Where the monarchy leads, will the Government dare to follow?

The Palace foresees a long game, but the Government is less cool about Scottish nationalism

THE UNITED Kingdom is on a constitutional and political magical mystery tour: the inevitable but underestimated consequence of devolution. The Prime Minister's unspoken fear has always been that the process he set in train will loosen the bonds that tie the UK together. Down the road at Buckingham Palace, the same concerns keep the lights burning late. The signs are that the Royal Family is coping rather better with the challenge than New Labour.

If it is imminent elections you want won, then New Labour's is the number to call. But the slick efficiency of its machine disguises a certain ricketiness when it comes to dealing with longer-term strategic problems. So depressing for the ambitious cast of officials at Millbank is the prospect of a posting to the party's Scottish HQ that prospective candidates for a northern transfer keep their excuses nervously burnished. For the Blairites, Kier Hardie House is the equivalent of a mosquito-infested colony they would rather not explore.

The monarchy, by contrast, has lost no time in seeking to ride the wave of devolution. It has channelled some of its brightest advisers to the task of predicting how Scotland will behave and what the consequences for The Firm will be. So it has been judiciously leaked that Princess Anne, the most marketable of the shop-soiled stock of first-rank royals, will make Holyrood House in Edinburgh her official home, and adopt the higher profile in Scotland. The ensuing tag, Anne Queen of Scots, would a few years ago have had palace courtiers fainting dead away. Now it is likely to be tolerated with a benign smile.

The expanded Scottish operation is the canniest attempt yet to ensure that devolution gives the monarchy what it needs most if it is to survive a general slump in faith - a revived role as the main symbolic expression of the unity of the Kingdom in a devolved and still devolving Britain; a permanence at the House of Change.

Under Queen Elizabeth's rule, its image had become that of an essentially English family, which takes its holidays in Scotland and has the tougher specimens of its children educated there. That is patently not good enough at a time when nationalist instincts are deepening.

Prince Charles's meeting last year with the SNP leader, Alex Salmond, was a recognition of that party's potential importance to the future of the monarchy. The Prince's advisers were anxious to emphasise that he was taking Scottish sensibilities seriously and intended to approach future constitutional reform in "a calm and open spirit".

That is a rather emollient way for a future monarch to approach a force whose ultimate aim is to turn a major part of the UK into a republic. For its part, the SNP is aware that the Royal Family remains the most widely accepted symbol of the UK, and that it will widen its appeal to the Scottish middle classes only by avoiding the kind of strident anti- monarchism exemplified by the late Willie Harrison.

If the Palace foresees a long tactical game in Scotland, the Government is far less cool about the prospect of Scottish nationalism. It is still feigning deafness to the potential of the SNP to emerge as the leading party - unlikely in the first elections for the new parliament in May, but perfectly thinkable in the election after that.

Even before the make-up of a parliament is decided this time round, the pace of argument is being set north of the border. This week, as Mr Blair prepares for his least favourite speech of the year, the address to the Scottish Labour Party conference, a popular left-wing candidate, John McAllion, has declared that Labour should drop its resistance to the principal of independence: "The Scottish Labour party exists not to defend the Union with England but to defend the interests of the Scottish people."

The Government's response to separatist voices is that the continued existence of the Union serves the people of Scotland best, and that divorce would lead to impoverishment and a narrowing of political and economic horizons. But the rising Labour generation there is not so sure. Douglas Alexander, anointed as Mr Blair's Scottish favourite before the last election, has privately warned London that bashing the nationalists will backfire on Labour and that the party needs to accept the inevitability of calls for greater autonomy and adapt its policies accordingly.

Nor are those with long careers ahead as blind as the Government appears to be to the impact on Scotland of British entry in EMU. Membership of the Euro zone and deeper integration would encourage Scotland to conduct more of its business through the EU than through Westminster. A single European currency is an invitation to Scotland to pursue independence from England. European institutions are far more encouraging towards federally structured countries than large, centralised states.

These uncertainties are compounded by a further strain between the directions of the English and Scottish Labour parties. New Labour's revisionist zeal never penetrated north of the border. Middle Scotland remains a very different place from middle England - less atomised, with higher expectations of the state's continued role in the provision of public services, and more suspicious of the market's advance.

Donald Dewar, Labour's prospective First Minister in Edinburgh, has sought to stem criticisms that the party is becoming too distant from the Scottish socialist tradition by adopting a more rousing egalitarian and redistributionist language than would be acceptable in England. A couple of years ago such variation would have been deemed "off message". Now, the variation is the message.

Even after Mr Dewar weeded out the more overt members of the awkward squad among the prospective candidates for the parliament, the list of public-sector workers, trade unionists and veterans of local town halls exudes a rich Old Labour patina. Looking at the Labour candidate list, you do wonder why Mr Blair went to such undignified lengths to stop Rhodri Morgan in Wales, when there are a lot more dogged lefties set for political stardom in Edinburgh.

Being in Scotland these days makes me aware of how slow we in England have been to understand that devolution as a process raises pressing questions about the status of what is left behind. Alex Salmond spoke last week of Britishness as an idea in decline - an identity without real substance. I hope he is not right.

We badly need to find a way to articulate a New Britishness in which the identities of England, Scotland, Wales and Northern Ireland exist securely and harmoniously within a single context. The Crown alone is not strong enough to hold us together. Devolution should concentrate all our minds on what we are, and what we wish to be. A vacuum is already being created which English nationalism will sooner or later expand to fill. We had better be ready for it.