Why a rise in poverty will humiliate Cameron

Osborne and Cameron will stand accused not only of being unfair but of being insincere.

"The right test for our policies is how they help the most disadvantaged in society, not the rich."

David Cameron, Built to Last, March 2006

The latest Institute for Fiscal Studies report, showing that the coalition's welfare cuts will hugely increase poverty, should set alarm bells ringing in Downing Street.

Cameron and George Osborne have chosen, against the judgement of several of their colleagues, to claim that their austerity package is a "progressive" one. Should poverty increase on their watch (as it is now certain, too), they will stand accused of being not only unfair, but insincere.

Without significant changes to its tax and spending plans, there is no prospect of the government meeting its child poverty targets. Indeed, it is likely to preside over the first increase in child poverty in 15 years. According to the IFS forecasts, absolute child poverty will increase by 200,000 in 2012/13 and by 300,000 in 2013/14. As a result, in the words of the IFS, "meeting the legally binding child poverty targets in 2020 would require the biggest fall in relative child poverty after 2013-14 since at least 1961".

In total, between 2010-2011 and 2013-2014, the coalition's plans will increase absolute poverty among all children and working-age adults by 900,000 and relative poverty (defined as households with less than 60 per cent of the median income) among the same group by 800,000. Were it not for a general decline in living standards, as earnings fail to keep up with inflation, the rise would be steeper still.

The coalition is now under increasing pressure to reject the internationally recognised definition of poverty (see here for a defence of it). Neil O'Brien of Policy Exchange, for instance, argues:

The problem with what the IFS is saying is that the measure they use isn't an indicator of real poverty; it's a measure of inequality. It defines "poverty" as being below 60 per cent of the average income.

This is a hangover from the Gordon Brown era. Real poverty isn't the same as inequality. The IFS's definition would mean that there are actually more people in poverty in Britain today than there are in Poland.

Many Conservatives would have preferred Cameron and Osborne to mount a Thatcherite defence of regressive economics from the start. But they have gone too far down the "progressive" path to turn back now. A rise in poverty will humiliate the coalition.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

Did John McCain just save Obamacare? What's next for the Affordable Care Act

To gasps in the Senate, McCain announced he was against the "skinny repeal" bill - and cast the deciding vote.

The last time John McCain, the maverick Republican senator from Arizona, had a chance to shift the course of history, it was 2008 and he was running for President against Barack Obama. 

This time, McCain interrupted his treatment for brain cancer to come back to Washington to vote on the Republican attempt to repeal Obama's biggest domestic legacy - the Affordable Care Act, aka Obamacare.

President Donald Trump, who ran on a platform of scrapping Obamacare, seemed convinced McCain's vote was in the bag. He also managed to convince wide sections of the left-wing twitterati, who put aside qualms about attacking an ailing octogenarian. 

But it was McCain who had the last word. To gasps in the Senate, McCain announced he was voting against the "skinny repeal" bill - the deciding vote which sank the bill by 51 votes to 49. 

McCain ended the day with a plea for a return to bipartisan politics, from both the Democrats and Republicans. He said: "We must now return to the correct way of legislating and send the bill back to committee, hold hearings, receive input from both sides of aisle, heed the recommendations of nation's governors, and produce a bill that finally delivers affordable health care for the American people. We must do the hard work our citizens expect of us and deserve."

So while McCain may have proved himself his own man, what next for Obamacare? Here's what you need to know:

What were the Republicans trying to do?

The Republicans spent years in opposition vilifying Obamacare, but here's the problem - even for those Republicans who hate every inch of the Affordable Care Act, replacing it is a huge operation. Now they truly do have the power to take healthcare away from poor and sick voters, some are having doubts. 

So the bill to repeal it was "skinny" - it would have repealed the obligation for employers to offer workers healthcare, and the obligation for individuals to take out health insurance, or pay a penalty in higher taxes. It would have also given states more flexibility to create their own healthcare systems. 

The problem is, the Affordable Care Act isn't just about legislation, but about playing the rules of the insurance game. In an insurance market, your insurance can only be cheap if the chance of the insurer paying out is low. In other words, for Obamacare to work smoothly, you need young and health people signed up to it rather than just a self-selected group of the sick. Remove the obligation to take out health insurance, and the second scenario looks much more likely. 

So what will they do next?

After the vote, the stunned Senate Majority Leader Mitch McConnell said: "It's time to move on." However, Trump tweeted the more cryptic: "Let ObamaCare implode, then deal."

For all Trump's bluster, this might be the end of the Republican Party's Grand Plan to Destroy Obamacare. Whether it means Obama's legacy is safe, though, is another matter.

The Affordable Care Act might have become a temple of the left, but there are problems with it. For example, insurers have been dropping out, and middle-income Americans are facing an increase in premiums at an average of 25 per cent in 2017. 

If the Republicans truly want to run Obama's legacy into the ground, they can just sit back and refuse to consider any improvements to the system - a la Trump's strategy.

On the other hand, McCain has called for more bipartisanship. If moderate Republicans and Democrats were willing to listen to him, they might be able to produce a wonkish bill that addresses some of the real concerns of middle America while preserving the principle of affordable care.

But based on the Trump administration's progress so far, this kind of co-operation looks unlikely. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.