized independence, loyalty, and honour. He rated himself highly, and judged others critically. ‘Not much,’ he said, when a friend sought his assessment of his parliamentary colleagues. ‘I’m the best of them.’87 Elected to the Senate in 1949, Gorton had spent the first nine years of his parliamentary career on the backbench. Menzies had left him there until 1958; Gorton had come into cabinet only at Holt’s elevation in 1966. Coming from the Senate, Gorton had garnered few headlines, and there was little knowledge of him within the parliamentary party.

  Gorton took a dim view of the intransigence that Holt seemed intent on maintaining. He perceived that the Senate was unlikely to back down on its demands for disclosure in the VIP affair, and believed that, unless the government changed its approach, the whole affair could become much more significant than it deserved. He told Holt as much, with some effect: Holt, Howson, and the secretary of the prime minister’s department, John Bunting, decided to disclose some material.

  On 24 October, two days after McMahon’s return to Australia, Holt made a statement in the House about the VIP fleet. He denied any impropriety, and tabled records that showed he had flown some 250,000 miles as prime minister.88 The statement, far from clearing up the matter, further inflamed it. In the House, Labor members seized on the disclosure that McMahon had often used VIP planes to travel between Sydney and Canberra despite the abundance of commercial flights on the route.89

  In the Senate that afternoon, the minister representing the minister for air, Colin McKellar (Country Party, New South Wales), began to answer some of the Senate’s questions about the VIP fleet when Clive Hannaford — the former Liberal, now independent, senator — collapsed in the chamber and subsequently died. The chamber was adjourned, giving the government vital time to regroup.

  On 25 October, Gorton made his first move to retrieve the initiative. He had learned there were some records in existence, and thus tabled a set of papers that gave the dates of VIP flights, the names of passengers, the names of applications, the authorising party, and the places of departures. Notably, he stated that if the Senate wished for more information, ‘it could be provided’.90 That afternoon, learning that it was possible to produce the authorisation books and passenger manifests, Gorton met with the secretary of the Department of Air, A.B. ‘Tich’ McFarlane, and asked him to bring the records. At ten minutes to nine that evening, Gorton returned to the chamber with the records and tabled them.91

  His actions averted disaster. Murphy had planned to call McFarlane to the bar of the Senate for questioning over the records. There would have been substantial government embarrassment had this occurred: the failings of Holt, Howson, and the prime minister’s department would have been on public display. With sudden, cool, and apparently nonchalant judgement, Gorton had put an end to it.

  The fallout was considerable. One of the consequences of the about-turn and inconsistency was demands for Peter Howson, as minister for air, to resign. Howson, however, returning from a trip to Uganda, believed Gorton had acted ‘abominably’. In his view, the Senate leader had broken cabinet solidarity, traduced a decision of cabinet, and exposed Howson considerably. Despite not believing he had done anything wrong, Howson offered his resignation.92 Holt refused it.

  Within the party, there was admiration for Gorton’s actions. He had saved the government at a critical point, acted decisively and shrewdly, and demonstrated an unexpected adroitness in parliamentary proceedings. For a party beginning to appreciate that Holt’s blunders were endangering the government, these were welcome skills to behold.

  Ian Fitchett espied the admiration and the contrast. Writing on 31 October, Fitchett suggested that Gorton had emerged from the shadows as a potentially significant figure within the government. ‘His leadership material is being remarked upon in a Liberal Party which is frankly worried about its future if anything happens to Mr Holt … If the occasion arose,’ Fitchett went on, ‘there could be a strong move to find him a seat in the House of Representatives with the party leadership in mind.’93

  This was the spur to growing unrest in the ranks of government supporters, who wondered about Holt and his judgement, were troubled by the government’s direction, and worried about tension between McMahon and McEwen.

  ON 8 November, Holt questioned McMahon about his relationship with Maxwell Newton and the progress of Treasury advice on a minor cabinet matter. McMahon replied via letter the next day. He denied offering any assistance to Newton while he travelled to Trinidad and Rio de Janeiro, and denied responsibility for the delay.94

  These answers did not satisfy anyone. The next day, Holt, McEwen, and McMahon met in the prime minister’s office with other senior ministers — Paul Hasluck (external affairs), Allen Fairhall (defence), John Gorton, and, from the Country Party, Doug Anthony (primary industry) and Ian Sinclair (shipping and transport) — present. Supposedly frustrated with McMahon’s misrepresentation of affairs, McEwen had refused to meet with him alone and requested that Holt arrange the meeting. Holt agreed, believing that it was the only way to handle the problems between the two men.95

  McEwen accused McMahon of leaking information on tariff policy to people outside of the Parliament, and of working against cabinet decisions by leaking secret information to critics of Australia’s tariff policy. McEwen soon brought up Newton. He demonstrated t
he clear bias that existed in Newton’s newsletters. Then he showed that Newton was being employed by the Japanese External Trade Organisation (JETRO) to provide information about Australia’s tariff policies. McEwen had a copy of Newton’s contract, and quoted from it in detail. McEwen argued that Newton was, in effect, a ‘paid agent’ of a foreign government, hired to serve the interests of the Japanese and work against the interests and policies of the government of his own country.96

  Gorton thought McMahon was rendered nearly inarticulate.97 McEwen attacked McMahon ‘horse, foot, and guns’ during the meeting: ‘You’re just a bloody liar, McMahon,’ McEwen said.98 The treasurer’s protests of innocence persuaded no one. And when he said that he had tried to talk with McEwen about it earlier, he was immediately shut down: ‘I would not talk with you alone because I would not trust you not to spread a false account of what passed between us,’ McEwen told him.99 When McMahon subsequently bleated platitudes about coalition unity, Hasluck interrupted to say that it was an issue not about the two parties but about the whole government. Holt told McMahon to end his association with Newton immediately.

  Little had been resolved. Afterwards, in the presence of Gorton and Hasluck, Holt ‘spoke feelingly’ about McMahon’s disloyalty to him, and rued Menzies’ inaction on McMahon: ‘If only Bob had done something about it we all would have been saved a lot of trouble.’100 Why, so many of them wondered, had Menzies not used the signed confession of McMahon leaking?

  There was one clear outcome: McMahon did end his association with Newton. Tony Eggleton thought that McMahon backed off from Newton in the latter part of 1967.101 Peter Kelly recalled the same: ‘It would have been too damaging, and would have given McEwen a reason to demand he be sacked.’102 When McMahon told Kelly about the meeting, he added that McEwen had pressed for Kelly’s sacking: ‘Jack wants you gone too,’ McMahon said.103 But if McMahon was cowed, his reaction quickly turned. Within weeks, he was spreading a different account of the meeting, most notably to Alan Reid.104

  Soon after, McEwen departed Australia for meetings in Geneva. His decision to do so had been picked over in the press when it was announced late in October, most notably by Inside Canberra, which suggested his absence stemmed from a refusal ‘to aid the government while Mr McMahon continued to undermine him’.105 Whatever its spur — and it is likely that it had less to do with McMahon than it did with the need to attend the talks — McEwen’s absence came at a critical time, for on 19 November the British government announced its decision to devalue sterling by 14.3 per cent.

  McMahon was in Dubbo when he heard. He travelled to Sydney, and from there issued a statement to reassure markets about Australia’s position. He wrote that Australia’s external reserves were ‘well spread’ across multiple currencies, and that for the British decision to have its desired effect, no other country should follow it.106 He was himself thoroughly in favour of the British decision, growling to one journalist that it was ‘about time that Britain faced up to her responsibilities’.107

  McMahon’s statement — issued without clearance from Holt — foreshadowed the line that the Treasury would take at the emergency cabinet meeting Holt called for the following day. Yet it could not hide the fact that, of the $1,170m Australia held in external reserves, $715m was in sterling and other foreign currencies that would be affected by the British decision to devalue. Cost pressures could rise and exports suffer if Australia did not devalue. The Country Party ministers would surely want Australia to follow the British devaluation: if Australia did not, its primary industry base would see its production costs rise, hitting farmers and seemingly validating the criticism of the Basic Industries Group.

  Mindful of the opposition he could expect, McMahon rang Howson and asked him to come to Canberra. But the next morning, McMahon told him not to attend the meeting. Holt, McMahon explained, had been conscious of the likely party-based tensions that the issue would bring up: Howson’s presence would ‘upset the balance between the number of Country Party ministers present and the number of Liberal Party ministers present’.108

  Holt was wise to be tactful. With McEwen in Geneva, Sinclair was acting minister for trade and industry. Though clearly adept and aware, he hardly had McEwen’s stature or force. It was best to give the appearance — if nothing else — of a fair and open debate.

  That afternoon, on 20 November, cabinet met to discuss its response. There were two submissions before it: one from Treasury, and one from Trade.109 The former argued that Australia should not devalue; the latter argued that Australia should. Country Party ministers Anthony and Sinclair asked for an adjournment to think the decision over and consult. Holt refused: ‘We can’t put this discussion off.’ The prime minister rubbished any prospect of getting a full devaluation through the IMF, and scorned suggestions that the government go halfway, saying it would look like a ‘sordid political outcome’. The politics, too, he suggested, were obvious: ‘We would be crucified by electorate if we went full 14 per cent.’ Trying to forestall objections from Anthony and Sinclair, he promised that there would be assistance to primary industries.

  The two Country Party ministers continued to voice their concerns and argue for devaluation, but they were wholly on the back foot. McMahon repeatedly countered that devaluation would bring its own cost increases and that inflationary reactions would be almost entirely at the expense of the primary industries that Anthony and Sinclair — and by extension, McEwen — were trying to protect. Sinclair tried to push for cabinet to wait until McEwen returned, but to no avail. Holt observed the tension the decision was causing:

  I recognise the grave problems for [the] Country Party — and for others of us. But we’ve had expert advice and as [the] Australian cabinet we reach a joint view. I appreciate in both sense[s] that you [Sinclair] and Anthony have argued not on party lines but on portfolio lines … Realise difficulty for Country Party — even to [the] point of its position in Coalition — not saying it does, but recognise that it could. But best we make announcement now.110

  The meeting broke up at six o’clock. Twenty-five minutes later, Holt submitted a draft statement announcing that Australia would not follow the British devaluation.111 When it was cleared, it was issued immediately to the press, to widespread praise. The decision not to devalue was welcomed almost unanimously, and fears that it would create divisions eased when McEwen issued a press statement from Geneva supporting the decision.

  For McMahon, the decision was one of the most notable of his time as treasurer. While it owed something to McEwen’s absence and Holt’s chairmanship of that cabinet meeting, the credit was largely his to claim. The argument had been conducted almost entirely on his turf. It was his line that carried the day. It was his department that triumphed over Trade. And it was a decision that was ultimately vindicated. ‘Politically, this was a major defeat for McEwen and a major win for McMahon,’ said John Stone later. ‘Economically, it was significant in breaking the relationship with sterling that had stood for decades, and beginning the long, drawn-out series of moves towards reorienting the dollar vis-a-vis other world currencies.’112

  The triumph and acclaim was short-lived, however. Five days later, another half-Senate election turned disastrous for the government. A 2.9 per cent swing away from the Coalition left it clearly in the minority in the Senate. The government claimed three of five vacancies in Western Australia and South Australia, but the DLP took a seat apiece in Victoria and Queensland, and the independent senator Reg Turnbull was re-elected in Tasmania. In the new chamber, the Coalition held twenty-eight seats to Labor’s twenty-seven, the DLP’s four, and the single independent’s. Overall, it seemed a rebuke to the prime minister and a spark for unrest.

  Members met in Sydney and in Melbourne to discuss the election and what it meant. Word of these meetings leaked. Spying Alan Reid at the top of the stairs in King’s Hall, Holt grabbed the journalist and asked what he knew. ‘Oh, I know a bit,’ said Reid. It w
as the wrong response. Holt wanted everything: ‘What do you know?’ he demanded. Reid told him the little that he did, but he neither possessed the details that Holt wanted nor was he willing to tell all that he knew. When Holt asked him to find out, Reid was noncommittal.113

  The unrest prompted others into action. Dudley Erwin, the government whip, had been talking to backbenchers in the House and Senate for some time, and he drafted a letter to Holt about the disquiet. He showed the draft to Gorton, who suggested amendments to make it ‘lower key’.114 Gorton thought that Holt was off his game, but also believed McMahon was making trouble for Holt. ‘He was being undermined all the time by McMahon, who was working around amongst members, trying to get rid of him,’ Gorton said.115 Some disagreed: ‘It would have been a waste of time and effort and done him [McMahon] no good at all,’ said David Solomon, later.116 Journalist Alan Ramsey believed that McMahon was not performing the vital role of deputy leader — to protect his leader’s back. Others suggested that Gorton was working against Holt. Years later, William Aston, the Speaker and Liberal member for Phillip, recalled Gorton telling him that he was working to become prime minister.117 Most, however, concurred with Gorton: ‘There was quite a clear emergence of a McMahon group who were obviously intriguing against Harold Holt,’ said Gordon Freeth.118 ‘I know that McMahon was actively working against him,’ said Sir James Plimsoll, head of the Department of External Affairs. ‘So much so that … he was spoken to very severely by somebody who told him that he was destabilising the government. And McMahon’s reaction was, “He had no right to tell me what I should do.”’119

  The meeting Plimsoll referred to was with the governor-general. Hearing that Holt’s attempts at reconciliation between McMahon and McEwen had failed, Casey renewed his July offer to intervene. This time, Holt accepted. Reasoning that McMahon was the most to blame for the dispute, Casey invited him to Admiralty House. They met on 8 December, and had a ‘long and hard talk’.120