J K Rowling is wearing a long, black velvet coat which flies out behind her as she skips through a breeze on George IV Bridge. The lining is of red shot silk which shimmers like fireflame. This could be a wizard's coat, except the pockets aren't big enough for all that quirky stuff carried by vigilant magicians. Still, it's mysterious that Joanne Rowling should have been drawn to this particular coat above all others. She bought it just the other day for a special occasion in London, and immediately it made her lucky. By the time she returned home to Edinburgh that night, she had a cheque for #2500 in her purse. Harry Potter had done it again.

For the second year running that magical orphan and his creator have won the most significant British award in children's fiction: the Smarties Prize, which draws its votes from the sternest critics of all, children themselves. It's almost impossible to exaggerate the bewitching impact of Harry on young readers. Indeed Rowling's own skill at wizarding has cast Harry's spell far beyond the target audience of nine to 12-year-olds. The two existing titles - seven are planned - are now required reading by adults who recognise that, like half the best novels ever written, these are more than a little mad, crammed full of surprises, and rife with beauty and life. The first, Harry Potter and the Philosopher's Stone, even comes with a grown-up cover for Christmas which, by some seasonal mischief on the publishers' part, is #2 dearer than the children's version.

But second time around, the Smarties accolade tastes even sweeter to Rowling because it confirms that initial story wasn't a fluke. Also, she doubts whether any of the future books will cause her so much heartache as the latest winner. ''But when I'd finished Harry Potter and the Chamber of Secrets, my gut feeling was that it was better than Book One. So, this new prize kind of vindicates that.'' In fact, after its publication last July, Chamber of Secrets went straight to the top of the hardback best-sellers chart for adult fiction, and remained there for a month. Now it's also been shortlisted for the Whitbread Children's Book of the Year Award, to be announced next January, carrying a cash prize of #10,000.

And the past year has yielded a clatter of other prizes, too, plus a record advance of $100,000 from American publishers for the entire Potter ouevre. Meanwhile, film rights to the first two books are under negotiation with Warner Brothers, for an expected seven-figure sum.

Even so, Rowling looks almost melancholic, giving no hint of the wittiness bubbling within. Th fact is, though, that she's not mournful at all, just frowningly pre-occupied with plotting Book Four - the third will be out next year - but it is true that the mighty advance from the States threw her into an extended panic. ''For at least a month it absolutely terrified me. My little daughter and I had gone from abject poverty to security at last, but - and I know this sounds very ungrateful -the money just didn't make me happy at first. Instead, I felt absolutely miserable.'' What she found ghastly was that Book Two, up to that point, had been sprinting along, then somehow the windfall seemed to turn into a curse, convincing her that the writing wasn't up to standard.

''I was already three quarters of the way through the story, and for the first time in my life I was suffering from writer's block.'' All at once the plot wasn't working, a challenge she normally enjoys, but this time no device would tease things out. ''I suppose it is very like constipation. Then, just as quickly, the weight dropped away and I became hugely appreciative of what had happened. In the end the solution had been to keep repeating, like a mantra, that it was no good trying to make every word worth a certain amount of dollars. In fact, it was no good trying to write to please anyone but myself. Obviously, I'd always known the stories would appeal to children, but for years the writing had been very, very private.''

Rowling's hair is the colour of chunky marmalade and she wears it loose in the sort of style that's not out of place beneath a pointy hat. Is this pushing the witch motif too far? She explodes in laughter which you can't help noticing is a bit of a cackle. ''I've never wanted to be a witch, but an alchemist, now that's a different matter. To invent this wizard world, I've learned a ridiculous amount about alchemy. Perhaps much of it I'll never use in the books, but I have to know in detail what magic can and cannot do in order to set the parameters and establish the stories' internal logic.'' So, Rowling underpins her droll and richly textured imagination with meticulous folklore research. In Chamber of Secrets, for instance, she refers to the hand of glory drawn from a grisly legend which claims that the chopped-off hand of a hanged man becomes a torch when lit, but only to the one who holds

it. ''That's macabre, I know, but a wonderful image, and I wish I'd invented it.''

With narrative verve, her own invention is a landscape of marvellous upheaval where magicians play havoc with Muggles (all unbelievers), turning absurdity into satirical suspense. But Rowling also wanted to combine the contemporary with the timeless, so there is Dudley, Harry's horrible cousin, greedily hugging his computer games, while the wizard world is somewhere unchanged for centuries, but capable of seeping into everything, like gas. ''I know it's unfashionable to use this word, morality, and I never set out to preach, but I think the books do explore the misuse of power, and there's an attempt to make some sense of death. That said, when a plot is going well, you can't imagine just what fun the stories are to write. I mean, it's indecent the amount of time I spend thinking up wizarding ways to subvert arrogant Muggles.''

But something of Harry's experience of loss is rooted in her own. In 1990, at the age of 45, Rowling's mother died after suffering from multiple sclerosis for 15 years. Rowling herself was 25 and likens the bereavement to a depth charge. ''Everything tottered. One night she just went to bed, and an hour later my father went up and found her dead. We had no idea the end was so close, but I think we were all in gross denial about how ill she was.'' During the following six months that tragedy was intensified by Rowling losing her IT job through redundancy, and by being burgled three times, the thieves making off, on one occasion, with all her mother's jewellery. She had trained as a teacher, and, desperate for a new beginning, she headed for Portugal, staying there for three-and-a-half years. She married a TV journalist and gave birth to her only child but later, with the marriage in ruins,

Rowling and the baby made for Edinburgh where her sister was living.

For years, though, she'd been working on the first Harry Potter, and then suddenly in the middle of all this emotional and financial bleakness, recognition arrived faster than an exploding sherbet lemon. She gained a Scottish Arts Council grant, bought a word processor, found a publisher, and immersed herself in a bundle of plot outlines. ''By the time the seventh book appears Harry will be almost 17. It's going to half kill me to stop writing about him but as it will have taken him seven years to become a fully qualified wizard, that seems the ideal stage to stop.'' And in growing older Harry will encounter girls, a situation which will demand a delicate balancing act from Rowling. ''Although a lot of readers may grow along with Harry, there could be others in the future, who at the age of nine or 10 read the entire series in 12 months. So it would be inapproriate to write about sex in detail,

and anyway, these aren't grittily realistic books. But I don't want to do a Famous Five, either, and have this ostensibly mature 16 year-old acting like a pre-pubescent. ''

Ruefully, Rowling notes that certain right-wing commentators have been particularly ecstatic about her success, claiming it as evidence that single mothers, once they put their minds to it, can spring the poverty trap. ''That turns me into a stick to beat them with, and it shows no understanding of how appallingly hard it is to get out of desperate situations. All I prove is that if you have the extraordinarily good fortune to possess a talent which can be pursued at home with a pen or pencil, and few child-care costs, then, yes, you just might do it.'' The real pleasure of recognition, she says, lies in readers' questions, and while the ones from adults are often sentimental, those from children are impressively taxing and observant. ''Like: what's the difference between charms and transfiguration?'' And what is the difference? ''With a charm you add properties to something. With a transfiguration

you change its nature completely; the molecular structure alters. . .'' Jo Rowling says that it is only as an author that she herself believes in magic, but you can't help feeling that she is something other than a Muggle. Billowing through Edinburgh in that long, black coat, she looks like the keeper of a sparling revelation, the precious discovery that nonsense is wisdom turned inside out.

n The Harry Potter books by J K Rowling are published by Bloomsbury. Prices from #4.99.