How Jack lost the battle

FOR 10 minutes, Jack McConnell and his team thought they had done it.

At 6pm on Friday evening, the unprecedented chaos of the 2007 Holyrood elections had boiled down to the calculations of one election official in Inverness, who was working out the list vote for the Highlands and Islands region. Suddenly, word came through that Labour had won four seats to the SNP's none. McConnell and a team of around 30 Labour activists at the party's John Smith House headquarters in Glasgow began to celebrate - the result meant that Labour had seen off the odds to narrowly beat the SNP. But then further word came through: the numbers had been wrong. In fact Labour had got three seats to the SNP's two. A hitherto unknown SNP candidate from Inverness called Dave Thompson had squeezed through as the last candidate on the last list in the last region. After more than two million voters had had their say, after a protracted 18-hour count, after all that shoe leather, cash, and effort, it all came down to one seat. By the smallest possible margin, the Nationalists had won.

That one seat was the difference between triumph and disaster. Salmond and his team began celebrations with a ceilidh in The Hub venue at the top of Edinburgh's Royal Mile. Exhausted Labour activists in Glasgow slowly drained away home, clinging on to the one recompense that at least they had not lost as many seats as some had predicted. Many, however, had been preparing for defeat for some time. The road to the SNP's victory and Labour's loss begins two years ago, when the seeds of both were laid.

It is not as if Labour can claim they were taken by surprise. Sixteen months ago, they were given a clear, sharp warning of the perils that might lie in store. In the Dunfermline West by-election in February last year, brought on by the death of local MP Rachel Squire, the party suffered a humiliation: an 11,000 majority was reversed and the seat lost to the Lib Dems - all in Gordon Brown's backyard.

The by-election had clearly revealed the fault-lines in the party's psyche. Jack McConnell and Gordon Brown were barely on speaking terms. The issue of tolls on the Forth Road Bridge was crucial, yet the two kept contradicting each other. McConnell's interventions were seen by Brown as a "stupid" attempt to assert his authority. He was putting his own status before the party's greater good. From the defeat on, the two were once again at loggerheads.

The feud within Labour ranks, between the McConnellites at Holyrood and the coalition of Brownites at Westminster, was in utter contrast to the work quietly going on at the SNP's small HQ, situated behind a printer's shop just off Edinburgh's Leith Walk. Labour had long scoffed at the Nationalists' amateurism - but that was all changing.

The impetus for change had been Alex Salmond's dramatic return as leader of the party in 2004. But that was being slowly backed up by a revolution in the party's management and organisation. Scotland on Sunday has obtained details of the election 'blueprint', written two-and-a-half years ago by a former Labour Party activist turned SNP supporter called Gordon Guthrie. A computer expert, Guthrie had constructed complex software for Labour, codenamed Activate, enabling it to identify key voters to target. He now applied his knowledge to the SNP. Guthrie advocated a complete change of culture in the party. The party needed to move away from its traditional base and start building a "coalition of electors".

"The party needs to position itself in the political landscape by understanding and reaching out to segments of the electorate, peeling layers of support from other parties, and binding them into an electoral coalition for independence," he wrote.

It would do this by carrying out detailed research about the policies with which people most identified. The SNP would become a "research-led party". Polling and market research - the lodestars of New Labour's success - were to become the SNP's tools. And they backed it up with new technology, copying Labour's, enabling them to track and identify potential supporters who were deemed susceptible to the party's new image. It was used for the first time during the Moray by-election in April last year, when the party increased its majority by 1,200. From that moment on, the Nationalists believed they could win on a national scale as well.

Unusually for the SNP, it managed to achieve this makeover without the internal strife for which it has become famous. The same could not be said for Labour. Over last summer, the feuds got worse. During the World Cup finals, McConnell publicly refused to support England, a move Brown and Blair considered puerile. And with McConnell's aides meanwhile insisting their man would run a "presidential" campaign for the 2007 elections, Brown's allies accused him of effectively pandering to the Nationalists.

Labour was itself doing polling - and it was well aware of the calamity it faced. It found that as many as a dozen seats were threatened, with the SNP and the Lib Dems likely to be the main beneficiaries. The torrent of bad news emerging from Westminster - such as the cash-for-peerages row, Iraq, even the revelations back then over John Prescott's affair - were to blame. But so too was the impression that, under McConnell, the Scottish Labour group were failing to distinguish themselves.

McConnell himself was seen as lacklustre and not even that popular among diehard Labour voters. People simply did not identify with him.

By the end of the summer, McConnell's stock was at a low. Fellow ministers were privately admitting that he could be the last ever Labour First Minister. And despite the forthcoming elections, senior figures were actively briefing against him, declaring that, if he did somehow sneak through in this campaign, he would be kicked out anyway regardless.

The cold war with Westminster continued. In October, McConnell used a speech to insist that "unlike others", he would not be running a negative campaign, attacking independence. In a question-and-answer session afterwards, he then infuriated his Labour colleagues even further by declaring that one of the benefits of the UK was that England could be used as a convenient place to dump nuclear weapons. He then hinted in Parliament that Scotland, like Northern Ireland, could get favourable rates of corporation tax - a plan the Treasury was desperately hosing down. Relations continued to plummet.

Over at the SNP, the party's message was being finely tuned. At an away weekend in Dundee last summer, attended by Salmond and several of his senior allies, the track to the election was set: the party would set a course and stick to it. Message discipline - another article of faith of New Labour - was set in stone. Salmond would seek to both soften his aggressive image, and also emphasise his supposed statesman-like qualities. Behind the scenes, the party's election experts were feverishly hoovering up information about voters, in search of that 'coalition of electors'.

As the election emerged into view at the beginning of the year, the full scale of the mess of Labour's campaign emerged. McConnell was still insisting that the campaign would be his to run. But, with Downing Street suddenly realising the extent of the party's difficulties, that control was wrestled away. This was not so much a question of London Labour demanding power, sources say; rather it was because they were horrified by the lack of proper preparations. To McConnell's fury, John McTernan - Blair's political director and a former chief of staff for Henry McLeish - was ordered up to sort things out. Pretty soon there were unnamed sources from those close to McConnell claiming McTernan would be sacked. He never was, but the resentment continued. McConnell was even unable to refer to McTernan by his first name.

As the winter months continued, so Labour's campaign continued to stutter. McConnell ordered all his ministers to concentrate on their day jobs. There was a country to run, he insisted, and therefore all talk of campaigning should wait until April. For himself, he refused to take part in any debates prior to the start of the campaign. He was too busy running the country, Labour insisted publicly.

Privately, however, there was fury over the reticence. Backbench MSPs began to ask why their leader was not engaging in the campaign. Health Minister Andy Kerr urged McConnell to "let him off the leash". But McConnell was adamant. In his own mind, the strategy was clear: safety first. The SNP's lead in the polls was not bothering the First Minister at this stage, his allies say. McConnell was convinced that, as in previous campaigns, those polls would change once the focus turned onto the SNP's economic plans. There was therefore no reason to risk a mauling by Salmond in a debate.

But he had not factored for the new SNP. Salmond had already shown evidence of his 'coalition building', having announced a £100,000 donation from Sir Tom Farmer. In January, he was planning for the big one: a £500,000 cheque from Brian Souter, the Stagecoach founder, whose hatred of the Labour Party had reached boiling point. Salmond had long identified money as being the key to the campaign: demanding that the party find £1m to spend. With Souter's cash in the bag, suddenly he was in a position to spend his way to success. Phone operatives could be employed to canvass voters. Billboards could be booked for expensively assembled adverts. The SNP was able, for the first time, to throw resources at dozens of constituencies where previously it had never had a presence. This was all crucial: only by winning across the country would it reverse Labour's lead.

Labour was caught on the hop. It dawned on the party, as the campaign got under way, that the SNP could possibly take previously 'safe-as-houses' seats, such as East Kilbride, Glasgow Kelvin and Paisley South. Consequently, the party was suddenly forced to up its local operations. But it was too late. Campaign organisers in the field complained about a "shocking" lack of organisation. They were aghast to find that in seats across Scotland, local parties had no records of canvass returns from the past and therefore no one knew who their voters had been and therefore who they now needed to chase up in advance of the election.

One campaign insider said: "It was a nightmare. No work had been done. Everyone thought these seats were safe and that we didn't need to worry. We basically had to start from scratch finding out who our voters were. No one ever thought we needed to do that in the past."

At party headquarters, McConnell's campaign was being beefed up by the heavy artillery from down south. Scottish Secretary Douglas Alexander (and another long-term enemy of McConnell) took over strategy; Philip Gould, New Labour's legendary pollster, began work.

In a private meeting at the turn of the year, McConnell, Blair and Brown had all discussed how best to construct the campaign. Blair and Brown were both conscious of the need to give McConnell his head, so the plan was clear: the Prime Minister and Chancellor would focus on the negative assault on the SNP, while McConnell would set out the positive case for another Labour government. But Brown and Blair were left disappointed. The "big sell" of the Labour campaign never materialised. Instead, McConnell's plans to construct his campaign around education flopped amid the confusion of his plans to reform the council tax.

The First Minister published plans to increase tax at the top and drop it at the bottom. But, from the start, the proposal fell to pieces. Local government leaders say they were not informed about the plan prior its announcement - and insist they could have warned of its flaws before it came out. Those flaws effectively drowned out Labour's message on anything else.

According to insiders, the campaign has staggered to the finishing line, with McConnell and his advisers being treated by party managers with barely concealed contempt. One said: "The disdain with which he is treated is quite depressing." Reports emerged on Friday that McConnell was now facing a coup involving former allies such as Andy Kerr and Tom McCabe. One campaign source claimed that McConnell spent Friday phoning up backbenchers insisting his position was secure, and bad-mouthing Kerr to anyone who would listen. Salmond, meanwhile, flew above in his helicopter, serene in the skies.

That it came down to one vote was seen by Labour activists on Friday night as something of an achievement. "They outspent us by miles; they had all that money; and we still managed to cling on," said one campaign insider. Another claimed: "Salmond will be disappointed that he has only got such a slender lead". Perhaps they have a point. Disunited, demotivated and seething with personal vendettas, that Labour still nearly won it on Friday is perhaps the most remarkable fact of all.