When I was in my Saturday-night-on-the-town phase, I used to run about with a guy who had earlier in his life been in biker gangs and was very familiar with street fighting. We were standing outside a pub ands there were two guys getting angry at each other.
"It’s going to kick off" I said. "No it’s not" he replied. "How come you say that?" I asked. He told me to look at them and ask myself if they looked like they meant it. I stopped, looked, and realised what he meant. They were shouting at each other but constantly finding ways to get dragged back by their pals without actually doing anything.
They were giving the illusion of being about to fight but, once you paid a bit of attention, you realised they were going out of their way to avoid actually being punched. "At least they’re not fighting" I said. "So why don’t they just walk away and stop embarrassing themselves?" my pal replied.
What on earth has this got to do with the Scottish Government issuing bonds then? Well I was off doing DIY last week when the news broke but, among the sawdust, I had an immediate question – since you’re stuck with a hard borrowing cap you negotiated badly, what advantage is there in the bond issue? It seemed unlikely to me to be cheaper than the current model of funding borrowing.
It was therefore good to see Laurie McFarlane’s take-down of this in The National, because it meant I’d not gone daft. As an bond issuer with no sovereign currency and no track record it would be hard to get brilliant borrowing rates anyway. But since even the best bond rates at the moment are more expensive than the intergovernmental method of lending usually used, why change?
Honestly, I don’t completely know the answer to this. The first and simplest answer is that this is technically a hangover from the Humza Yousaf era where the strategy was to announce nine risky policy ideas before breakfast each morning. But since the defining feature of the Swinney era is that no idea is risk-free enough to attempt, and since he’s disappeared any other policy with a whiff of risk to it, why is this continuing?
There are a few possible answers. The technical one I guess many in the SNP loyalist camp will be raising is that this will build up a bond market track record. Except this is ill considered if it is the reason. At the moment bond markets are being used by political leaders to discipline their own members into accepting substandard policy-making on an ‘it’s all the bond markets will allow’ basis.
But this is many layers of unwise. First, bond markets are much more like petulant children than wise elders. They chase around after the instincts of whichever person is making the decision at any given moment. To be clear, spending on welfare creates more economic gain than spending on weapons, but the former is punished by bond markets in ways the latter is not.
Bond rates are a combination of vibes and investor political activism
In any case, if you look at bond yields and credit rating you’ll find a very hazy relationship. In case that sounds like gibberish to you, credit ratings are supposed to tell people how credit worthy you are while bond yield is about much an actual lender will make you pay to borrow, and they most certainly don’t track.
The UK has the worst bond yield in the G7 – and yet France has way more political turmoil and Japan is much more in debt. Bond rates are a combination of vibes and investor political activism. For some reason lenders feel better about France and are happier with its pension-cutting policies, but worse about the comparatively more stable UK and its more modest cuts to welfare.
On top of that, Scotland gaining a track record as a borrow in one context (as part of the UK) and in another (as an independent country) may not be judged the same way. The analogy might be a 25-year-old getting a mortgage with a parent acting as a guarantor or a 25-year-old getting a mortgage all by themselves – they’re different calculations. Remember, we’re borrowing in Sterling.
Building up a limited track record with bond markets may not make any difference to what happens later. And in any case I’m on record as saying run from bond markets almost as fast as you run from US IT monopolies, and that is ‘as fast as you can’. So I can’t see that as good policy.
So is it good politics? That’s the other interpretation. That this is about ‘sending a message’ or ‘boosting Scotland’s standing’ or ‘living as if we are living in the early days of a better Scotland’ – or whatever. Is this the Scottish Government ‘acting up’ and ‘pushing at the boundaries of devolution’?
Alternatively, is this grandstanding for an internal audience? The entirety of the current SNP election strategy is to motivate independence supporters to turn out; no more, no less. They are also trying to placate an increasingly sceptical party membership.
Of the two (political boldness or cynical campaign messaging), I find the latter more convincing. Why? Because unless I’ve missed it, for John Swinney courage is something that happens after independence, not before. You can survey all his works and you won’t find evidence of Swinney acting up. Cautious management yes, risk-taking? Not so much.
Swinney’s entire survival is based on enough of a result at the election to look like he is unmoveable. He’s not going to get his majority and he doesn’t think he’s going to get a majority. It’s about persuading enough people this is an ‘independence election’. So I don’t know whether it is a party audience or a voter audience he has his eyes on, but it is one of them.
This feels like that fight outside that pub – whatever it is, I don’t believe they mean it
Either way, here is the fundamental problem; Common Weal called for a programme of ‘pushing the limits of devolution’ from referendum time onwards. We primarily meant ‘use the powers you have to their fullest degree’ rather than ‘pick set-piece fights with Westminster’ which has rapidly diminishing returns.
Unfortunately, while Sturgeon used the rhetoric of pushing the boundaries and exhausting options, that wasn’t the reality. Ten years later and very, very little has change in Scottish public policy. Everything is running much as it was in 2014.
And it is this which takes me back to the street fighting analogy. I genuinely don’t know if Swinney and his advisers think this is a clever long-term move to build a relationship with bond markets, or if they think this is the time to step up a more distinctive Scottish governing style which challenges the limits of devolution, or whether this is a con job to fool either the electorate or his party into believing something is happening.
But it feels like that fight outside that pub – whatever it is, I don’t believe they mean it. Comedians can’t give medical advice like accountants don’t run night clubs like weightlifters don’t break 100m sprint records. When you choose to be one thing, you can just be the other thing when it suits you.
I don’t think bond markets think this is bold or brave or all that serious. I can’t believe Swinney is suddenly a bold risk-taker. I don’t think the public will believe Swinney is suddenly a bold risk-taker and I no longer know what those left in the SNP think day by day but I don’t think it’s ‘this is the pugilistic Swinney we always knew was in there’.
Everything about this bond policy feels misjudged to me – monetarily, strategically, politically, policy analysis-wise. It isn’t that this policy or this stance couldn’t be made to work. It’s that I don’t think it can be made to work by these actors in the context they have created for themselves.
What my friend taught me about fighting was simple. Try hard not to, walk away every time you can, but if you really have no option, mean it. I am unconvinced they really mean this. So why do it?