Why did Bill Drummond set fire to £1 million? Why did he want to chop off his own hand on stage? And why did the chart-topping KLF disband? As the controversial pop-star-turned-artist hits middle age, are we any closer to knowing the answers?

What were we supposed to call this? Was it art? Some kind of bizarre political statement? A bit of a larf spun horribly out of control? If it was any of these things, it was the most extraordinary example anyone committed in the last two decades of the 20th century. It went almost unnoticed at the time, because few people were prepared to countenance the possibility that it was more than a stunt, couldn't believe anyone would do such a thing, be that stupid/irresponsible/free. But it wasn't a stunt. They really did it. If you want to rile Bill Drummond, you call him a hoaxer.

'I knew it was real,' a long-time friend and associate of his group the KLF tells me, 'because afterwards, Jimmy and Bill looked so harrowed and haunted. And to be honest, they've never really been the same since'

On 23 August 1994, Drummond and his partner Jimmy Cauty travelled to the Isle of Jura and, before a sceptical invited audience, ritually burned £1 million - in notes - of their own cash. Both in their late thirties, they'd earned the money as the men behind one of the UK's most unlikely pop groups. In 1991, the KLF, an acronym for Kopyright Liberation Front, was the bestselling British act in the world. Riding the post-acid house boom in club music, they could do no wrong: every tune they touched turned to gold. But the next year, they opened the Brit Awards with a scathing performance, backed by a co-opted heavy metal band. At the end of it, a stunned audience heard them announce that 'the KLF have left the music business'. A freshly slaughtered sheep was laid at the entrance to the post-awards party, with a tag reading: 'I died for ewe. Bon appetit.' They had been presented with the coveted gong for best group, then immediately dissolved themselves. Then, in 1994, they burned most of the money they'd made up to that point. Why?

Drummond sits before me, a stubbly

but youthful-looking 47, eating a cheese omelette and chips in a north London greasy spoon, the first thing he's eaten today, at 2.30pm, in the first interview he's done in six years. He and Cauty have made a deal not to talk about the million pounds, he tries to tell me. We're fencing. I ask him how much they earned during their peak.

'Are you trying to ascertain whether a million pounds was that much to us?' he replies, fixing me with a steady gaze.

Yes, I say.

He nods slowly. 'But it wasn't about burning all the money. And it wasn't about cleansing anyone's soul. In this context, a million is a lot more than 2 million. A million is the icon. It's what we talk about, dream about. It has the power.'

Have you regretted it since?

'...No...'

Are you financially stable now?

'No, I'm not. No.'

So why did they do it, I ask, and how did

it feel to watch it wither and snake, finally, irretrievably, into the sky? The answer takes two hours to emerge, and even then I'm not sure I quite understand.

For the past few years, Drummond has been relatively quiet, living with his wife Sallie Fellowes and two (soon to be three) small children on a farm in Aylesbury. The tangled logic of his career appears to be reflected in his private life, which takes in three other children, with two other women. He is close to the eldest two, but hasn't seen the third since the child was 18 months, a situation he acknowledges as 'weird' and is understandably reluctant to talk about. At one point in his new book, 45, after having 'trashed' another relationship, he wonders whether he 'will ever get to live with any of my children'. The longer you look at his life and read his work, the more clearly do you see what looks like a pronounced and compulsive cycle of creation and destruction, stretching right back to his schooldays.

His music career fits perfectly into this pattern, and it's what makes 45 such a good book about pop: few people in Britain can be in a better position to explore the dumb, chaotic tensions that make it tick - tensions between creation and destruction, ephemera and unwitting consequence, between mythology and visceral, irreducible truth. Many of his activities look like japes, but he will admit that 'we are serious about them, ridiculously serious'. He wants them to mean something, but knows that pop usually works best when it doesn't know what it means. And he knows. He can't help it. No wonder he wants to escape, but can't.

45 purports to be a series of snapshots and memoirs taken from the year he turned 45, seemingly at random, but actually compiled with deceptive - he would say accidental - logic. An early passage finds him driving to Helsinki with his children Kate, 12, and James, 10, to deliver some records and take in a Michael Jackson concert. James has just announced his decision to give up learning to play the guitar he badgered his father into buying him and switch to bass. A row ensues.

"That's it, James. I'm not paying for your lessons any more. The only reason why you want to start playing the bass is because you think it is easier." My voice is raised, I'm losing it, something I hardly ever do with my children. A year ago he would be crying by this point; now he just sinks into sullen silence. Kate says nothing. I switch on the radio. Abba's 'Winner Takes It All'. I slip from reality into pop nirvana, where the pain of heartbreak feels like the ecstasy of submission... I hope Kate and James can't spot the tears now rolling down my cheeks.

"Don't you understand, Dad? I have to work hard at school all day, and if I come home and just spend all my time practising guitar it makes me a boring person."

"What, and lying around watching television doesn't?"

"You're just getting like all the other dads, wanting me to do what you did."

"No, I'm not. I would far rather you didn't want to be in a band. Most people who dream or struggle their youth away wanting to be in a band end up unhappy, depressed, unfulfilled, 'cause it never happens."

"It happened for you."

"That was just luck. Look, even if it does

happen, it always goes wrong. Do you think Keith from Prodigy goes home at night happy?"

"You talk rubbish, Dad. I want to be in a band because that's what I want to do; it's got nothing to do with you. And anyway, I don't want to be a bass player, I want to be a singer."

"James, all singers are thick. Think of the boy you like least in your class - he'll be the singer. Everybody hates singers."

"Crap. Everybody loves the singer most."

"I mean the other lads in the band. They always hate the singer. He's always the lazy, loudmouthed, show-off one. You don't want to be like Liam Gallagher, just standing around doing nothing but being thick."

"Oasis are one of the best bands in the world; better than the Beatles ever were - it would be great to be the singer of Oasis."

I do not rise to the bait. Silence descends.

I can't believe I've just had this conversation with my 10-year-old son. If he's like this now, what's he going to be like when he's 15 and growing dope plants in his bedroom?

When Drummond was 15, he lived in a council house in Corby, in the East Midlands. He was born in South Africa, where his father, a Church of Scotland missionary, was working, and proudly recounts that his first words were in Xhosa, the language of the Bantu people. The incoming apartheid government forced the family home to Scotland before William was 18 months old, and thence to a council house in Corby. He was impatient with school and ultimately deemed unsuitable for the sixth form, he claims, after being caught reading the NME during a study period. Noting interests that included music and 'making things', a careers adviser suggested a future as an instrument maker, which required a qualification in art. Drummond enrolled in art school, but left before long, although his passion for art remains strong. 'It didn't work out,' is all he says now.

Music provided the solution, first through membership of Liverpudlian one-hit wonders Big in Japan (with Lightning Seed Ian Broudie and future Frankie Goes to Hollywood singer Holly Johnson on - don't tell James - bass). When that collapsed, Drummond found more lasting influence as manager of fêted local post-punk outfits The Teardrop Explodes and Echo and the Bunnymen. Establishing what would later become a pattern, he severed links with the latter at the peak of their popularity and went to work in the A&R department of WEA Records, where he was responsible for signing acts to the label. The only significant thing he did at that time was to sign a group called Brilliant, which had been formed by the former Killing Joke bassist, Youth, and featured the guitarist Jimmy Cauty. After three years, Drummond left his job in ignominy, but not before he and Cauty had struck up a relationship. Their subsequent commercial success, he explains, was partly inspired by a desire to 'prove [WEA MD] Rob Dickens wrong'. So they did, spectacularly.

KLF stands for Kopyright Liberation Front. Their first album, 1987 - What the Fuck is Going On?, made use of the newly accessible 'sampling' technology to borrow parts of other records and assemble them into something new. This is routine now - just ask Fatboy Slim - but was controversial at the time and led to a lawsuit with Abba over the unauthorised use of a passage from 'Dancing Queen', after which all unsold copies of the record had to be destroyed. Presaging things to come, Drummond and Cauty travelled to Stockholm in order to present a commemorative gold disc to Abba singer Agnetha Faltskog. Also presaging things to come, they couldn't find her, so gave the disc to a prostitute they happened across in the street, and came home.

In 1988, the pair decided to have a number-one record. They changed their name to The Timelords and released a cheesy dance take on the theme from Doctor Who, 'Doctorin' the Tardis'. It duly topped the UK singles chart and inspired its authors to follow up with a book entitled The Manual (How

To Have A Number One The Easy Way).

An Austrian duo, Edelweiss, followed their instructions and shifted 2 million units of a single called Give Me Edelweiss. A year later, again operating as the KLF, Drummond and Cauty began an extraordinary run of success with a pair of juddering rave anthems called 'What Time is Love?' and '3am Eternal'. In 1990, there came the first 'ambient house' LP, Chill Out, and in 1991, a further series of hit singles and the bestselling album

The White Room. Most bizarre of all, perhaps, was a version of their song 'Justified and Ancient', which featured country star Tammy Wynette on vocals and was only kept from the Christmas number-one slot by the death of Freddie Mercury and the re-release of 'Bohemian Rhapsody'. It was hardly surprising if the duo began to imagine themselves immune to failure. They were having fun, could do anything. At the 1992 Brit Awards, they proved as much.

Drummond is wearing jeans and work boots and fluorescent-orange donkey jacket with 'K2 Plant Hire' emblazoned on the back. He is soft spoken and intense, more comfortable discussing ideas and abstracts than emotion or inner life. His second wife used to worry that he would find God and join the church without warning. It hasn't happened yet, but you can see how it might.

I'd heard that the original plan for the 1992 Brit Awards was to chop up a sheep on stage and throw the gore into the audience. Unfortunately, Extreme Noise Terror, the heavy metal backing band they used for the performance, were vegetarians and refused to be part of such a performance. Oh dear. At the same time, Drummond tells me with absolute conviction that his first wish for the 1992 Brit Awards was to cut off his hand and throw it into the audience.

'I thought that would be the ultimate thing, a way of taking it even further. I was inspired by the story of the red hand of Ulster, which you see on the Ulster flag. That comes from the story that, when the first people came to the region, there was a young man in the boat who wanted to be the first to claim it for his king or laird, so he chopped off his hand and threw it on to the beach. So in my head, I was chopping off my own hand and throwing it into the massed ranks of the music business, claiming it for myself.'

You're telling me that you seriously considered this?

'Yes, but it's hard... you end up going down an avenue where you are almost daring yourself. I bought the implement... and then... Jimmy talked me down, persuaded me that I didn't have to. The sheep became symbolic. They took the place of the hand.'

Extraordinary. I am looking at Bill Drummond, yet hearing the voices

of Hannibal Lecter and David

St Hubbins of Spinal Tap. Perhaps it's me that needs help. At the same time, subsequent events suggest that Drummond should be taken seriously. After the dissolving the KLF, he and Cauty took the additional step of deleting their back catalogue, thus cutting off future sales and royalties. Reconstituted as the K Foundation, their first overt act was to establish a prize for the worst art of the year in 1993. Remarkably, you might think, the shortlist was the same as for that year's Turner Prize. Sculptor Rachel Whiteread won both, and was allegedly warned that, if she refused

the K Foundation's £40,000, it would be

set alight. The Turner Prize was worth £20,000. Whiteread did all right that year. Soon, however, the ante would be upped.

I want to know two obvious things, the first being what possessed Drummond and his partner to burn £1 million, the second being what he felt at the moment he knew the money couldn't be retrieved, that it was gone forever. He tries to tell me that his actions that day were just like the others.

'I think I've always done the same thing, and it's just what it looks like on the outside that's different,' he contends, unconvincingly. 'I don't know what it is, but it's dealing with that same feeling on the inside and working with that.'

What kind of feeling?

'A sort of big thing that you've got to get out, and it's just the wrapping that makes it look different. I'm trying to make sense of something.'

What?

'I don't know what it is.'

To me, as with the way you ended the KLF, it looked like an aggressive expression of loathing, not dissimilar to Richie Edwards of Manic Street Preachers carving '4 Real' in his arm with a penknife, or Kurt Cobain blowing his brains out. Reading 45, I wondered if you were exacting revenge on pop music for the damage it inflicted on your personal life? As we know, the myth and iconography come at a price. I also thought the act said something quite profound about our relationship to money, as the anger felt in some quarters about your not having given yours to charity showed, but we'll have to save that for another time.

'No, I don't think that's right, though it touches on

certain things. Jimmy and I made an agreement not to talk about this for a certain time, because the more we did, the more its impact became dissipated. What I will say is that I've never seen it as a destructive thing. It wasn't to destroy the money. It was to watch it burn.'

Can you imagine ever regretting what you've done?

'Well, obviously, if one of your kids is dying of cancer and there's an expensive clinic in California which can cure them... but other than that, no.'

The great thing about UK pop is that trash and substance can exist side by side, often in the same artefact. In 45, Drummond betrays a rare trace of pride as he tells the story of how a forgotten KLF tune came to be used as an anti-Milosevic rallying cry in Serbia.

You spend your pop life longing for one of your three-and-a-half minute slices of radio

fodder to rise above being mere pop music, to enter the social fabric of the nation and times

we live through, like 'Give Peace a Chance' or 'Anarchy in the UK' or 'Three Lions'. And this morning, I learn that a track that we recorded in a day, never released as a single, thought was crap and had forgotten about has taken on a meaning, an importance in a struggle I hardly understood. Strange.

The most poignant passages of 45 come at the end, though, in a pair of chapters called 'Now That's What I Call Disillusionment' 1 and 2. In the first, Drummond tells the story of how he and Echo and the Bunnymen guitarist Will Sergeant flew home from the US specially to catch a rare performance by San Franciscan avant-garde legends the Residents, in Birmingham Town Hall, of all places. As so often in these instances, what they found was not what they had conjured in their fantasies. The next chapter concerns the KLF's self-mocking final performance, disguised as old men in motorised wheelchairs, at the Barbican in 1997. This provoked righteous scorn in the press, mostly in relation to the irony of the KLF making a comeback, however pranksterish and absurd. Drummond begins by quoting some of the reviews of that show, despairingly to begin with, then with a growing sense of peace and acceptance. Finally, he suggests, he was relieved of all obligation to live the myth, to be credible, bankable, in touch with the zeitgeist. He could pick up his pencil and get on with the rest of his life. That wasn't the best thing that happened that night, though. That involved a journalist from Time Out who had been one of the KLF's most ardent fans.

In 1988, at the age of 12, he had bought our 'Doctorin' the Tardis'. He got on board. Then through his teenage years he had faithfully followed our every move. We were the idealised big brothers he never had. On our retirement from the music business in 1992, he even wrote a book recounting our exploits. Then that night in 1997, after we daubed our message on the grey concrete and were about to speed off looking for some after-hours action, I shook our former teenage Number One Fan's hand and wished him well. In that moment, as our hands shook, I detected something in the glint of his eye: disillusionment, as real and pure as disillusionment can get. Almost as powerful and strong as when I saw that bit of dark curly hair sticking out the back of that Resident's eyeball mask. In our (Jimmy's and my) short journey through pop, that moment of disillusionment was maybe our greatest creation. Without that final state of disillusion, the power and glory of pop is nothing. And when it happens (and if it has not already happened for you, it surely will), savour it, because it very quickly slithers into disinterest and gets forgotten as life marches on.

 Bill Drummond's 45 is published by Little, Brown at

£12.99, on 3 March. To order a copy for the special price

of £9.99, including UK p&p, freephone 0800 316 8171