Credit rating agencies still not very good at rating credit

The University of Cambridge is apparently a safer investment than the UK.

More ratings-agency craziness. Cambridge University is entering the bond market for the first time, and Moody's has rated its debt as safer than Britain's. The Financial Times' Michael Stothard and Chris Cook report (£):

Britain’s richest and second-oldest university issued a 40-year, £350m bond, taking advantage of low yields to fund a new laboratory for stem-cell research and accommodation for postgraduates.

The bond, priced at 60 points over gilts, was well received. Last week, the university was awarded a triple A rating by Moody’s. The agency said the rating reflected Cambridge’s “outstanding market position, significant amount of liquid assets and strong governance structure”.

Yet more evidence that ratings agencies "quite simply don't understand what they themselves are saying", in the word of NIESR's Jonathan Portes. As Matt Yglesias writes, there is no possible situation in which Cambridge bonds, denominated in British pounds could be safer than UK sovereign debt:

When the UK government borrows money, it borrows pounds sterling. The UK government also has the capacity to create infinite quantities of pounds sterling instantaneously. Therefore, the UK government can never be forced by economic circumstances into defaulting on its debt obligations. At worst it could be forced into inflationary policies that erode the value of its pound-denominated debt. If you're an investor, that's a real thing to worry about when buying British debt. But any such inflation would equally impact any pound-denominated debt no matter what the circumstances of the issuer. University of Cambridge debt can't be safer than UK sovereign debt in inflation terms.

The bizarre decisions made by the ratings agencies have always been there – back in 2002, for instance, Moody's downgraded Japan below Botswana – but finally, awareness is starting to become more widespread. If that awareness can penetrate the world of finance, then the end of their influence may be nearer than it looks.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Why Clive Lewis was furious when a Trident pledge went missing from his speech

The shadow defence secretary is carving out his own line on security. 

Clive Lewis’s first conference speech as shadow defence secretary has been overshadowed by a row over a last-minute change to his speech, when a section saying that he “would not seek to change” Labour’s policy on renewing Trident submarines disappeared.

Lewis took the stage expecting to make the announcement and was only notified of the change via a post-it note, having reportedly signed it of with the leader’s office in advance. 

Lewis was, I’m told, “fucking furious”, and according to Kevin Schofield over at PoliticsHome, is said to have “punched a wall” in anger at the change. The finger of blame is being pointed at Jeremy Corbyn’s press chief, Seumas Milne.

What’s going on? The important political context is the finely-balanced struggle for power on Labour’s ruling national executive committee, which has tilted away from Corbyn after conference passed a resolution to give the leaders of the Welsh and Scottish parties the right to appoint a representative each to the body. (Corbyn, as leader, has the right to appoint three.)  

One of Corbyn’s more resolvable headaches on the NEC is the GMB, who are increasingly willing to challenge  the Labour leader, and who represent many of the people employed making the submarines themselves. An added source of tension in all this is that the GMB and Unite compete with one another for members in the nuclear industry, and that being seen to be the louder defender of their workers’ interests has proved a good recruiting agent for the GMB in recent years. 

Strike a deal with the GMB over Trident, and it could make passing wider changes to the party rulebook through party conference significantly easier. (Not least because the GMB also accounts for a large chunk of the trade union delegates on the conference floor.) 

So what happened? My understanding is that Milne was not freelancing but acting on clear instruction. Although Team Corbyn are well aware a nuclear deal could ease the path for the wider project, they also know that trying to get Corbyn to strike a pose he doesn’t agree with is a self-defeating task. 

“Jeremy’s biggest strength,” a senior ally of his told me, “is that you absolutely cannot get him to say something he doesn’t believe, and without that, he wouldn’t be leader. But it can make it harder for him to be the leader.”

Corbyn is also of the generation – as are John McDonnell and Diane Abbott – for whom going soft on Trident was symptomatic of Neil Kinnock’s rightward turn. Going easy on this issue was always going be nothing doing. 

There are three big winners in all this. The first, of course, are Corbyn’s internal opponents, who will continue to feel the benefits of the GMB’s support. The second is Iain McNicol, formerly of the GMB. While he enjoys the protection of the GMB, there simply isn’t a majority on the NEC to be found to get rid of him. Corbyn’s inner circle have been increasingly certain they cannot remove McNicol and will insead have to go around him, but this confirms it.

But the third big winner is Lewis. In his praise for NATO – dubbing it a “socialist” organisation, a reference to the fact the Attlee government were its co-creators – and in his rebuffed attempt to park the nuclear issue, he is making himeslf the natural home for those in Labour who agree with Corbyn on the economics but fear that on security issues he is dead on arrival with the electorate.  That position probably accounts for at least 40 per cent of the party membership and around 100 MPs. 

If tomorrow’s Labour party belongs to a figure who has remained in the trenches with Corbyn – which, in my view, is why Emily Thornberry remains worth a bet too – then Clive Lewis has done his chances after 2020 no small amount of good. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.