Prime ministerial paralysis

Kevin Rudd’s inner circle expected him to begin the new year in 2010 by going on the offensive, announcing an early election to fight Tony Abbott for his carbon emissions scheme. Instead, he announced he’d written a children’s book.

The sense of anticlimax was acute as Rudd revealed he'd co-authored with actor Rhys Muldoon a book about the misadventures of the prime ministerial cat and dog, Jasper and Abby and the Great Australia Day Kerfuffle.

Nobody complained that he was writing a book with the proceeds to go to charity; but there was discomfort that he was not calling an election for immediately after Australia Day. That was what the government had planned. That was the kerfuffle the Labor leadership was hoping for.

Instead it was witnessing what it did not, at first, recognise: prime ministerial paralysis. They had no idea how serious it was about to become.

The first time Rudd and Gillard diverged in any serious way was over carbon pricing. Rudd knew he held the leadership at her pleasure. It was to be the first time Rudd encountered her displeasure.

Rudd's first mistake on the emissions trading scheme was that he didn't embrace victory when it was available. His minister for climate change, Penny Wong, advised him to "cuddle" Malcolm Turnbull as opposition leader to strike a bipartisan deal as quickly as possible in 2009.

Turnbull was in favour of an ETS. He was open to a deal and entered negotiations with the government.

But Rudd enjoyed publicly tormenting Turnbull instead of closing ranks with him. The Labor leader wanted to extract political advantage.

Turnbull was in an increasingly tough position, fighting a rearguard action against a rising clamour in his own party. Barnaby Joyce led a widening insurgency against his own leader.

Rudd told his staff to maximise Turnbull's pain: "I was going up into the press gallery daily and pushing hard [to reporters] any sign of dissent in the Libs," recalls one of Rudd's press secretaries at the time, Sean Kelly.

"Kevin prioritised politics over events. It meant we didn't get the ETS over the line."

When Tony Abbott abruptly seized the leadership on an anti-ETS platform, Rudd's best chance was lost. "It was a huge political mistake," says Kelly. The Liberals combined with the Greens in the Senate to block Rudd's ETS.

When Rudd later despaired and stalled his promised ETS, his poll support crunched. It was a fundamental breach of promise to the people.

Rudd has since explained publicly that he postponed the ETS because it was opposed by Gillard and Wayne Swan. These two between them accounted for half of the inner cabinet or Gang of Four that made all major decisions.

But Swan rejects this interpretation: "It was very poorly handled. He has subsequently claimed that Julia and I knocked it off. My advice to him was to fight the issue", after it was blocked in the Senate by the combined votes of the Abbott opposition and the Greens in 2009.

"But if he was going to fight it," Swan says, "it had to be in late January or early February" of 2010. "We should have actively considered going to a double dissolution election and done it. But he didn't make up his mind."

After returning from the UN climate change negotiations in Copenhagen at the end of 2009, Rudd had been dispirited by the failure of the world to reach a comprehensive binding agreement on cutting carbon emissions.

Blocked in the Senate at home, and finding himself without the momentum and vindication he'd expected abroad, Rudd hesitated.

One of his close allies of the time was Mark Arbib, who served as Rudd's political consigliere: "He came back from Copenhagen deflated," Arbib told colleagues. "He was a different man. He never got his mojo back."

Rudd called a critical meeting to decide the government's course of action on the ETS in the Commonwealth Parliamentary Offices in Phillip Street, Sydney, in December 2009. It included Gillard, Swan, Arbib and the general secretary of NSW Labor, Karl Bitar.

Bitar recommended that Rudd call an election as soon as possible after Australia Day. The meeting was unanimous. It was to be an early election, it was to be a double dissolution, and it was to be fought squarely on climate change, "the great moral, environmental and economic issue of our time", as Rudd had called it. Bitar left the meeting and went immediately to plan the campaign.

But Rudd returned from his Christmas break in a state of indecision. The early election option came and went.

"He had to burst out of the blocks in January," says Swan. The weeks and months went by and the future of the ETS was in limbo. After missing the election option, Gillard, Swan, Arbib and Bitar all turned against the ETS.

Rudd had campaigned at the 2007 election on his promise of an emissions trading scheme. It was hugely popular and it had helped Labor defeat John Howard.

But with Abbott campaigning aggressively against it, public support was starting to turn. Bitar produced Labor polling showing that it was becoming an electoral liability. Together with Labor's failing policy on boat people, Bitar was worried Labor would lose the election due that year.

At a series of meetings, this group urged Rudd to dump or delay it. Others, notably Wong and Lindsay Tanner, Rudd's finance minister and a member of the Gang of Four, advised Rudd to proceed with it as soon as possible.

Weeks turned to months. April arrived, the month before the federal budget was due. "What are we going to do?" Swan asks. "Include the ETS in the budget or not? Fight it or not? The problem was he couldn't make up his own mind. When the leak came, it was too late."

Lenore Taylor, then a reporter with the Herald, published a story that the Gang of Four had decided to defer the ETS for at least three years. Rudd had still not taken the ETS to his full Cabinet for a debate. The leak forced his hand. He lost the option of keeping alive a core election promise. "It was clear he wasn't ready to proceed," says Swan.

Rudd was making planned visits to hospitals when the story broke. He couldn't avoid the press. "We went to the hospital," says Kelly. "He was in a terrible mood. Alister Jordan [Rudd's chief of staff] was in the front seat writing the script for Kevin.

"I said to Kevin, 'It's really important that you own the decision.' He did the presser. It was a disaster." Rudd confirmed the postponement. It was the biggest mistake of his prime ministership. It was not only a broken promise. It was fundamental statement of political character. For the electorate, it was not only a sign of untrustworthiness but also of a vacuity of purpose. What did Rudd stand for if not for this?

His polling support fell steeply. Realising the depth of his error, he tried to return to the issue. He asked Wong, again and again, to come up with another policy. Wong told him that if he wanted to do something serious about carbon emissions, he had to put a price on carbon. "There is no other policy."

Had he lost what Gillard had called his "special connection"? The big question facing the government was how to overcome the slump in the polls.

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