People often ask me:

why do the Yes Campaign appear so confident when they are miles behind in the opinion polls? Don't they know they're going to lose? It is a remarkable phenomenon in many ways, since pollsters like Professor John Curtice and the US psephologist Nate Silver have been writing off their chances of winning for most of the last year.

One reason for a lack of panic is the Yes Campaign believe they have conducted the most honest, positive and intellectually reputable campaign. Even if they lose, they think they have won. There are some grounds for believing this.

Last week, there was confirmation of what many suspected: that George Osborne's "declaration on the pound" in February has backfired. Nearly half of Scots, according to a poll, did not believe him when he said last month that "If Scotland walks away from the UK it walks away from the pound". That included members of his own cabinet, according to reports suggesting Scots would get to keep the pound in exchange for a deal on Trident.

This has thrown the Better Together campaign, which was based on the pound scare, into chaos. It has caused huge problems for Labour and the Liberal Democrats who of course enthusiastically backed the Chancellor's declaration of monetary exclusion and are now left high and dry. And where does it leave all those Scottish and UK businesses who responded to the Chancellor's cue last month like BP, Standard Life and RBS who said they would quit Scotland because of the uncertainty over the pound?

The reason for the currency U-turn is pretty clear: during Fear February, support for independence rose marginally. Scots had economic fire and brimstone hurled at them, but they didn't fall quaking to their knees. The politics of fear can only work so long as people are prepared to be afraid.

This is being recognised at least by the LibDems, the shattered remnants of which have been meeting this weekend in Aberdeen. Their ex-leader, Charles Kennedy, has condemned the negativity of the No campaign, and even their current leader Nick Clegg has called for a more "thrilling" unionist campaign - though thrilling and Nick Clegg don't sit well in the same sentence.

Regrettably, the Liberal Democrat leader then undid the good work by trying to equate Alex Salmond with Nigel Farage of Ukip - calling them "breast beating nationalists". No-one who knows anything about Scotland could possibly confuse Ukip with a social democratic, pro-Europe party that campaigns for open borders and increased immigration and is called the SNP. Oh, and which voted against the benefits cap last week Nick Clegg supports.

This is the kind of thing that has led key figures like the ex- Libdem chief executive, Andy Myles and Denis Sullivan, the former treasurer, to announce they are going to vote Yes. These guys have been pillars of the party in Scotland for over thirty years, commanding great respect across all the Scottish parties because of their work in the Scottish Constitutional Convention in the 1980s. But they can't see any possibility of change under the present Westminster regime And the coalition with the Tories has left the Scottish Libdems having to support - at least tacitly - policies like the benefits cap.

The Liberal Democrats used to be guardians of the soul of civic Scotland: PR, home rule, Europe, human rights, gay marriage. They were responsible for many of the early achievements of the Scottish parliament, like free personal care, reform of local government, even the abolition of university fees.

But now locked into the Westminster system since 2010, they have had to capitulate to the logic of the London political elite. They are in many ways a metaphor for what has happened to Scotland. The Westminster connection has ensnared the Scottish parties into a political culture which is alien to Scotland's social democratic soul. Tax cuts for the wealthy, the bedroom tax for the poor. Hostility to Europe, stigmatisation of welfare, opposition to immigration. These are not the issues that decide how people vote in Scotland.

Ironically, the LibDems policy on the constitution is the one most Scots would almost certainly vote for, if they had the chance. They want Britain to become a federal country, with a formal declaration of sovereignty entrenching Scotland as an autonomous state within the UK. Under the scheme devised by their former leader, Sir Menzies Campbell, the Scottish Parliament would be given all income tax powers, plus corporation tax, capital gains tax inheritance taxes - amounting to 60% of the revenue raised in Scotland. This goes beyond anything the Scottish Labour leader, Johann Lamont, has proposed and unlike her taxes that go up but not down, makes sense.

The Liberal Democrats envisage a similar arrangement to that in federal countries like Canada and Australia. The state of Quebec in Canada arguably has as much autonomy as that envisaged by the Scottish government in the 2013 Independence White Paper. That may sound extraordinary, but remember that under the SNP's plan for monetary union the UK Bank of England would set interest rates and borrowing in Scotland. Quebec has all tax powers that matter and has pioneered the child care policy which became the centrepiece of the Scottish Government's independence White Paper.

Federalism could answer most of the fears and uncertainties about independence. The Scottish Parliament becomes a sovereign state within a reformed UK that is no longer dominated by London. The only problem with it is it is never going to happen. Westminster has shown little interest in federalism, and hasn't even taken the opportunity presented by reform of the House of Lords to create a regionally-elected senate to reflect devolution. Westminster seems incapable of grasping the need for reform to rebalance the UK.

Federalism in one country is not possible, but it is possible for Scotland to become functionally independent within the United Kingdom-- which is essentially what the Yes Campaign is arguing for.

This is not separatism but a new UK, with an independent Scotland participating and co-operating in a new confederal relationship with the other nations in it. The Queen as head of state, as in Canada, a currency union, a welfare union, a defence union in Nato, an energy union, a pensions union, a broadcasting union. Sometimes it looks as if the Yes campaign is more unionist than Better Together.

The nationalists seem positive in face of polling adversity as they feel the tide of history is moving their way, and they are the only people who are offering something that could work. They dismiss Nick Clegg's slander that they are narrow nationalists wanting to set up "barriers to cooperation between nations". It is George Osborne who is trying to erect a financial Hadrian's wall to stop Scotland using the pound - a currency to which Scotland has as much right as England. What could be more divisive?

True internationalism is only possible with national self-determination. The unionists seem to hark back to a lost age in which nations were self-sufficient and sovereign within their borders - like Europe before the EU, or like Britain under Ukip - bristling with trade barriers and national armies. Scottish nationalists are after something different: the political freedom to create a more fair and just society and reject the class-based politics of the London City State. Call it independence in the UK, call it federalism, it comes to much the same thing: democratic self-government.