Rough guide to Blair's tartan trouble

Labour faces an army of trouble-makers within its own ranks in Scotland. Unusually, it now finds itself less popular there than south of the Tweed. By Douglas Fraser

The "project" was to do for England what Labour had done in Middle Scotland: appeal to the type of voter with two cars and a driveway who lived around John Smith's Edinburgh home. Five years on, the project has been so successful that Labour is facing up to the unusual sensation, at its Inverness conference this weekend, of being less popular in Scotland than it is south of the Tweed.

The reason? Apparently simple. Scotland has four-party politics. If you put the Scottish National Party (SNP) into the mix, Labour at the last poll had 46 per cent of intending voters, down six points, with Nationalists at 26, Tories on 16 and rural pockets of Liberal Democrats up to 10 per cent.

Competing against three opponents has created problems for New Labour. Whereas it is designed to appeal to the English centre ground, the SNP poses a serious risk to Tony Blair's troops by attracting those on the left and undermining the heartlands vote.

But perhaps the reason is not as simple as it looks. The ease with which votes switch away from Labour may reflect the fact that it has been the political Establishment in Scotland throughout the Conservative years - powerless in Westminster while dominant in the nation's council chambers. This week saw local authorities setting their budgets in the toughest round of spending cuts yet. Edinburgh is to shed 830 jobs, and on Thursday faced a Unison shutdown of many services in protest. In Glasgow, teachers were on strike for the first time in a decade. The blame is aimed at the Government, but no one is in any doubt that Gordon Brown's budgets - aimed at reassuring Middle England - would do little to help. Disillusion in Scotland's huge public sector workforce has set in already.

This might be good training for Labour in power, but has created fissures within the party. Talk of New Labour versus Old is misleading: there is a Home Rule Labour cause as well.

Last summer, Labour, along with the Liberal Democrats, trade unions, churches and assorted others, agreed a plan for creating a Scottish Parliament with the power to raise tax 3p above the UK rate, backed by the promise from Tony Blair that it would be legislated for in the first session of a Labour administration. But the Tories were warning of the break-up of Britain, and their Scottish Secretary, Michael Forsyth, was making mischief with claims of a "tartan tax". Somewhere between the offices of Blair and Shadow Scottish Secretary George Robertson, the policy was changed. Such constitutional reform required a referendum, they announced, asking first if the Scots wanted a parliament and second if they wanted it to have tax powers.

Leadership loyalists suggest this was an overdue dose of reality for a policy which had more to do with Caledonian sentimentality than with getting a bill through Westminster. It is argued the two questions, if approved, would embed constitutional change and blunt the tartan tax attacks. But the manner of the change caused fury in the Scottish party. Tony Blair appeared to be backtracking on a promise. And this seemed precisely the kind of policy aimed at winning Middle England, but losing Scottish support to the Nationalists. Devolution spokesman John McAllion, associated with Labour's home rule wing, hadn't even been told, and he resigned.

A threatened rebellion by Labour's Scottish executive was quelled only by a desperate plea for party unity. Facing turmoil, Robertson invited ridicule by hastily shifting ground again to propose two referendums, before and after legislation - though within a week he had U-turned again, increasing the chances that early May will see him return to the relative calm of European affairs at which he excelled.

Although the leadership prevailed, the episode left a trail of ill will, not least with those who had won. A group emerged earlier this year, conspiratorially named The Network, dedicated to ensuring such an embarrassment could never happen again. Though few admit to membership, it was deemed to be behind an attempt to oust the Stroppy Jock tendency from the Scottish executive, the unwieldy focus of activist plotting.

So for all the show of pre-election unity in Inverness, there are two loose groupings ready to emerge more prominently after 1 May. On one side are the loyalist leadership supporters such as George Robertson and Jack McConnell, the party's top official in Scotland. Some see them as continuing a tradition of Labour's old right, where Robertson once belonged though McConnell didn't. Some members are appalled at the tactics of those who opposed the policy change last summer. And finding common cause are those who see the new policy as the best way to limit the extent of Scottish home rule. Tam Dalyell, creator of the fabled West Lothian question, is not alone: there are others, such as Brian Wilson, with an anti-devolution past, and senior councillors who don't want to lose their powers to an Edinburgh legislature.

Against them are ranged home rulers such as trade unionist Bill Speirs and veteran home rule activist Bob McLean, determined to push the cause if the leadership takes fright again. There is the left - now branded Old Labour - though not necessarily keen on devolution, and also the awkward, oppositionist tendency, given to mistrust of Blair. Count MPs such as George Galloway and Dennis Canavan in all three categories.

New Labour has the momentum and the fire-power until the election. And it is clearly using it in a bid to ensure that a prospective Labour administration in Edinburgh does not go completely native. One of the main threats to the constitutional reform is of antagonism between Edinburgh and London resulting in growing demands for separatism.

Yet the closer a Scottish parliament comes, the more the mechanics of it seem to dampen enthusiasm. Labour activists who identified as primarily Scottish when the English party was doing badly have less reason to do so now that they are close to power on both sides of the Border. And the real test of the commitment to an Edinburgh parliament may come when senior figures have to decide if their future lies there or in Westminster. George Robertson has been forced into saying he would opt to go north. Robin Cook, Gordon Brown, Donald Dewar and Brian Wilson, however, may find the attractions of Whitehall keep them there. After all, Scotland has a long tradition of exporting its best talent to the benefit of the English.