'It's a gamble. If I win, great. But I've been there before'

MARK Wallinger was immediately installed at 2/1 against as favourite to win this year's £25,000 Turner Prize when the shortlist was announced in May. But with the exhibition of work by this year's four nominees now open - for the first time outside London, at Tate Liverpool - he's now even hotter.

Having fluttered on the horses since childhood, this veteran of the Young British Artist scene knows when to hedge his bets. "It's a gamble. If I win, great," he shrugs, "But I've been there before."

Wallinger, 48, was shortlisted a decade ago for A Real Work of Art, a real racehorse of that name which he made into a real work of art. But his life-sized horse painting lost out to Damien Hirst's pickled cow. This year he's back with a bear of which more later.

He dithered before letting his name go forward again. "I was surprised to be asked a second time. When the Tate call came, I assumed it was just someone asking me to go and give another dreary talk."

"The difficulty is it's such a protracted business," he frowns. An owlish, bookish figure, Wallinger picks his words with care. "Being in that kind of spotlight for nearly seven months is disruptive to working life."

His rivals, each nominated for a particular past work, are Zarina Bhimji, Nathan Coley and Mike Nelson. Wallinger was selected for State Britain, a reconstruction of Brian Haw's anti-war protest, which occupied 40m of pavement in Parliament Square until last May.

"At the end of April I was talking to Tate Britain about making it the subject of a commission. I'd already taken a lot of photos. Exactly one week later, the police announced a crackdown and soon after 78 unblushing policemen arrived to take it away. Sir Ian Blair claimed the process cost £7,000. But now they say it was closer to £111,000. Why don't they tell the truth? All that gave my piece a new dimension, new urgency."

State Britain immediately became a symbol of human liberty - enjoyed freely in a gallery but not as pavement protest. Wallinger was offered £3,000 by Tate for the commission ("which, actually, I'm still owed") though it cost him nearly as much to construct his work of art as it took the police to dismantle the original.

For the show in Liverpool, nominees fill a space in the gallery with whatever they choose. Wallinger's contribution is a two-and-a-half-hour video of himself in a bear suit, roaming around Berlin's National Gallery at night.

Called Sleeper, it was first shown at the Venice Biennale in 2004. Though he won't offer a detailed explanation, Wallinger clearly intends it as a political work. The title, he concedes, refers to a double agent and to the fact that the bear is the heraldic symbol of Berlin, where he lived for two years.

"It's partly about passing that gallery, often at night, and thinking that a lone figure, illuminated in the darkness, arriving with no announcement and sticking around for ten nights, would be interesting."

Born in Chigwell in 1958, Wallinger and his younger sister were brought to central London frequently by his parents. His father ran the family fishmonger's, then went into life insurance. His mother worked in an office.

He studied at Chelsea School of Art and at Goldsmiths ("I'm not sure I learned much except a certain stubbornness, and an enthusiasm for Warhol"). Success arrived in the late 1980s - Charles Saatchi started collecting his work. His Race, Class, Sex (1994) was included in the Royal Academy's Sensation show.

"Class and nationality were obsessions. It was the end of the Thatcher years, and I was provoked by constant fury about the Brixton riots and flag-waving and Elgar." A video, entitled Sleep of Reason, consists of nothing but Margaret Thatcher's lips in movement. "I'm a lot calmer now," he says.

Wallinger's studio is in a converted mint by Kennington Oval. It consists of two rooms, one functional and office-like, the other he calls his "romper room", a place for the imagination to run wild.

On the floor is a series of objects dredged up from the Thames. "When the tide goes out, I find all kinds of riches," he says.

Above the flotsam and jetsam on the floor, delicate balls of silver foil are suspended, perhaps something to do with the moon and tides but he won't say. "Yes some of what I do is inspired by rage, it's true," he says wistfully. "But I always like to have beauty on my side."