Banking crisis: are we in 2008 again?

The US Federal Reserve.
Picture: By AgnosticPreachersKid – Own work, CC BY-SA 3.0,

The more people pop up to say that the situation in financial markets is not like 2008, when the Great Financial Crisis got going, the more we will worry. But while a crisis like that of 2008-10 looks unlikely, a prolonged period of wealth-destruction is in prospect.

The current bout of nerves comes from the collapse of two mid-sized American banks, and from a globally big one: Credit Suisse. Technically Credit Suisse hasn’t gone bust – it was taken over by Swiss rival UBS. But shareholders were bought out very cheaply, and some bondholders were wiped out in a move that has raised a lot of eyebrows. This follows a period of tightening monetary policy, responding to a period of inflation – after a prolonged boom based on very low interest rates. There are many parallels here with 2008. But the differences are striking too.

It’s worth taking a deep breath, stepping back, and trying to get a broad view of what is happening. At issue is the financial system – the world of money, rather than the “real” world of things and services – though there is quite an element of the real directly tied up in finance, which is a substantial employer in many economies. Money is a means to an end, and not an end in itself – in principle anyway. Because of this, economists, especially the macro sort, tend to ignore it, or treat it in a very cursory way with very basic models for money supply. And yet money is essential to the modern way of life; we can do little without it. If the financial system seizes up, disaster strikes. The episode that looms most over economists is the Great Depression of the 1930s, when some little local difficulties within the financial system were allowed to explode, causing mass unemployment. In a depression, lots of people want to work, but can’t; and lots of people want to buy goods and services that employ people, and can’t either. It is a colossal social waste – and one that in the 1930s fed into racism, fascism and ultimately war and genocide. The financial system matters.

At the centre of the financial system are banks. In the days of Henry VIII the monetary system was controlled completely by the state, which had a monopoly on minting coins – and the state has always played a central role in the financial system. But these days money means bank accounts – the role of notes and coins is negligible. Because of their critical role, banks are heavily regulated, with a central bank, accountable to the state, playing a keystone role. Banks provide access to money, but what do they do with it? They can just park the money with the central bank, but they will make no profits that way. So they find various ways of lending it out – further, they may create money through their lending. They make loans directly to members of the public and businesses and to governments, sometimes on a short-term basis, sometimes for terms of many years. This creates a source of instability – if the the public withdraw their deposits, the banks may not be able to liquidate their loans fast enough to give them their money back. But this “maturity transformation” is generally profitable, and it is at the heart of a healthy economy, which allows resources owned by people that have too much to be used by those that have too little.

So far, so good. This is as far as classical economists got. Interest rates are set by a process of supply and demand between lenders and borrowers, spiced up by credit risk. More modern economists then added in a role for government/central bank intervention – monetary policy. By one means or another the government could tighten or loosen monetary conditions, mainly through setting interest rates, or through “quantitative easing” (QE) – the creation of money by the central bank buying bonds through its reserves. In many accounts monetary policy brings back the idea that the government/central bank controls money like Henry VIII and the Royal Mint. The process of QE is often referred to as “printing money”. This conjures up a happy picture of a world of governments, consumers and businesses buying things with banknotes, with banks making loans to cover investments in houses or industrial machinery, or to smooth ordinary cashflow fluctuations of businesses and the public. It is at least easy to visualise this world, but, alas, too many people who should know better seem to get stuck in it.

The trouble is that we don’t use banknotes any more. And banks lend to a range of financial intermediaries rather than to “real” people and businesses; businesses and governments don’t borrow directly from banks but via these intermediaries, often through tradable instruments – “securities”. This creates the modern financial system, and instead of being a simple machine for the transmission of funds from “real” lenders to “real” borrowers it becomes a merry-go-round of speculation fuelled by the chance to make money from trading securities. Money becomes an end in itself, rather than mere lubricant. One spectacular example of this are fans of cryptocurrencies such as Bitcoin, touted as alternatives to “fiat money” created by central banks. They meet scepticism with the rejoinder “Have fun staying poor”. The point for them is to make money as intermediaries, not facilitate financial transactions. The money merry-go-round becomes a complex frenzy when monetary conditions are loose – when banks have more deposits than they know what to do with, either because there is a lack of serious lending opportunities, or because of “liquidity risk” – the risk that depositors will suddenly withdraw their deposits. At this point banks seek out opportunities for short-term speculations based on securities or short-term loans to financial intermediaries.

This was the situation in the run-up to 2008. Monetary conditions had been very loose. The narrative on why this was so varies. Many of a libertarian bent blame irresponsible monetary policy by the developed world central banks trying to fight deflation while asset prices were in a bubble. This was through low interest rates – only in Japan was there serious QE. Others point to the entry of China into the world trading and financial system with its huge excess saving. It brought in vast quantities of funds from its exports, and only used a proportion of these to buy imports, depositing a surplus of money in developed country financial markets. An oil price spike added to this with oil producers generating a similar financial surplus. Banks then had the headache (though mostly they thought of it as an opportunity rather than a problem) of where to put this surplus money and how to make a profit. Quite a lot of money went into sub-prime lending in the US property market. German banks, and others, happily lent money to the Greek government, which had entered the Euro and was fiddling its financial statistics. There was a frenzy of securitisation as banks sought to evade their regulatory straitjackets. It was like picking up pennies from in front of a steamroller. One thing I find striking from reading up my observations at the time was how much “risk management” featured in the jargon of bank professionals. They gave the impression that they had sophisticated risk models which meant that the massive profits they were making were simply the result of increased global productivity from the more efficient use of resources. There are still commentators that look back at the statistics of the mid-noughties and ask why productivity growth has slowed since then – insert pet theory here. It was a work of fiction – the trend in lost productivity growth in the developed world goes way back to way before the financial crash. Massive amounts were being lent off bank balance sheets supposedly to long-term investors like insurance companies. In fact the money was going round in circles amongst thinly capitalised intermediaries which often came back to haunt the banks themselves.

It couldn’t go on forever. Central banks increasingly felt they had to do something about loose financial conditions, especially as that oil price spike was causing headline inflation. In early 2007 the US sub-prime market started to show strain. Then in August 2007 the financial system broke when the interbank market – banks lending to each other to manage daily fluctuations – froze over. The complexity of financial securities meant that nobody knew who owed what to whom. I wrote this in September:

The ship has hit a reef below the waterline.  There isn’t much visible sign at first; the ship slows down; it has a slight list, perhaps.  But the crew looks worried even as the captain voices reassuring words to the passengers.  Will the watertight compartments limit the damage until the ship makes it to port for repairs?

The ship limped on for more than a year, as market professionals and commentators went through the process of denial and then attempted to negotiate with their fate. And then the collapse of Lehman Brothers in October 2008 created a free fall. If governments had not indulged in massive bailouts of the system, the 1930s might have been repeated with institutions essential to our way of life going down. Alas that meant many undeserving people made out like bandits. The crisis kept going for two or more years, with the drama moving to the Eurozone in 2009.

So how do things compare in 2023? We are similarly in a period of monetary tightening following period of very loose policy, this time featuring the heavy use of QE in every major developed country market. Things were loose before the Covid pandemic struck in 2020, but this stayed the hands of central bankers, and unleashed a flood of fiscal intervention by the government to offset the effects of lockdowns as well as the direct impact of the disease. And then Russia started a war with Ukraine which completely disrupted the markets for oil and natural gas, forcing yet more fiscal interventions. This loose policy similarly unleashed a riot of financial speculation. But it is different this time. Banks are better regulated, though regulation of mid-sized banks in the US is still too light. There seems to be a lot less off-balance sheet lending. Paradoxically it is good thing that banks don’t tout sophisticated risk management these days – in 2007 this was justification of excessive risk. But inflation is much higher, and nominal interest rates have gone up much more, with big losses on government (and other) bonds that was not evident in 2007-08. This played a critical role in the demise of Silicon Valley Bank. Others presumably have similar exposures. There may be no substantial sub-prime market in the US, but many are worried about US commercial property lending.

And then there is the madness of cryptocurrency. I have not written much on this craze of the last few years. It is such deep, multi-layered nonsense that I couldn’t bring myself to take it seriously enough to write about it. The problem is that more respectable institutions started to take the phenomenon seriously and lent money to facilitate speculation. One of the biggest blots against current British prime minister and former Chancellor Rishi Sunak is that he wanted to make Britain a crypto hub. This is going predictably badly – an idea billed as an escape from the the tyranny of fiat money turns out to be even more dependant on fiat than fiat money itself. I understand that it contributed to both US bank collapses.

But the biggest difference between now and 2008 is that in 2023 we are in the shadow of the Great Financial Crisis, which remains in recent memory to those in charge. This is evident in the extraordinary level of intervention by the US Federal Reserve, in effect guaranteeing all bank deposits, even those outside the scope of deposit insurance. This has prevented such spectacular events as the freezing of the interbank market which led to my holed below the waterline image. A more apt image is the one conjured up by FT columnist Megan Greene: Schrödinger’s cat. We don’t know whether the system is stable or not – so it is both at once.

The striking thing is that with each crisis in the financial system the power of the central banks seems to grow. At the start of the 20th century the Americans didn’t even think they needed a central bank. Now the west seems to be converging with communist China in the use of both formal and informal state power. But power does not necessarily mean control, and the Federal Reserve especially is confronted with a series of very difficult choices. Inflation remains rampant but the banking system is fragile.

As I reflect on this the more it seems to me that the modern banking system is not fit for purpose. Steadily essential parts of the system are being nationalised. We are slowly moving to a system whereby deposits are in effect placed with the central bank – something which is happening rather rapidly in the US as the Federal Reserve gives support to money market funds. How, then, do banks fund loans? This is a role that central banks are ill-equipped to perform and should not be nationalised beyond a few specialist agencies. I guess they will need to provide longer term investment products – but the transition is bound to create casualties – and destabilise the banking system.

For now though we must expect this period of wealth-destruction to continue. Bank deposits may be safe, but inflation is eating their value away, as the prospect of positive real interests diminishes. Bond markets are undermined by the cessation and reversal of QE. Share markets need a growing economy. A weakened financial system will undermine property prices. And yet unemployment is low, minimum wages are in place and there are strong social safety nets. It is, surely, the wealthy that are being squeezed. That is not a bad thing.

Guest post: AUKUS – more than just submarines

US Virginia class nuclear submarine.
Picture: By U.S. Navy photo by General Dynamics Electric Boat – This image was released by the United States Navy with the ID 040730-N-1234E-002 (next).

By Cllr Noel Hadjimichael

More than 100 years ago, Liberals were often the party challenging military spending, security and defence of the realm. We took Britain into the First World War in defence of an invaded Belgium and served in the 1940s Churchill Government. We got defence and voters knew it.

In the Cold War, we were champions of pluralism, liberty, decolonisation and western values. This was in opposition to USSR state centralism so loved by many current day dictators. We were, and remain, realists: radical but responsible.

This week’s announcement on a tripartite (Australian, American and British) submarine deal is not the subject of this blog. However, the framework, context and geopolitics behind the announcement is. Progressives, social democrats and liberals should take notice. 

What has made three of the Five Eyes [also including Canada and New Zealand] turn so purposefully and publicly in this direction? The answer: defence science, capacity building, capital investment and operational structures. Realigned, tweaked and reinforced for today’s threats.

It is more than just the behaviour of Russia, China or Iran. It is a breakdown of the liberal world order that has positioned Britain poorly in this post Brexit era. There is a new global security setting that was unleashed by the pandemic: rogue states undermining democracy, leading to peer to peer warfare. 

Neither the Conservatives nor Labour have a monopoly on patriotism. Serving personnel and their families (as well as veterans) are a sizeable demographic in many constituencies. Not just the South West shires, Norfolk, the Midlands or natural cities like Portsmouth. In every region of the United Kingdom, there is an increase in voter concern about our security (food, logistics, technology or military). 

The war in Ukraine has heightened our focus. But so has the poisoning in Salisbury and the cyber attacks on our critical infrastructure. 

The AUKUS framework is a long term and strategic pressure point to revisit our defence stance. We should ask ourselves: how do we protect our people, communities and institutions? 

We don’t do borders well. Just ask the Government about its frustrating failures on Ireland or the Channel. 

We don’t have the luxury of being the dominant global leader. But we still rank highly in critical capabilities: soft power, science and technology. 

Our people are universally respected for professionalism, training and creativity. They deserve our resolve to get the politics correct.

Our new aircraft carriers have effective and demonstrable reach to the western hemisphere, the Straits of Hormuz, the Asia Pacific and beyond. Our airpower is critical to NATO and the European friends and allies many of us yearn to be closer to. Our Army is still seen as having the punch needed in the field. It has also offered Ukraine best in class training. We count. We matter in this space.

Understanding the new challenges and being the adults in the room come naturally to LibDems. We think, talk and debate. 

We also often come down on the side of evidence, experts and the engaged voter. 

Conference at York this weekend will deal with the nuclear deterrent. A sensible and suitable proposal. Those serving deserve our thanks and gratitude for their commitment. We as active party members must also play our part. We should reassure millions of LibDem voters that we understand the current global landscape.

As it is. Not as we may want it to be. 

AUKUS is part of that landscape, as is an effective and continuous at sea deterrent. 

Question it, challenge it but don’t ignore it. It is the same with our Conference. A liberal Britain is worth defending.

More on this can be found on

Noel is Chair of the Defence & Security Circe of the National Liberal Club London. He is also a Liberal Democrat councillor on the London Borough of Kingston-upon-Thames

Weak leadership gets the BBC into trouble

Nadine Dorries – who gave an astonishing interview on World at One

The BBC is one of my main sources of news, but it often annoys me. Recently I wrote that the choice for mainstream media is either partisan and useless (like Fox News) or impartial and dumbed-down – like the BBC. But now it seems that pressure from Conservative politicians is making the institution erratic, and editorial management weak.

The narrative amongst British conservatives has for some time that the BBC is part of a liberal elite, which also includes the civil service, that constantly undermines conservative policies, which represent the will of most people. This narrative became politically dominant after the Brexit referendum, and seemingly unassailable with the landslide victory for Boris Johnson’s Conservatives in December 2019. Pressure on the BBC mounted, as the government sought to influence senior appointments and news coverage. The outcome has not been more rightwing bias, though, so much as weak editorial leadership.

This was illustrated recently by the news that the Labour leader, Sir Keir Starmer, was in the process of recruiting the senior civil servant Sue Gray to be his chief of staff. This was a pretty unremarkable episode of itself. Unlike most British politicians, Sir Keir is not a lifelong career politician – he had a substantial career as a lawyer in government service – a “securicrat” I have seen it called. It is easy to spot an affinity with another career securicrat like Ms Gray, though she is not a lawyer – they had known each other professionally for some time, apparently. The move shows that he is serious about the business of becoming prime minister. It also shows that senior civil servants, among others, think that he has a serious chance of doing just that. Senior civil servants have taken up this role before, for both Labour’s Tony Blair (Jonathan Powell) and the Conservative David Cameron (Jeremy Heywood, though he had a more overt relationship with the Conservatives). Nevertheless many Conservatives were incandescent at the news. This is doubtless because it is an intimation of their own political mortality – after such a dramatic fall from their seeming invincibility after the 2019 election. They suggested that it threatened the impartiality of the civil service – though their usual complaint is that the civil service isn’t biased enough. Their argument isn’t really sustainable, but it is at least arguable. That cannot be said for the line attempted by some supporters of Mr Johnson, who suggested that the report on parties at 10 Downing Street during lockdown prepared by Ms Gray was part of a malign conspiracy that caused Mr Johnson’s resignation. This is so wrong-headed, on so many levels, that it hardly needs refuting. Suffice it to point out that Ms Gary’s report was much delayed and pulled its punches, allowing the former prime minister to escape until his next series of blunders.

So there was a political kerfuffle, and clearly the BBC had to report it. But I was astonished when immediately following the news on Radio 4’s World at One, the BBC aired a long and unchallenging interview with Nadine Dorries, a former minister under Mr Johnson, in which she aired the conspiracy theory, and several clear untruths about the affair. Even the BBC admitted that the interview “in hindsight” should have been a bit more challenging – though the whole thing was so mad and implausible, challenge was hardly required. It was a display of astonishingly bad editorial judgement, which can only be explained by the sort of hidden political machinations that so often lie behind the BBC’s news agenda (which, to be fair, don’t just benefit one party or faction). What was even more astonishing was that in the flagship Ten O’Clock News on BBC television that evening the whole story barely rated half a throwaway sentence from one the political correspondents. If it was top story at 1pm, surely it counted for something at 10pm?

Alas this sort of muddle is becoming typical. But the BBC then became engulfed in a much more serious episode. The government last week launched a policy on what it calls “small boats”, headlined “Stop The Boats”, which, among other things, is designed to cancel asylum claims from refugees crossing the English Channel in dinghies. This policy deserves a post all of its own – though I’m a bit more sympathetic to the government than most other liberals. This generated the political controversy it was designed to. During the general shouting BBC sports presenter Gary Lineker tweeted his outrage at the policy, and compared the language used to justify it to 1930s Germany. There is a debate to be had, if anybody is interested, as to how far this claim is justified. The Holocaust came in the 1940s: Mr Lineker was talking about the propaganda that preceded it, building up the conditions that allowed it to happen. Still, the government has never encouraged violence against refugees. Actually, as the FT’s Stephen Bush points out, the government’s approach can be more fairly compared to 1930s Britain, who ignored the plight of refugees from Nazi Germany, on the grounds that it was somebody else’s problem (as did almost every other country in the world). The usual suspects complained that this was an outrageous act for a BBC personality, and undermined the institution’s impartiality. They’d had Mr Lineker’s card marked for some time as a member of the sinister liberal elite.

The BBC Director General responded by withdrawing Mr Lineker from his presentation of Match of the Day the following weekend. He had breached BBC guidelines – or as it guidance? Normally BBC guidelines allow freelance sports presenters to express political opinions – anything else would be an outrageous infringement. But they had been modified to impose extra standards on big stars. This undoubtedly applied to Mr Lineker, the BBC’s best-paid presenter (best-paid anything, I think). In fact I suspect this policy was adopted with Mr Lineker in mind after an earlier round of complaints. This turned a minor media skirmish into a major news story – as Mr Lineker’s colleagues pulled out of the BBC’s weekend sports coverage. They couldn’t even give us the main football scores on the evening TV news. It wasn’t hard for critics of the BBC to point out inconsistencies in the way the BBC applied its guidance (the political presenter Andrew Neil was an oft-quoted example). More to the point, the episode had clearly touched a raw nerve amongst BBC journalists, doubtless including many who disagreed with Mr Lineker’s expressed view.

I haven’t seen any public polling on the issue. Many people have been cheering Mr Lineker on. Many more feel that a sports presenter should be allowed to express political views. Conservatives often make pleas for freedom of speech for “politically incorrect” views – and it’s hard even for them to understand why this should be an exception. Opposition parties have piled in criticising the BBC management – though they mostly draw a connection with a row over the apparently politically connected appointment of BBC Chairman, an entirely separate episode. The top priority for Conservatives seems to be to re-energise their more conservative supporters, who are in a funk; they seem less bothered by trying to win back more liberal former supporters. If that is so they shouldn’t be too worried by the political fall-out. Still, liberal supporters aren’t just a tiny elite, and if can’t be good for the government to keep crossing the street to slap them in the face.

But for the BBC, the episode shows what happens if you keep giving in to political pressure. You don’t just get fairly harmless nonsenses like the Nadine Dorries interview: you ultimately lose credibility.

Productivity, growth and wellbeing – the awkward triangle

Two recent developments have tickled this cynical old veteran of office work. There was a successful trial of a four day working week. And there is general excitement at the latest thing in Artificial Intelligence – ChatGPT (generative AI, apparently). Both seem to point to improved productivity. But if that’s true it doesn’t follow that economic growth will result.

To my cynical mind office work can be divided into two broad categories: problem-solving and bullshit. The latter seems to take up most of people’s time: talking about solving problems rather than actually solving them. In any office-based environment remarkably few people in organisation actually seem to be productive problem-solvers. The others supervise, communicate, convene meetings, make calls, write presentations, set deadlines, monitor project plans, strategise and so on. Doubtless a lot of the activity I am describing as bullshit contains an element of necessary work, but it often doesn’t feel that way.

So it’s no surprise that some businesses have found that they can reduce office hours without impacting adversely on output when implementing a four-day week. The saving seems to have been in the region of four hours in a five-day week – four eight-hour days making up for five seven-hour ones, for example, though that’s a saving of three hours. ChatGPT, meanwhile, automates the production of bullshit. It manufactures a lot of plausible but unreliable verbiage that you would be unwise to stake much on. Since producing such verbiage is what so many people spend such a lot of effort doing, it’s not hard to see why people are getting so excited. Both ideas offer ways of spending less time doing pointless things. So productivity should improve.

But, of course, it is much harder to see how either invention increases the production of useful things. The idea of a four-day week isn’t to give people the time for side-hustles. The idea is that people get more time for unpaid domestic things (“leisure” is probably an mis-description of this). The study reported high levels of improved wellbeing among employees – which was seen as the main benefit. As for ChatGPT, it’s not meant to solve tough problems or make hard professional calls – the things you most want service providers to do for you – or provide the warmth of human company, though doubtless some people hope that it will help robots to do that job, it sounds a poor substitute.

Doubtless I exaggerate. But there is a more substantial point here. A lot of improvements made to workplace efficiency – improved productivity in economic speak – won’t have much impact on the sort of economic growth you can measure in money and tax – the holy grail for economists and politicians. But that doesn’t mean that people won’t be better off. Wellbeing and per capita economic income or consumption are quite different things. Some people have been saying this for quite a while – Professor Richard Layard for one, and he still is. I met him when I was part of a Liberal Democrat policy working group looking at the issue more than a decade ago. Lord Layard’s big idea is to use self-reported wellbeing as a measure of progress. I am more sceptical – I don’t think the measure is robust enough to do heavy lifting, though it is interesting nevertheless. Still I wish politicians would take up the mantra of improving wellbeing a lot more. The Lib Dem policy paper I co-authored was adopted as official policy and then forgotten. But people are voting with their feet. If growth is slowing because people are opting out of the money economy and improving their health and wellbeing, then that’s to be celebrated. Economists rarely consider this possibility, though. And Conservatives who advocate cutting taxes don’t suggest this so that people can afford to work for fewer hours – though this could be the result. Indeed they think it will increase GDP rather than reduce it.

In my youth I remember a story of some western development experts and going to an African rope factory. They gave them a machine that improved output per poker ten-fold. A year later they returned and were surprised to find the factory empty. “Why aren’t people working,” they asked. “Well, we finish the production in an hour, and then everybody can go home,” was the replay. Doubtless the original story was play on African stereotypes, but even at the time, we weren’t clear the the joke was supposed to be on.

The goal of advancing wellbeing while economic growth remains lacklustre is a perfectly feasible one. Improvements to workplace organisation and continued automation have their part to play. But public services and infrastructure can be better directed towards this goal too. And political reform to reduce the feelings of powerlessness will also help. This remains a long way off – but eventually public pressure will force it. If the four-day working week starts to take hold, it will be a major step forward.

Nicola Sturgeon: a very British politician

Picture: Scottish Government, CC BY 2.0, via Wikimedia Commons

I was going to title this blog “A very British failure”; this follows a lot of the political commentary here in England on the Scottish First Minister, after she announced her resignation. She has been one of the most successful British politicians of this century so far, and she is leaving on her own terms. She has taken the Scottish National Party from its defeat in the independence referendum in 2014 to complete political domination north of the border. Her communication skills have won her plaudits across the whole country, especially during the Covid-19 pandemic, putting to shame occupants of 10 Downing Street. This can hardly be called failure.

And yet. There are two clouds on Nicola Sturgeon’s reputation. The first is that she has not succeeded in winning a second referendum on independence, let alone victory at that referendum. The British government has refused, and there does not seem seem to be majority demand for it in Scotland either. And the problem is a bit deeper than that, so far as independence is concerned – there is no clear majority for the move. Younger voters are in favour, though, so this may just be a matter of patience. The second cloud is that she and her party have made no progress on improving public services north of the border. For people (like me) who advocate decentralising public services, Scottish (and indeed Welsh) devolution provide no support. During the pandemic Ms Sturgeon may have been an excellent communicator, but the outcome, including the death rate, was no better than England’s. The Scottish NHS is beset by the same long waiting lists and overstretch as England’s; Glasgow has one of the worst drug problems in the developed world; Scotland’s school standards trail England’s.

It can be no surprise that Ms Sturgeon’s record on delivery is a weak one: she is a pure, careerist politician. She was active with the SNP from a young age; she did train and qualify as a solicitor, but by 29 she was a full-time member of the Scottish Parliament. In this career path she is little different from most other British politicians. And the situation appears to be getting no better. Those vying to succeed her are of the same ilk. With little flair for actually running things, such politicians gravitate to what they are good at: politicking and communicating. For Ms Sturgeon that meant elevating the issue of independence to be of all-consuming importance – though without properly addressing the practical questions that arose from it. In England the issue of EU membership has been similarly elevated, as a distraction from administrative competence, or as a way of undermining those in power. Culture wars play a similar role in America. In Scotland, the government has also placed a lot of energy into changing the law on transgender issues, partly at the insistence of their Green allies. This is the sort of “values” issue that professional politicians favour – though there are administrative issues there too, but these tend not be well dealt with.

In Scotland, the SNP has devoted much energy to consolidating its hold on political power by, for example, disempowering local government. Meanwhile it has not taken on the vested interests in public services as vigorously as it should. They did push through a major reform of policing (to centralise it); this did have some merit, but it did not go well, or not at first. I find the lack of progress in education standards the most shocking, though, perhaps because I know about what this entails. It isn’t rocket science: what is required is rigorous accountability down to school level, measuring the progress of every child. The techniques are well-established, and huge progress has been made in England, though some areas have made more progress than others. But this is unpopular with teaching unions, and the Scottish government seems to have been unwilling to take them on.

The SNP, of course, has a ready excuse for its poor track record: it’s the fault of the union with Britain. But this is unconvincing. It is hard to see how an independent Scotland would have access to more money for public services, especially now that North Sea oil and gas is in decline, and politically tainted because of climate change. If the Scottish government wants to show some of the administrative flair of its nordic neighbours, such as Norway, Sweden or Denmark, why doesn’t it try and get started now, rather than waiting for independence to arrive? Wouldn’t that make the case more convincingly?

And yet we can’t be too hard on her or the SNP, because all Britain’s political parties are like this. Scotland is mired in a very British set of problems. And yet breaking away from the United Kingdom offers no escape from the country’s essential Britishness.