The Westminster parties have a northern problem but they do not know quite what it is or what to do about it. Alex Salmond, leader of the Scottish National Party and First Minister, stands all-conquering, a nationalist hero to some, a one-man band of "El Presidente Salmondo" to others. The SNP's "big-tent" politics, social democratic yet pro-business, leaves the opposition with little terrain to mark out, a position redolent of Tony Blair and New Labour at their peak in 1997.

How has this happened in such a cautious nation as Scotland? Are we witnessing a Scottish spring, a nation finding its confidence again, or, as some claim, a black-and-white nationalism becoming the new orthodoxy after decades of Labour control?

There is a long story in this. The scottishing of Scottish politics has been ongoing for more than a century. In late-Victorian Britain, the administrative making of a distinct Scottish political sphere began with the creation of a separate government department, the Scottish Office. This led to pressure for more political control and the creation of the cabinet post of secretary of state for Scotland, and its transformation under Thomas Johnston, the wartime holder of the job from 1941-45, into a powerful, defining figure in Scottish life.

There followed ever louder demands for democracy for Scotland, which eventually led to the establishment under the Blair government of the Scottish Parliament in 1999. With the arrival of the national parliament, Scottish politics changed irreversibly and its main fault line switched from pro- and anti-devolution to pro- and anti-independence, preparing the way for the SNP's ascendancy.

“Scotland is in a new place," the commen­tator and novelist Katie Grant says. "The last [Scottish] election was cataclysmic for everyone. The collapse of the Tories is an old story. The collapse of Labour is what's new."

Many Tories have already given up on Scotland and dream of losing the burden of Labour's 41 seats north of the border. For them, Scotland is a subsidy junkie, a state-obsessed and entrepreneur-free zone. Scotland was once characterised by powerful industries such as steel and shipbuilding, as well as robust trade and commerce, which made some Scots wealthy and created many of the middle-class enclaves of Glasgow and Edinburgh. Salmond makes the point that Scotland had the highest GDP per head in the world in 1900 and that this should be our modern aspiration. What he doesn't mention is that the Scotland of 1900 did not exactly share its wealth and was a sharply divided, mostly impoverished society.

As Scotland's economy was buffeted by the interwar recessions, the reach and influence of the state expanded as it set up corporatist structures in the 1930s and then promoted new industries and inward investment in the 1940s. Gradually, the state made its presence felt in most nooks and crannies of Scottish life, and this made the case for a distinct Scottish political sphere more compelling.

At the same time, the British state's role was being increasingly questioned and challenged, with many Scots seeing the answer as a more clearly defined Scottish state, more autonomous and democratically run.

Carping business syndrome

Scottish nationalism isn't the property of the SNP. It can be found across Scottish society and includes those who call themselves unionists - the late Labour MP Donald Dewar, Scotland's first First Minister, once described himself as a "Scottish nationalist with a small 'n'". Nationalism has become one of the defining characteristics of Scottish society, culture and politics.

To many, it is the ultimate "banal nationalism". However, it was once viewed even north of the border as a thing of interest largely to eccentrics and oddballs, to those in tartan trousers, beards and sturdy plaid who made the annual pilgrimage to the Bannockburn Rally.

There remains residual power in these images. It can be seen in how the British political classes, Labour, Tory and Liberal Democrat, view Scottish independence as a maverick demand, not a challenge to be taken completely seriously. How else to explain why neither of Scottish Labour's remaining two big hitters, Douglas Alexander and Jim Murphy, could be persuaded to return north to save his party and, with it, the Union? Either they think Labour is not worth saving, or they don't believe that the Union is in peril.

Scottish nationalism is a force for continuity as much as change. There is a powerful yearning for the Scotland and Britain of the period 1945-75, for a society where there was more security, solidarity and compassion. There is palpable distrust of the British state's commitment to keep to the social contract that was implicit during those years.

Fundamental in this is a slow decline of legitimacy and trust in the British state. The ebbing of trust can be seen across the western world, but in Scotland it is related to the rightward drift of British politics since the late 1970s. The question of legitimacy is shaped by the long decline of the Scottish Conservatives, which began at the height of the Macmillan era but accelerated under Edward Heath and Margaret Thatcher.

The SNP is a cautious and conservative party in many respects, which reflects Scottish society and its tendency to shy away from any red-toothed radicalism of left or, heaven forfend, right. It was historically the party of those who operated outside the institutional, entitlement culture of much public life. It disliked the intricate web of public institutions and quangos and detested even more the carping, girning voices of the ubiquitous business lobby, especially CBI Scotland.

SNP Scotland has been a land of outsiders, self-starters, entrepreneurs and small businessmen and women - people who lived outside the big cities and sat outside the big public agencies and firms. This group has for decades stood up to what it saw as overbearing Labour power. Now it finds itself being feted. Many in the public and voluntary sectors, if not business, are talking the nationalist talk. The SNP is becoming the new establishment.

Left, right or centre?

Where does this new force in the land want to take Scotland? And what is the nationalist vision? It is of Scotland as a self-governing country, springing from a belief that profound constitutional change can have a transformative effect on Scottish confidence, energy, international profile and more.

David Torrance, who recently wrote a biography of Salmond, believes that "the trouble is that different sections of society project on to independence what they want it to mean, be they left, right and everything in between". This, he argues, is "fine in uniting people towards a common goal, but the outcome inevitably can't please everyone".

Some do not dispute this account yet they see a more nuanced SNP. The party leadership is implicitly post-nationalist rather than conventionally nationalist. A survey last year of the SNP's membership by Professor James Mitchell of Strathclyde University showed a more pragmatic view of what independence is, or could be, at ease with sharing powers and sovereignties in the European Union and the UK.

The Nationalists are as far as you could imagine from the old caricature of "separatists" as portrayed in unionist propaganda. The ancient, fossilised nationalists are Westminster politicians such as Tony Blair, Gordon Brown and David Cameron, each of whom has fetishised the idea of "Britishness", as well as engaged in a late-in-the-day nation-building project.

The British nationalists of Labour, the Conservatives and, by extension, the Lib Dems don't see themselves as such, but that is what their world-view is, with its introverted obsessions about parliamentary sovereignty, the British way of life and, in the Tory version, standing up to Brussels.
Unfortunately for the SNP, its greatest hour has come at the point of the biggest crisis in the history of the EU - a crisis that poses huge questions and dilemmas for the Nationalists as well. Fast-changing events in Europe make life much more difficult for the independence project. Although it would seem highly likely that an independent Scotland would be welcomed into the EU, there are other obstacles. The SNP wants to retain sterling as Scotland's currency but keep its options open of joining the euro at a later date. Some have pointed out that this could leave an independent Scotland still dominated by the Treasury in London.

What a turn-up

The SNP vision of the future and the soul of the party and its members is not independence but self-government and statehood. What requires further elucidation are the distinctions between the options of full fiscal autonomy for Scotland within the UK ("devolution max"), statehood and independence. For all the Labour and Tory talk of separatism, most Scottish voters view constitutional change as a continuum of devolution, and do not see a fundamental break between "devo max"/reforming the Union and independence/supposedly ending it.

The new Scottish Labour line, led by Johann Lamont, the sixth leader in a dozen years, is to rebuff any SNP moves to offer a referendum vote on both "devo max" and independence.

The Scottish public may be a bit hazy about what independence would mean, but most see it as part of a process of evolution rather than a rupture: a continuation of the journey Scotland has already begun. There are policy differences between fiscal autonomy, statehood and independence. Fiscal autonomy would allow Scotland to control most, if not all, of its domestic life. Statehood is a more explicitly nationalist version of this, and could evolve to full independence, or not.

The differences between statehood and independence come down to how Scotland wants to present itself in the world and to matters of defence, foreign affairs and Trident.

The deciding factor in much of this may well be the British government. If David Cameron is careful and astute he could probably accommodate Scottish wishes for greater autonomy in a reformed and altered Union. There is a long Tory thread of pragmatic, decentralist unionism that has been more flexible than Labour's centralist traditions. Some had assumed that Tory statecraft and the Conservatives' pragmatic sense of the Union would be much in evidence over the next few years; that they would not fall into the traps set by the SNP.

However, the Prime Minister seems set on challenging the SNP and devolving to the Scottish government, in a limited, legally tight way, the power to ask only a Yes or No question to independence on the referendum ballot paper. This is surprising. Perhaps he has given Scotland too little serious thought. "It is somewhere he has gone on holiday," Salmond's biographer Torrance says dismissively. "He associates [it] with posh places, posh foods and some posh friends."

There is the issue, too, of who is advising Cameron on Scotland. The task seems to have fallen by default to Michael Forsyth, the last Conservative secretary of state for Scotland. Forsyth's abrasive unionism and right-wing views cost the Scots Tories all their Westminster seats in 1997, a defeat from which they have not recovered. He wants to call Salmond's bluff by forcing an immediate referendum. This could have worked before last year's elections for the Scottish Parliament, when all the unionist parties were against holding a vote on independence; but now, with a majority SNP government in power, it looks desperate.

Scottish majority opinion would like to have an open, mature conversation about the nature of the relationship of the nations in the Union; its aspirations could be described as looking for a more modern marriage, a bit more respect in a partnership of equals. Behind much of this debate is the Scots' search for a voice and polity that give them more confidence in their centre-left traditions - traditions they no longer trust the British state to protect and articulate.

The Scottish political debate has its romantic nationalists, but much more important are a growing confidence that Scots can do things better themselves and a lack of faith in what is widely seen as a diminished, even deformed, British political system that gave us Thatcher and Blair. Scotland stands on the brink of historic change, with huge consequences for the Union. This is the story of a small modern nation; it is about the future, about democracy and ambition, not about past battles, anniversaries and folklore, or about having a referendum on or close to the 700th anniversary of the Battle of Bannockburn.

A mixture of pragmatism and idealism has taken Scottish nationalism a very long way. It now stands closer than ever to its ultimate prize - independence. The SNP might yet interpret this in a way that remakes and maintains some kind of political co-operation, even union, and in so doing develops a very different kind of Britain.

Wouldn't it be a turn-up if Salmond delivered the kind of far-reaching constitutional change that reformers have long dreamed of? Through a reconfigured set of relations in these islands, he could drag "Britain", or what Britain becomes, into the modern democratic age.

Gerry Hassan's "The Strange Death of Labour Scotland", co-written with Eric Shaw, will be published by Edinburgh University Press in June