Prime Minister John Howard is in a difficult position over National Textiles. His brother, Stan, is chairman of the board of directors of the company. Mr Howard explained this week that his brother had briefed him about the company’s difficulties more than a year ago. Stan Howard said that the company might apply for government assistance. The Prime Minister had then contacted the responsible minister and, quite properly, declared his interest and said the matter should be treated on its merits. No assistance was given. So there is no issue on that score.
However, the company has since gone into administration and the Prime Minister was told about that by his brother very shortly beforehand. When the company went into administration it owed its employees several million dollars in leave and other entitlements. That immediately became a political issue. There has been concern over the past several years about the fate of workers’ entitlements when businesses fail. The arguments have split on party lines with Labor supporting the workers and the Coalition on the side of employers. True, Labor in government did nothing to change the law to give workers better protection, but there were no spectacular crashes in its term of office, such as the collapse of the Woodlawn mining company which left 160 workers owed $6.5 million in 1998 and put the Government on notice that something ought to be done.
The Workplace Relations Minister, Peter Reith, proposed a scheme whereby the workers will get compensation capped at $20,000 provided by the Federal and state governments equally. This week Cabinet postponed a decision on that, but it went on to work out what to do about National Textiles.
Since National Textiles went into administration, the administrator made it very clear that the 342 workers would not get several millions of dollars of their entitlements. What should the Government do, bearing in mind it has done nothing for the Woodlawn workers and nothing for workers in several other failed companies like Braybrook and Consolidated Apparel, similarly in trouble because of globalisation? Well, Cabinet decided that the workers at National Textiles should get their full entitlements through a “”special case” arrangement involving a payment by the Commonwealth of $4 million. So the company that Mr Howard’s brother is chairman of is a special case. Surely, Mr Howard should have excused himself from the Cabinet discussion on both National Textiles and on any general scheme, because both affect his brother.
At present, National Textiles is in administration, not liquidation. The administrator has proposed a deed of arrangement with all creditors, including the workers. If that works out, there will be no formal liquidation involving a search of where assets might have gone over the past six months, including things like directors’ fees and the appropriateness of increasing directors’ fees and the question of why the company continued trading for as long as it did. The Prime Minister has encouraged the arrangement. He has made the Commonwealth’s $4 million conditional up on it, which is a great enticement for all creditors, including the workers, to accept the arrangement. That in turn will leave Stan Howard out of the liquidator’s firing line.
Either Mr Howard did not think through his actions, or it looks like he has bailed out his brother.