The history books will record that one of the first acts by the Labour government in 1997 was to deliver devolution to Scotland through the establishment of a Scottish Parliament. They may also be required to note that this marked the beginning of the end for Labour as a party of government in the United Kingdom.

That is the true significance of what is going on at present, of which the Glasgow East by-election was a symptom. The large Commons majorities since 1997 disguise the fact that it is normally difficult for Labour to win in Britain without substantial representation from Scotland; so losing that base would have far-reaching implications.

In part, Labour's Scottish malaise is in line with what is happening elsewhere. Few seats could be held in current circumstances, whether in Glasgow, London or Birmingham. But the complexities of Scottish politics make the prospects for recovery even more uncertain, since it is not a Tory tide that has to be turned but the altogether slippier doctrine of Nationalism.

At present, Labour members in Scotland are electing a new leader of their diminished Holyrood representation. The three candidates are worthy but scarcely inspirational. Whoever wins will lead an opposition party which has, over the past year, shown few signs of recovery or indeed of how to lay a glove on the incumbent First Minister, Alex Salmond of the SNP.

Anyone who has been away for a while is bound to ask the question: "How on earth did Labour get itself into this mess in Scotland?". To which the honest reply is that the wounds are almost entirely self-inflicted and flow mainly from the obsession with constitutional reform. Whether devolution was good for Scotland is a matter for debate. But a decade on, it is indisputably a disaster for the Labour Party – a parochial consideration which its architects brushed aside.

The masterplan was for there to be permanent Labour-LibDem coalition at Holyrood. This cosy strategy reflected the warm personal relationships between Labour and LibDem grandees of the time – Donald Dewar and Gordon Brown, Jim Wallace and Menzies Campbell. A Byzantine electoral system was created which would ensure that the Nationalists would remain in the minority.

This grand strategy took just eight years to unravel. Shackled by coalition, Labour failed to brand its considerable achievements with a political stamp. Last year, the SNP emerged with one more seat than Labour and promptly formed a minority government without seeing any need for coalition. And quite right too. With an annual cheque for £30bn to play politics with, who needs a majority? They have proved competent populists while never missing an opportunity to drive wedges between Scotland and the rest of the UK.

For anyone who cared to examine precedents, for instance in Quebec and Catalonia, the SNP's success is predictable. Voters tend to support Nationalist parties in order to extract most from the centre. It does not mean they want independence and that subject tends to go on the back-burner. But it is always there as a threat. On that basis, the SNP could be running Scotland for quite a while and, particularly if there was an unpopular Tory government at Westminster, just might see a promising opportunity to go for a referendum.

Increasingly, Scottish voters will not distinguish between Holyrood and Westminster elections and therein lies the threat to Labour's UK prospects. Unless their leader at Holyrood makes a more favourable impact than his or her predecessor, it will be Labour's contingent at Westminster that will be next hit at a general election.

Given that devolution is now irreversible, what sensible measures could be taken to improve Labour's Scottish fortunes? Much will depend on the new Holyrood leader who must have fresh ideas and be able to articulate them with clarity, but also match Salmond blow for blow on setpiece occasions. That leader should have freedom of manoeuvre to develop priorities tailored to Scotland's needs. It is ironic that devolution's strongest proponents in Whitehall are also the most reluctant to devolve power within Labour itself.

I also believe that downgrading the Secretary of State for Scotland to spare-time status was a foolish error which should be reversed. The present title-holder, Des Browne, is too busy fighting wars to argue Labour's case in Scotland. Yet two-thirds of public expenditure in Scotland still comes from Whitehall .

For good measure, Labour's local government base in Scotland has been largely wiped out by PR as part of the deal of the Liberal Democrats. So the new Holyrood leader does have an uphill struggle on his or her hands. Labour should pay heed because the implications may extend far beyond Berwick.

Brian Wilson is a former Labour MP and Energy Minister