Shell-shocked Labour supporters held back their anger, but Mr Blair's retreat from his commitment to a tax-raising parliament, in the face of a Tory onslaught over a "Tartan Tax", was seen as the biggest test he has faced since ditching Labour's Clause IV commitment on public ownership. Last night it appeared he was winning after securing the backing of Labour's Scottish National Executive Committee by 20 votes to 4 in favour of the referendum plan.
But opponents threatened to continue their campaign, claiming that the Labour leader had reneged on a declaration signed by the cross-party Constitutional Convention that sovereignty should be given to the Scottish people. The SNP and Liberal Democrats accused him of dumping that promise with a commitment in his Edinburgh speech that the devolution Bill will contain a clear statement "of the sovereignty of Parliament".
As Mr Blair was threatened with a growing revolt, Jim Wallace, the Liberal Democrat spokesman, said his assertion of Westminster parliamentary sovereignty over the Scottish people was "yet another attempt to reassure Tory Middle England".
The shifts of policy by Labour have been so great that the Tory Party leadership privately admitted last night it was having to change its own strategy for dealing with Mr Blair. It is dropping the claims that Labour has not changed and plans an offensive over allegations that Mr Blair has shown "weakness" by backing off. They claimed there would be more retreats by Mr Blair on the European Social Chapter and the European single currency. John Major said Mr Blair had "buckled at the first whiff of grapeshot. I think this is the first of many retreats."
Mr Major will discuss the Government's strategy for making the most of the uncertainty in the Labour ranks at a special political meeting of the Cabinet on Monday.
Tory leaders believe it could give the Conservatives the chance to reduce the gap with Labour and avoid slipping up in July on "banana skins" - including votes on the beef cull and armed forces' married quarters - before the Summer recess.
The centre-piece of Mr Major's fight-back against Mr Blair will be the Tories' charge that Labour is threatening to tear apart the union. That may begin to pick up votes for the Tories in the South, and it could be that threat which yesterday led Mr Blair to reassert the authority of Westminster.
Mr Blair insisted that a referendum on the tax issue would "nail forever" the Tory lie that Labour was imposing a Tartan Tax on the people of Scotland.
"I have done it because if we are not prepared to take those tough decisions in Opposition, we will never win the trust of the people," he said.
"Better to get the hard decisions taken now in Opposition and be open and honest with people about them than to go into government pretending that the world can be delivered without those tough decisions". The Labour leader, who was booed and heckled when he entered the hall at Edinburgh University, acknowledged he was taking a risk over a referendum on devolution for Wales and Scotland with a separate question for Scots voters on whether they want it to have tax-raising powers. But he said risks had to be taken.
Last night, the party's Scottish executive swung behind the leader, backing the referendum by 20 votes to 4. John McAllion, the Labour MP who resigned as Scottish constitutional affairs spokesman, said: "This change to the policy has been imposed on the party without consultation, without debate and without the opportunity to influence or to change that decision. It is not, therefore, Labour Party policy.
Mr Blair offered an olive branch to Mr McAllion, saying he could rejoin the front bench or become a minister in a Labour government. Mr McAllion said he would not desert Labour for the SNP.
John Prescott, the deputy leader, defended the plan for a referendum as a means of ensuring a future Tory government could not "unpick" the devolution legislation, which is to be introduced in the first 12 months of Labour taking office.
Alex Salmond, the SNP leader, accused the Labour leader of a "sell out", and Mr Wallace accused Mr Blair of tearing up the Convention declaration on the sovereign right of the Scottish people.
However, the Labour leadership is confident that it will retain the support of the parliamentary party for the Scottish devolution policy.Reuse content