Wendy Alexander is facing growing discontent in her party at Holyrood over her latest declaration that Labour MSPs will not vote down a Nationalist Bill for an independence referendum in 2010.

The internal Labour wrangling over exactly what the party's position is has now taken yet another twist with Labour MSPs, who only last week agreed to back Ms Alexander, asking whether the position she laid out last weekend is tenable.

Several MSPs who have spoken to The Times say that they now want a full internal debate on Ms Alexander's decision, announced on Sunday, that the most that Labour would do, when confronted by the details of the SNP Bill, would be to abstain on the ground that they did not like the question Scots were to be asked.

They point out that any such referendum would be consultative and not legally binding, that it would take the focus away from major policy issues in the run-up to the scheduled 2011 Holyrood election and that the election itself is the proper place for voters to say whether they back the SNP's policy of independence or, indeed, a referendum.

One senior MSP said last night: “We need some clarification quickly on what Wendy is currently proposing. Is it sensible to have a referendum only months before a Scottish Parliament election? We have to have the debate on that.”

He was backed by other MSP colleagues who pointed out that the stance now adopted by Ms Alexander on how Labour would vote amounts to “carte blanche” for the SNP because they would have sufficient backing in the Parliament to win a vote - no matter whether Labour supported them or abstained. There was further confusion last night when Ms Alexander's spokesman agreed that when the group backed her last week on her call for a referendum, they were backing only an early referendum and not the SNP's planned one in 2010. If this is the case, it may lead to another U-turn by the group when it discusses the issue at their weekly meeting at Holyrood today.

The growing unease in Labour MSP circles is the latest development in an affair that has fast developed into a full-blown policy crisis for the party and led to serous criticisms of Ms Alexander's leadership qualities.

There is still no sign of an outright move against her, although worried Labour MSPs believe that she is deeply tarnished, with one close colleague going as far yesterday as telling The Times that she is “close to a busted flush”.

Ms Alexander's latest pronouncement came on Sunday when she said in a BBC Scotland television interview that while there was no “blank cheque” from Labour for an SNP referendum Bill, Labour would not oppose it. “We will not vote down the opportunity to let the Scottish people speak,” she said.

The clear implications of this statement - that Labour MSPs would sit on their hands and abstain if they did not succeed in amending the referendum question outlined in an SNP Bill - have taken some of her MSPs aback.

The issue of Labour's position on a referendum has convulsed the party in Scotland and embarrassed the Prime Minister, who has said he is “not persuaded” of the need for a referendum, thus leaving the leadership north and south of the border adopting two clearly different positions.

It began when Ms Alexander challenged Alex Salmond, the Nationalist First Minister, to “bring it on”, arguing that she did not fear the verdict of the Scottish people. Aides then made clear that she wanted a referendum before 2010. She then said that she had not ruled out a Bill of her own but Mr Brown, in the Commons last week, failed to back her. Ms Alexander said last Thursday that she was sticking to her guns, but on Saturday she accepted that her plan of forcing the SNP into an early referendum would not be technically possible under Scottish Parliament rules. On Sunday came her latest version.

Last night Ms Alexander's spokesman reiterated that Labour support for an SNP did not amounted to a blank cheque. He added: “The principle is that the Scottish people deserve the choice and deserve it now.”

Asked about the Labour group's support for a referendum last week, he then said: “Duncan McNeil [the Labour group convener] was talking about an early referendum. He was not referring to an SNP Bill.”

Meanwhile, Tam Dalyell, the fiercely anti-devolution former Labour MP, said last night that he believed that if there was to be a multi-option referendum rather than a straightforward yes/no question, a fourth question had to be asked in addition to whether voters preferred the devolution status quo, more powers or independence.

That fourth question, he said, would ask voters: “Do you wish the Scottish Parliament to continue in being?”

Mr Dalyell told The Times:

“Twenty-five per cent said they did not want devolution. If you are going to have a multi-option referendum, these people should have the right to express their view.”

The Steel Commission on extending the powers of the Scottish Parliament met again yesterday for the first time since it set out its report two years ago.

Lord Steel of Aikwood, speaking after the meeting in Edinburgh, said: “Scotland's future is too important to be left to the narrow nationalism of the SNP or the increasingly bizarre machinations of the tired and failing Labour Party.

“As part of our review of the Scotland Act, the Steel Commission will make a strong case to the Calman Commission for Scotland to gain new legislative and fiscal powers within the United Kingdom.”