“We have a good idea of what would have happened after March 2016’s indy day… a ‘classic currency crisis’ with cash in the economy drying up… on the ground that could have meant public sector workers not getting paid… And that’s why an indy Scotland would not have been in a position to bail out its economy in the way the UK has this year” – LibDem John Ferry, Twitter, June 12, 2020


SCOTLAND already has one of the most sophisticated financial systems in the world, operated by over 160,000 professionals. It is perfectly positioned on independence to create its own effective monetary machinery. Even under devolution, the Scottish Government runs a budget surplus. Rather than the dither we have seen from Boris, an independent Scotland would have been in a better place to deal with Covid-19 – economically as well as medically.


JOHN Ferry is a rising star of the Scottish LibDems and stood for the party in the December 2019 General Election in Dumfriesshire, Clydesdale and Tweeddale, coming a tardy fourth with 7.2% of the vote at his second try. He is a former oil analyst with the Wood Mackenzie consultancy before working for Risk Magazine, “the undisputed leader in risk management and derivatives intelligence”, between 2001 and 2010. Derivatives were the complicated financial products that caused the 2008 financial crash which means Ferry has a lot to answer for. Currently he runs Greyfriar Communications, providing PR for companies gambling in so-called exchange-traded funds. His main client is a subsidiary of Deutsche Bank. The latter has been subject to repeated fines for money laundering, corrupt hiring practices and rate fixing.


ON June 12, 2020, Ferry published a lengthy, 18-part thread on Twitter weaponising the Covid-19 crisis by claiming that if Scotland had voted Yes to independence in 2014, it would today be unable to cope with the medical emergency. He paints a lurid picture of a currency collapse similar to a South American state, a flight of currency abroad, and ensuing public sector and NHS bankruptcy.

He concludes: “… An indy Scotland would not have been in a position to bail out its economy in the way the UK has this year. We’d still be reeling from the 2016/17 self-inflicted economic crisis brought on by indy.” Ferry bases his apocalyptic scenario on the following premise: “Scotland removing itself from the UK, which would entail full monetary and fiscal autonomy kicking in overnight … It’s never been attempted in the modern era …”

But no-one ever proposed that a Yes vote meant Scotland “crashing out” of the UK with no monetary arrangements in place. Between the September 2014 referendum and the notional March 24, 2016 independence day would have been an 18-month negotiation period. This would have allowed a realistic time for creating new monetary and fiscal institutions.

Ferry seems to forget that Scotland has a sophisticated financial architecture on which to draw, including banks, insurance companies, investment houses, corporate lawyers and fintech. The industry employs some 160,000 people and accounts for 13% of all UK banking employment and 24% of UK employment in areas like insurance. An independent Scotland’s monetary authorities would be staffed with industry professionals with deep roots in and personal connections to the UK and global financial system. As it is, the SNP Government has found no difficulties in creating a new Scottish National Investment Bank this year or staffing it with respected industry professionals.


FERRY points out that the priority demand of the SNP Government in 2014 was to maintain a currency union with rUK, including retaining a joint Bank of England structure to provide lender of last resort facilities. During the referendum debate such an arrangement was rejected by the UK Government.

It is perfectly feasible that in the aftermath of a Yes vote that the UK Government might have changed its mind. This is because Scotland, through its whisky and energy exports, is a major contributor to the UK balance of payments. The UK runs a massive current account deficit (meaning it needs foreign currency to pay for imports). Without Scottish dollar earning, the UK current account deficit would widen, putting downward pressure on the value of the pound, and pushing up interest rates. In which case, Ferry’s apocalyptic vision disappears.

What if the rUK government refused a currency union? A newly independent Scotland would have had to choose between “sterlingisation” (i.e. keeping the pound anyway) or creating a separate Scottish currency.

If the former, the Scottish Government would borrow by issuing bonds denominated in sterling. The cost of Scottish Government borrowing would be linked to sterling interest rates which are near zero. The cost of borrowing for most small industrial states in Europe is actually lower than for the UK Government because their total liabilities are much smaller than for the British state (now nearing £2 trillion).

Ferry makes moderate sense when he argues that sterlingisation might limit Scotland’s ability to deal with a crisis on the scale of Covid-19 because the state would not have been able to print money. Even here, Ferry is deliberately misleading. The obvious form of sterlingisation would be for the Scottish monetary authorities to issue a local currency (Scottish pounds) backed one-for-one by sterling, with the Scottish central bank holding all sterling reserves. Ireland operated such a system for decades. Under such an arrangement, in the event of an existential crisis, the appropriate action would be to break the sterling anchor and simply print more Scottish pounds.

If the Scottish Government had decided to create its own currency, it would have had as much as four years to put in place prior to the Covid-19 crisis (i.e. 2016 to 2020). By comparison, the three, post-Soviet Baltic states each took three years to create new currencies from scratch and they lacked any of the monetary and banking machinery possessed by Scotland or any professional staff who knew how to run a modern, market economy.


FERRY now repeats an old and inaccurate proposition: “We know for a fact that the new state would have started with a budget deficit of at least £13.3 billion, or 8.3% of GDP for 2016/17.” But we know for a fact that the devolved Scottish Government has a budget surplus, not a deficit. The £13.3bn deficit quoted by Ferry comes from the so-called GERS calculation which applies a share of the Westminster Tory Government deficit to Scotland, following independence.

This calculation is wrong on two counts. First, it is inconceivable that an SNP Government post-independence would have the same spending, taxation and borrowing priorities of the Conservative Government (e.g. the Trident replacement). Second, the actual post-independence liabilities of the Scottish Government would have been determined as a result of the indy negotiations themselves. These negotiations would have seen Scotland acquire its share of UK assets as well as any liabilities – something which Mr Ferry conveniently ignores. Those assets would guarantee Scottish solvency.

There is also the question of Scotland’s liability for any share of the UK accumulated National Debt. During the referendum, Alex Salmond extracted an admission from the Treasury that the National Debt was in fact the responsibility of the UK: “In the event of Scottish independence from the United Kingdom (UK), the continuing UK Government would in all circumstances honour the contractual terms of the debt issued by the UK Government” (Treasury, January 13, 2014).

Had the Conservative Government refused to transfer Scotland’s share of national assets, or if it had tried to jeopardise Scotland’s monetary security, there was the distinct possibility that Salmond would have retaliated by legally repudiating the UK debt. That would have left an independent Scotland debt-free. Ferry speculates that an independent Scotland would have found it difficult to borrow “at an affordable price”. On the contrary, a debtless Scotland would have been in an enviable position when it came to raising funds.


JOHN Ferry’s fantastical arguments about Scottish independence leading instantly to a monetary crisis assume a totally inconceivable set of circumstances: specifically, that no work whatsoever was done to prepare the financial structures required of a modern economy. This is hardly credible.