Leaders: Fiscal questions dog the debate | Better connected

THE Better Together campaign in Scotland’s ­independence referendum can have no complaints about the flak it is taking this weekend following the news that Britain has lost its AAA credit rating.

One of the campaign’s key messages in support of keeping the UK united is financial security – in fact, a Better Together leaflet published last year deployed an argument that the AAA rating helped keep Scots’ mortgage rates low, suggesting the same might not be true in an independent Scotland that found itself at the mercy of the credit ratings agencies. Alongside this considerable problem is the continuing headache for the No campaign that it finds itself defending a British state that happens to be run by a Tory-led government few Scots feel an affinity for, to say the very least.

The political difficulties these factors impose on Better ­Together cannot be underestimated. Look beneath the headline exchanges, however, and a more complex picture appears. The SNP may argue for a Plan McB under independence that would allow Scots to take a different approach to the one ­being doggedly adhered to by George Osborne at the Treasury. But the price an independent Scotland would pay for keeping the pound would be to agree to a framework of fiscal curbs set by the Bank of England. The lesson of the euro crisis is that monetary union requires a high degree of fiscal standardisation across a currency zone, and this would be just as true for the pound as it is for the euro. While an independent Scotland would have a degree of discretion, it would not be able to stray too far from strictures determined by Threadneedle Street. The additional problem for the Yes camp is that it cannot say with any degree of certainty that the credit rating of an independent Scotland would be any better, or even as good as the UK’s – especially in the key period between Scotland winning its freedom and the markets deciding whether it liked the cut of this fledgling state’s jib. The markets like stability, and a country whose financial standing was disproportionately based on oil revenues – which are notoriously volatile – would be another potential reason for bond market hesitation. Hard to believe that in such a key interim period the markets would cheerfully give Scotland the benefit of the doubt.

Most political battles are a tussle for the centre ground. The centre ground in this campaign wants a more powerful Holyrood, but is not wholly convinced about full statehood. The SNP has already moved substantially away from the trappings of full nationhood in a 19th-century sense, agreeing that the head of state, military alliances and currency would remain much the same as they are now. The No campaign has yet to show its hand on what it will offer this middle group, but it seems likely to include greater fiscal freedom on top of the limited borrowing and income tax levers already heading to Scotland under the recent changes to the Scotland Act. In economic terms, it is not hard to envisage the financial levers on offer to a stronger Holyrood within the UK being not terribly different to the financial levers available to an independent Scotland within the strictures of retaining the pound.

Before such a choice is available to Scots voters, however, the anti-independence parties have to formulate their offer. That currently looks like a long and drawn-out process. And until they get their act together, Scots will continue to choose sides according to the options actually on the table.

Better connected

WHEN politicians talk about infrastructure they usually mean big ticket items such as roads, bridges, schools and hospitals – the usually expensive projects that glue society together. Over the next few years, millions of pounds will be spent on providing a Forth Replacement Crossing and millions more will head out of government coffers into making our roads safer and better and providing the schools and hospitals our children and patients deserve. They are usually vote winners for the party in ­power and, despite the crunch on government and local authority budgets, are likely to happen.

Unseen, however, is another kind of infrastructure; digital pathways which, through the wonder of the internet, bind communities together. That’s why, as we report today, a new regional internet hub proposed for Scotland deserves support, not just because it will help end the frustration of trying to download films, videos and music from a seemingly lethargic digital network. Crucially, the hub will provide better, faster connections for Scottish businesses operating across the globe in an increasingly competitive marketplace. Such hubs have had a dramatic effect on business connectivity in Ireland. When Linx, the company involved, meets Internet Service Providers in Edinburgh next month to discuss a hub for Scotland, the Scottish government should be there to take a stake in Scotland’s digital future.