How Scotland could end up with best of both worlds

I readily acknowledge that too few English celebrate the role that Scotland has played in the creation and construction of Britain, and thus in British institutions and values that are reproduced all over the world.

Whether parliamentary democracy, freedom of the press or even the expansion of Britain overseas, we fought for these together. We are one people, richly drawing from each other's traditions. The English got golf and whisky; the Scots rugby and gin. It is a cocktail others envy.

I was in Canada recently - first prime minister, a Scot. But you cannot avoid the Britishness of the place, despite the best efforts of French speaking but highly Britishised Quebec; for example, the Ottawa parliament is an exact replica of the British, down to the colour of the seating.

The English, the Welsh, the Scots: none could have done it by ourselves. But as Brits we did. It is long overdue that the English recognised this truth - but then so might more Scots.

There is one important difference, of course. Canada is a federation, and one of the interesting consequences opened up by yesterday's white paper is the possibility of a more federal Britain.

Its middle option, "Devolution-max", repatriating more fiscal powers to a strengthened Scottish Parliament, would in effect create a Scottish state within Britain rather like Alberta or Ontario within Canada.

Northern Ireland and Wales could hardly settle for less, and key English regions would soon demand similar status. Britain would become a more federal democracy.

The SNP has had buckets of bile poured over its head for its demand for independence. The notion that England or the British state is to blame for Scotland's problems is to carry victimhood to new levels of self-indulgent unreality - and it is wrong to diagnose political independence as an antidote to all ills.

Economic and social vitality are the complex result of a whole skein of interlocking institutions, values, and processes. To blame the 1707 Act of Union is unfair and intellectually mistaken.

Nor is it right to imagine that the EU and its once generous subsidies will ride to Scotland's rescue as they have done for other small west European states like Portugal and Ireland.

Enlargement has changed the rules of the EU game forever, reducing the growth in EU spending and focusing what is left on the poor countries of Eastern Europe.

The SNP is wrong to point to Brussels or dwindling oil reserves in the North Sea as sources of largesse that will insulate Scotland from the impact of independence.

Perhaps Alex Salmond, a much more subtle politician than his reputation belies, recognises some of this even as he invokes the old certainties of the virtues of sovereignty. He probably guesses that the federal option would be more acceptable to Scottish opinion - and to British opinion more widely. It also makes more economic sense.

Globalisation, with its implications for climate change or the financial markets, has to be managed by bigger units, not small. An independent Scotland would be a helpless, voiceless bystander incapable of shaping anything in an era of globalisation and at the complete mercy of forces outside its control; a 19th century response to 21st century dilemmas.

A Scotland as part of a more federal Britain could get the best of both worlds, as well as being the trigger to a more dynamic British democracy. The SNP would paradoxically have become a change agent for a better Britain - not the purpose for which it was founded, but once again a reason for the English to thank the Scots for being co-builders of this extraordinary country we call Britain.

• Will Hutton is chief executive of the Work Foundation and a columnist for the Observer.