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Mr Howard and Mr Costello / Pic: John Feder
Secret deal ... neither Mr Howard nor Mr Costello will comment.

JOHN Howard has again been forced to deny striking a deal to hand control of his Government to Peter Costello after revelations of a secret meeting between the pair 12 years ago.

Reports the Prime Minister talked of handing over to the Treasurer during a December 1994 meeting with Mr Costello yesterday prompted some of Mr Howard's closest allies to question whether he can put off declaring his future intentions until Christmas.

The explosive details of the meeting, revealed in News Limited newspapers yesterday, were confirmed by former Liberal minister Ian McLachlan, who was at the meeting between Mr Howard and Mr Costello.

For 12 years, the Adelaide-based former head of the National Farmers Federation has carried a business card-sized piece of paper in his wallet with notes from the meeting, which came before the Coalition won power in the 1996 election.

Mr McLachlan's notes refer to an "undertaking" reportedly given by Mr Howard to hand over the leadership to Mr Costello after two terms. This would have seen a transition after the 2001 election, but Mr Howard has continued as Liberal leader - with the strong backing of a majority of his colleagues.

Mr Howard last night again dismissed talk of a leadership deal. His spokesman said: "The Prime Minister had nothing to add to earlier statements that no deal had been entered into by him and Mr Costello regarding a transition of the leadership of the Liberal Party."

Mr McLachlan defended releasing details of the 1994 meeting. "After 10 years it was reasonable; 11½ years actually ... it was reasonable that the truth was known by those that wish to know it," he told the Nine Network.

Mr Costello's supporters are demanding Mr Howard come clean on the issue and announce whether he will fight Kim Beazley at the next election, due next year.

"Leaving it to December or January is going to have a degree of difficulty now," one senior Liberal figure said.

One of Mr Costello's strongest backers was more blunt: "He needs to declare it sooner rather than later."

But the view is not universal across the Liberal Party. "I don't believe Howard is under any pressure," one of his ministerial colleagues said.

Mr Costello's supporters argue the Treasurer should take over before the end of the year, giving him almost a year to build his profile.

"There is no shadow of a doubt that Costello's loyalty as deputy has been a fundamental part of our electoral success," Liberal MP Steven Ciobo said. "Peter's standing as deputy leader has certainly been further enhanced by this so-called revelation."

But another Costello supporter, Education Minister Julie Bishop, was careful not to play favourites.

"I don't think it's useful for me to speculate on what might or might not have been said 12 years ago before we were in government," she told the Ten Network's Meet the Press.

Both Mr Howard and his deputy will attend a cabinet meeting tomorrow, before Mr Costello is scheduled to fly to Africa.

The leadership issue flared again last week when Mr Costello refused to rule out whether he had made a Kirribilli-style deal with Mr Howard, similar to Bob Hawke's aborted pact with his Labor colleague Paul Keating.

Mr Howard was less circumspect, ruling out any deal with his deputy over leadership transition.

Mr McLachlan was the only witness to the meeting between the two Liberal MPs, held in Parliament House on December 5, 1994.

The alleged deal was struck amid manoeuvring by Liberal MPs to replace then Opposition leader Alexander Downer. Mr Downer, now Foreign Minister, stood down in January 1995. He was replaced by Mr Howard, who led the Coalition to a famous victory over Mr Keating a little over a year later.

Despite four successive election victories, Mr Howard is again under pressure to announce whether he will contest the 2007 election.

The leadership tussle is a bonus for Labor, which is campaigning hard on industrial relations and has had a bounce in support in the most recent Newspoll.

Mr Beazley yesterday reiterated his call for Mr Howard to remain as leader.

"What he owes the Australian public is a firm statement, today, that he will lead the Liberal Party into the next election," he said. "What's been left out of this grubby deal is midland Australia.

"I'm the one who's fighting the battle for middle Australia while they engage in a catfight with each other.

"(I believe that Mr) Howard should not cut and run like a coward from the next election but that he should state now that he intends to fight it and fight it on the changes to industrial relations which he did not push at all during the last election campaign."

Mr Howard has maintained that he will step down only when he believes it is in the best interests of the nation and the Liberal Party.

But late last week, a confidant of Mr Howard, his former chief-of-staff Grahame Morris, predicted Mr Howard would decide his future in the lead-up to Christmas.

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