Look to Scotland to see if coalition politics can work

`As Kennedy knows, the threat to co-operation lies not in Harrogate but in his native land'

CHARLES KENNEDY is the living embodiment of a prediction made a few years ago by the former Foreign Secretary Lord Hurd. It was that the successful politicians of the future would be those who didn't sound like politicians. Ken Clarke has the gift; so does Ken Livingstone. And so does Kennedy, who has set a tone for his first conference as Liberal Democrat leader with a refreshing mixture of humour, jargon-free common sense, and every indication of being a member of the human race.

He has also been shrewd; on the issue of relations with Labour he has avoided provoking hostility from the tribalist majority in the conference hall without compromising his own clear desire to maintain co-operation with the Blair government. He has also sensibly reminded those infuriated that Blair has refused to grant a referendum on Commons electoral reform, that it would be better to win a referendum in the next parliament than to lose one in this. All this should make for a happy conference.

But in any case, as Kennedy must know, the real threat to co-operation lies not in Harrogate at all, but in his own native land, where, for all its early successes, an experiment in co-operative government is threatened with a collision that could yet terminate it. The events unfolding in Scotland could have a more profound effect on the future shape of British politics than any of the rhetoric resounding round the conference hall this week.

For the average English voter, who unfortunately takes rather more interest in the internal politics of Thailand than in those of Scotland, the facts are these. The programme on which the Liberal Democrats fought the Scottish election included a pledge to oppose tuition fees for Scottish universities - a policy which reflected the fact that a large proportion of students whose families could well afford to pay the fees were having them paid, instead, by the taxpayers, including the poorest taxpayers. All students eligible to pay the fees would now have a new right to take out long-term soft loans. In Scotland, because the requirement to pay any fees at all only kicks in at an absolute minimum of pounds 17,000 a year - usually pounds 23,000 - only half of students have to pay any fees at all. Although the policy has proved especially aggravating to middle Scotland, it is warmly supported by the heads of Scottish universities who fear the loss of their competitive edge as international centres of learning if their English counterparts secure a source of funding denied to them. Since Labour does not have an overall majority in the Scottish Parliament, the opposition parties have the power to overthrow the policy.

The wrinkle, however, is that the Lib Dems, whose support would be needed for such a vote, are in fact coalition partners in the new Scottish administration. The preparedness of the four Liberal Democrat ministers to bow before the Cabinet majority and accept the new system in Scotland is now rapidly becoming, for Labour at any rate, a crucial test of their willingness to co-operate in real, grown-up government.

It is hard to know how much of this is bluster; but all the current hints are that the Lib Dems are prepared to bring down the coalition rather than accept the imposition of student fees in Scotland. Although the whole issue has been referred, with the agreement of the Lib Dems to a review under Andrew Cubie, a leading Edinburgh solicitor, those around Jim Wallace, the Scottish Lib Dem leader, suggest that even if Cubie finds broadly in favour of the status quo he will still oppose fees.

The stakes are therefore very high for first minister Donald Dewar and his party, whose long-term prospects of containing nationalism and the threat of independence depends in part on entrenching co-operative government with the Liberal Democrats in order to keep the SNP out of power. A breakdown would put Dewar in the unenviable position of losing both the coalition he needs to maintain control in Scotland and the policy of tuition fees.

But the stakes are even higher for the Liberal Democrats. Since some of those keenest on Wallace's stand on tuition fees are also those most impatient to see PR for the House of Commons, they should consider this: how could Tony Blair argue the case for electoral reform in a referendum in the next parliament if the only concrete example of co-operative national politics, based on a Scottish Parliament elected by PR, has ended in abject failure within a year of assuming its powers? And how does he persuade an already sceptical Gordon Brown to back further concessions to the Liberal Democrats when that same party has just kicked away a measure which is a central element not only of higher education policy but of Labour's whole programme of social and economic reform?

This is not to deny that the Scottish Parliament should take decisions at variance with its Westminster counterpart. But this is a special case because of the porous nature of UK higher education; the anomalies created in the Scottish system will have an immediate knock-on effect on English universities. By contrast, Wallace is commendably determined, for example, to introduce a Freedom of Information regime in Scotland that is more liberal and robust than the - despite some new concessions - apology for one planned by Jack Straw. Equally, the Liberal Democrats are determined to press ahead for PR in local government in Scotland, a highly desirable reform which could help to breathe some fresh air into some of Labour's worst rotten boroughs. If the Labour executive majority in Scotland were to risk the coalition by resisting, then the opprobrium would be visited, correctly - on Donald Dewar and his Labour colleagues.

Tuition fees is another matter. They aren't popular, but there isn't a serious progressive centre-left politician who has come up with a solution remotely as good to what everyone recognises is a structural funding crisis in higher education. Are the Liberal Democrats, supposedly champions of the poor, really going to collapse co-operative politics to preserve free tuition for the BMW-owning classes? There is much talk in Scotland of a fudge. Wallace himself spoke pregnantly yesterday of "hard choices" ahead for his party. But it is highly unlikely that Labour will abandon the central principle of fees in favour of the graduate tax canvassed as an alternative.

It may yet be that, in the long run, Kennedy will have to confront his own Scottish parliamentary party with the hard facts of life. It will be very difficult; he believes that the party in Scotland, like the parliament it serves, should be devolved. But there are UK-wide implications which Kennedy well understands, not only for higher education but for the Lib Dems' long-term hopes of real power in Westminster as well as in Edinburgh.

Yesterday, Jim Wallace ended his speech to the conference with a resounding call for "50 years and more at the very heart of government" for the Liberal Democrats. Unless he averts a coming crisis, 50 years could shrink to around nine months.