Mark Irvine, head of Scottish local government for Unison, said Labour had "lost its moral centre" while trade unions had become little more than a handy milch cow. His protest was a welcome relief to the SNP, the party under most pressure.
Labour and Unison tried to play down the resignation. MP Douglas Alexander, a key campaign strategist, said Mr Irvine's decision was a matter for him and had no bearing on the union or the party.
Labour is under attack in Scotland for its reliance on Tory-inspired private finance initiatives to build schools and hospitals. Next week trade union leaders will call for an end to private funding, which they argue stores up high pay-back costs for the future. Mr Irvine says union concerns were ignored. Mr Alexander said: "If people choose to make one of the issues of this election Labour's commitment to deliver 100 new school developments and eight new hospital developments, then that is territory on which we are happy to fight."
Labour's attempts to show how Scotland benefits from higher per capita spending than England were undermined by a report suggesting the gap is narrowing. Spending rises in Scotland are being squeezed much tighter north of the border, says Professor Brian Ashcroft, head of Strathclyde University's respected Fraser of Allander Institute. He says the pounds 4bn Labour earmarked for Scottish education, health and other services translates into an average real budget increase of 1.8 per cent a year up to 2001- 02. Comparable real term growth in spending in the rest of the UK would be 4.4 per cent a year.
Scotland is feeling the "Barnett squeeze", the effect of changes in the so-called Barnett formula determining Scotland's share of UK public spending. But there is still a big gap in Scotland's favour.
Andrew Wilson, of SNP, said the report was a devastating blow to Labour's campaign. During Labour's first three years, spending in Scotland was pounds 1bn less than in the last three years of the Tories, he said. "These figures show there is no public spending argument in favour of the union."
Wendy Alexander, tipped as finance minister in the first home-rule government, said: "Scotland benefits from 20 per cent higher spending on health, 26 per cent on higher education and 39 per cent on trade and industry. That is part of the argument Labour is advancing that we are stronger together, weaker apart."