Scottish Affairs Committee - Minutes of EvidenceHC 1608

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Oral Evidence

Taken before the Scottish Affairs Committee

on Wednesday 21 March 2012

Members present:

Mr Ian Davidson (Chair)

Fiona Bruce

Iain McKenzie

Pamela Nash

Simon Reevell

Mr Alan Reid

Lindsay Roy

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Examination of Witnesses

Witnesses: Owen Kelly, Chief Executive, Scottish Financial Enterprise, Iain McMillan, Director, CBI Scotland, and David Lonsdale, Assistant Director CBI Scotland, gave evidence.

Q526 Chair: Gentlemen, I welcome you to this meeting of the Scottish Affairs Committee, which is part of our investigation into the impact of separation in Scotland. Before I ask you to introduce yourselves and tell us your organisations, given the prevailing political climate, I feel that I am obliged to ask you whether or not you are now, or have ever been, anti-Scottish, since people who give evidence at these sorts of events are often accused of being anti-Scottish if they produce any comment that does not find favour with the existing regime. It is only fair to warn you also that you can expect a fair amount of abuse and character assassination from those who might not like your evidence. That is a regrettable fact of political life in Scotland today, but we just have to put up with it.

Could I start from this end and ask you to tell us if you are anti-Scottish and what your name and organisation is?

Owen Kelly: Scottish Financial Enterprise is the body that represents Scotland’s financial services industry. As our name suggests, we exist purely for the purposes of promoting Scotland and its success. We are a private membership organisation. The companies that are our members are not only financial services companies but also companies that have a stake in the continuing success of our industry.

Iain McMillan: I am Iain McMillan. I am the Director of CBI Scotland. CBI Scotland is a part of the wider CBI, which is a UK organisation. Our business is business advocacy, to make sure that as far as possible the legislature, Governments and others in public life throughout the UK understand our interests in wider society. We do that in Scotland. We have a great deal of autonomy north of the border on all those matters that are devolved, for example, to the Scottish Parliament. Our council north of the border has the authority to develop devolved policy there independently of the rest of the CBI. In fact a lot of that is about promoting business in Scotland’s best interest.

David Lonsdale: I am David Lonsdale. I am Assistant Director of the CBI Scotland. I would add one very brief point to Iain’s remarks. We represent firms that are small and large and also trade associations within the membership.

Q527 Chair: First of all, could I ask you to describe to us what you think the mood is among businesses and organisations in Scotland about the current uncertainties? Is it something that is welcomed or something that is causing difficulties?

Owen Kelly: I will go first. Specifically on the financial services industry, because that is what we do, I should just put it on the record that we as an organisation are not at the moment adopting a position on the rights and wrongs of the question of whether Scotland should become an independent country, because we see that as a matter for voters. However, on the question of uncertainty, we think there are a number of questions and areas of uncertainty that can be removed now, ahead of the referendum.

The four key areas for us are: the situation and the relationship with the European Union; the impact of independence on the single market for UK services, particularly financial services; financial regulation; and the currency. In all of these areas we think there are questions that can be answered now, which will remove some of those uncertainties.

We do not think that all of those questions, or indeed any of them, can be answered by those who favour independence. We think the authoritative voice on many of those questions will be either the European Union authorities or indeed the UK authorities. We are looking for a lot more certainty on those questions.

It is not reasonably deniable that, since we are having a referendum, we cannot predict the outcome. If we could, we would not be having one in the first place. There is necessarily some uncertainty about the outcome of the referendum, but ahead of that actual point of decision we think there is a lot of uncertainty that could be removed, and that is what we are currently focused on.

Iain McMillan: Like Scottish Financial Enterprise, we fully accept that the decision will be one for the Scottish people. However, it is important that the voters of Scotland who will participate in a referendum need to be as fully informed as possible. Our view is that our organisation should not necessarily be precluded from taking a view on independence. We have seen material produced by the Scottish Government in the form of a 2007 White Paper, a series of national conversation documents and a 2009 White Paper. There has been other material in the public domain, including debates. We ourselves have put questions to the Scottish Government to try and tease out some answers as to what the effects of their policies around independence would be. The view of our policy-making council is that the case for secession cannot be supported at this time.

Q528 Lindsay Roy: I was very interested to read that in your documentation. What questions were not answered? You say you are unconvinced. Where was there a partial response and where was there virtually no response at all? Can you maybe indicate why that was? Do you have any explanation for it?

Iain McMillan: For example, if you take the question about which currency an independent Scotland would use, for now the Scottish Government have answered that question. They have said that they will retain the pound sterling until such time as an independent Scotland may or may not enter the European single currency. That leads to many other questions. For example, if Scotland shared the pound sterling with the rest of the UK, then how would the inflation target in Scotland be set? How would it be met? What would the fiscal arrangements be across the border of the two states?

We have seen what has happened in Europe as a result of there being a single currency across the European Union. What has emerged is that some absence or lack of co-ordinated fiscal policy has led to some problems in the eurozone. How would an independent Scotland manage that and navigate their way forward in that kind of environment? For example, if you had full fiscal autonomy but within a currency union, do you open up the potential to the kind of problems that we have seen in parts of the eurozone?

Q529 Lindsay Roy: That begs the question, in relation to the point you made: to what extent are you independent?

Iain McMillan: Yes. It could be argued that in the world today we are all interconnected and therefore there is a great deal more interdependence than independence. The extent of that balance between independence and interdependence is possibly something that Scottish Ministers would be able to assist the Committee with.

Q530 Chair: I want to continue with this. We have seen the list of questions that you submitted and I was aware that you had some answers. It would be very helpful if you could let us have the equivalent of a report card. If there are nine or 10 questions and you have had three of them answered to your satisfaction, it would be helpful to know that. If the points that you have had responses on have either not been answered or have raised further questions, it would be helpful if we were kept informed of what will be an iterative process with responses going back and forward. Is that possible?

Iain McMillan: We will be very happy to do that. At the present time we have received responses to some questions that we put to the SNP prior to their assuming Government in Scotland in the early part of 2007 and we evaluated these answers then. Since then some of the questions have evolved and moved on. The most recent ones were tabled in a speech that I made in Glasgow in November of last year. We have not had any response to these questions other than the Scottish Government Ministers referring to the 2009 White Paper. I believe the Ministers have referred to that White Paper and said that the answers are embedded in there.

The council of CBI Scotland looked at the 2009 White Paper along with some other material and concluded that the answers were not as full or as helpful as we would have liked.

Q531 Chair: Presumably you would not have made the speech raising questions last November if the answers had already been provided in the White Paper.

Iain McMillan: That is correct. It was a way of airing these questions in the public domain, first, to assist the Scottish Government to bring forward answers, but, secondly, to assist others who are participating in the debate to see what kind of questions we were asking and then to see what answers we get from them.

Q532 Chair: Just to be clear on that, from November of last year when you made your speech, answers came there none.

Iain McMillan: We have had no direct answers from the Scottish Government. What has tended to happen is that perhaps a journalist will approach the Scottish Government and refer to a speech-not necessarily mine, because sometimes others raise questions-and the answer is then given to the journalist and then reported. At least on several occasions, I think, the answer has been that these answers were given in the 2009 White Paper. That is my recollection.

Q533 Chair: You can’t always believe what you read in the papers, of course.

Iain McMillan: Of course not, no.

Owen Kelly: I completely recognise the questions that Iain has raised and agree that they are absolutely questions. Our approach is only slightly different, in that we think there are an awful lot of questions that are not answerable at the moment. That is the reason we do not look to the Scottish Government to give us the kind of certainty we are looking for.

What I mean by that is that, when somebody makes an assertion that, for example, corporation tax will be lower in an independent Scotland, we apply a fairly heavy discount to that because that can only be conditional on a negotiation process with the UK Government, which we cannot foresee, on an election under a system we currently cannot foresee either. It makes very big assumptions that the person making that claim is going to be in power and is going to have the ability, with all the pressures they will be under in terms of public spending, to make particular decisions. At the moment we do not try and engage in that kind of speculation about what might or might not be decided in the future.

That plays out on both sides of the argument. Others can make assertions that Scotland might not be in NATO and therefore there will be certain consequences. We do not try and get involved in that because, until we have more understanding of the parameters of independence, we do not think we can sensibly speculate on those things.

Just to take an example from my own industry of financial regulation, as you can imagine, it is a very big deal for us. The way you are regulated is a key differentiator in international markets. It is very important to us to understand what the implications for financial regulation and the regulation of financial services would be. It seems to us that, under European law, if you are an EU member state-and I do not think anyone is currently suggesting that under any scenario Scotland would not be part of the EU-then that brings with it certain legal requirements that demand you have a regulator of some kind. We want to get that agreed so that we can then move the debate on to understand what that regulator is required to look like, what sort of costs might be associated with it, how it might work and so on.

At the moment we still feel that there is an awful lot of uncertainty about what is even possible under independence. To follow on from what Iain was saying in terms of what the Scottish Government have said about this-and I refer to the same document that Iain was referring to, which was the second in the series of descriptions of what might happen-they have really just said that they think something might be done in partnership with the FSA. We do not think that is possible. It is trying to understand what is even possible and then distilling out of that and putting to one side assertions that might be made on either side of the argument, because they can only really be assertions and that is what we are trying to get away from.

Iain McMillan: Owen makes some very good points there, and I would concur with most of them. We do not know, if Scotland were to become independent, who would form the Government if there was an election shortly after secession, and what their policy on corporation tax would be, for example. We do know that it would mean setting up a separate corporation tax regime. We do not have that in the UK at the moment. Therefore, companies can quantify their taxable profits across the United Kingdom.

If Scotland were to become an independent country, then taxable profits in the two jurisdictions would have to be quantified. There would be a cost in terms of assessment and collection by the Scottish Revenue authorities, by the rest of the UK and by the companies themselves that would be subject to the tax. Therefore, notwithstanding what might happen in terms of the tax structure and the tax rates following any secession of the United Kingdom, what is the Scottish Government’s estimate of the cost to the public purse and to business of that kind of regime? That is a perfectly legitimate question to ask.

Q534 Pamela Nash: I am not sure I entirely follow the logic in your argument there. I can understand what you are saying about the UK and EU authorities having to provide some clarity on the questions that you and others raise. However, we do not know who is going to be in power in the UK or the EU in the future either. Applying that logic to what you said about the Scottish Government and how we do not know for how long the SNP will be in power, we do know that immediately after the referendum SNP will be in power for a year and a half, on the date they are putting forward at the moment. Indeed, we do not exactly know when the referendum would be. They are the ones making the argument at the moment for Scotland to separate from the rest of the UK. Am I right in saying that you do not feel that they should be answering these questions at the moment?

Owen Kelly: I do not disagree with what you are saying. If you are proposing a big change like that, it is up to you to justify and explain it. I do not have any issue with inviting the SNP to explain how they think things should work. My point is that a lot of the most important decisions will be decisions that they will not take. Iain mentions the currency. Determination of how the currency will work in the UK is primarily going to be a matter for the UK authorities. How Scotland’s membership of the EU will be managed and whether it would inherit the UK opt-outs, should it ever vote for independence, is a very big issue for our industry. At the moment we have to be strict and even-handed, as we all are.

There is an assertion by the SNP that that will be a fairly smooth process; it may take a wee while, but it is going to be quite straightforward, and, as I understand their view, all the opt-outs will be inherited by Scotland.

There is another point of view from the UK Government, as I understand it, which says that it would be a secession-that word has already been used-and, therefore, under international law there would be a whole load of consequences that would essentially mean that none of those opt-outs would be inherited. The opt-out from Schengen and the euro would not apply.

My point, just to go back to your question, is that the Scottish Government or those who favour independence will always emphasise those interpretations of law that suit their case. Of course that is understandable, but who will give us the authoritative answer ahead of the referendum? I do not think that will be the SNP. I think it will be the European authorities.

Q535 Pamela Nash: But they still have a responsibility to provide it, as well as other authorities.

Owen Kelly: It might be helpful to the Committee if I just explain where we are, and I suspect we are in a very similar position to the CBI on that particular European question, where we have obviously written to the Commission. We know what the Commission are going to say. We probably all know what the Commission are going to say. They are going to say, "It is not for us, and this is a bridge we can’t cross until we come to it." They will not immediately rush forward and give a clear interpretation. The next step for us, and perhaps for others too, is to approach the UK Government and the Scottish Government jointly and say, "Would you make a joint approach to the European authorities so that we can get some clarity about what the consequences of a vote for independence would be for continued membership of the European Union?" As I say, the authoritative voice on how all that will work will rest there; it will not rest with the SNP. We need to distinguish between the authoritative voice and the aspirational voice of those who are arguing a particular case.

Q536 Simon Reevell: I have met with an organisation and a company that are both household names in Scotland. They have both said to me, individually from the company’s perspective and also on a representative basis for the association, that they felt they could not push for the sort of answers you are talking about because, if they were perceived to be rocking the boat, they might pay for it if independence came about. Is that a fear that you have encountered among your members?

Iain McMillan: Yes, it is a fear that has been expressed by some members. Not all members have expressed that fear but certainly some have, and it is not just if independence were to come about. There is a fear among some that, if opinions are expressed or difficult questions are asked, then, notwithstanding the future of the constitution in Scotland, the business leaders could be subject to ridicule.

Owen Kelly: On that specific question of whether people would be concerned that somehow they would suffer in some way if independence were achieved, I must say that none of our members have said anything about that. I echo Iain’s point about the nature of the debate. It is a highly politicised debate and it is difficult for business organisations or business people to find their place in that debate. I thought the experience of Michelle Mone was particularly awful. I thought that was a very bad example of Scottish politics operating. As you will see from our comments-and I am sure from many of your other witnesses-we are all treading carefully.

Q537 Simon Reevell: The impression I had was that there was a fear that, if you were seen to ask an intelligent and necessary question from the perspective of business, you would be treated as if you had formed a view, were on the other side and dealt with accordingly. It was as clinical and unpleasant as that. I see you nodding your head. Is that something you have encountered also?

Iain McMillan: There have been some instances of that, certainly. As I say, it is not necessarily a view that is shared by every business person or every company in Scotland. Certainly there have been some instances of discomfort.

Q538 Lindsay Roy: I understand that some businesses have been publicly unwilling to put their heads above the parapet and declare a position. I can understand why. Are you aware privately of a number of businesses who have expressed concerns about deals not done or a postponement of investment? Is that the kind of thing that comes your way?

Iain McMillan: We have heard of instances of that, but I have to tell the Committee that these are not first-hand instances; they are second-hand. David was approached by a business member not so long ago. The business said to us that most of their customers were in England and, if Scotland seceded from the United Kingdom, they would move out of Scotland and headquarter south of the border.

Q539 Chair: On the same issue of deals not proceeding and so on, is this uncertainty destabilising progress in business?

Owen Kelly: Like Iain, I could not name a particular company.

Q540 Chair: We would specifically ask you not to name them.

Owen Kelly: As I have said before, we are having a referendum and therefore there is uncertainty. Business deals with uncertainty by making contingency plans. I have to say that I do not know why anyone would be surprised by that. Uncertainty is something that companies manage. Companies are dependent for these purposes on the extent to which their businesses are affected by the possible consequences of independence. Part of what we are now about is understanding the consequences of independence better should it come to pass, precisely to inform our members and other businesses about what sort of issues they need to take into account.

We all swim in the same sea, so I do understand the political sensitivities around some of these points, but I do not think anyone should be surprised that business takes some account of uncertainty that appears in any situation. There is currency uncertainty and market uncertainty. It is one of a number of uncertainties that people are managing. Are they doing that? Yes, of course, but then I don’t know that anyone could expect them to do anything else.

Q541 Lindsay Roy: But like the population at large, wherever uncertainty can be removed by some clarity, that would be helpful.

Owen Kelly: Exactly, and that is very much what we are all striving for at the moment.

Iain McMillan: I would echo Owen’s points there. This is good management and good due diligence. If I was on the board of a company, I would certainly be encouraging the chief executive-and in fact the entire board-to risk assess secession in terms of its likelihood and its impact. That is nothing other than good risk management in the stakeholders’ interest.

David Lonsdale: We know a number of companies who have embarked on that type of very detailed work. They have asked for support from us and no doubt from other trade organisations of which they are members for help and assistance on that to try and map out some of the practical issues and implications that an independent Scotland would mean for them. One of the challenges is that the debate often gets wrapped up in currency, central bank independence and things like that. There is a long list of second order issues that companies face, whether it is on taxes, regulation, the trading environment, competition policy, or takeovers-things like that. There is quite a deep range of issues, such as employment law, corporate homicide and things like that that companies are interested in. These companies that tell us they are undertaking risk assessments are looking to identify these things, map them and then work out and attribute some sort of risk to them.

Q542 Lindsay Roy: Can you quantify that? Are we talking about a handful of companies? Has it increased in terms of expectation over the last few months, as opposed to over the last year?

David Lonsdale: A lot of our work just in the last couple of months has been talking to companies who are doing this. There is a great demand for assistance to try and help them and bring members together to discuss some of these common cross-sectoral issues that they will be facing.

Chair: If it is of any reassurance to you, we are following some of these issues. We have just had a paper in from Professor McLean indicating that the Czech and Slovak currency union lasted for five weeks. I am sure that will not be entirely reassuring to your members, but we thought we would just draw that to your attention. Iain, do you want to follow this up?

Q543 Iain McKenzie: Good afternoon, gentlemen. Could you tell us if there is any evidence you are aware of from Canada and Quebec relating to the economic impact of constitutional uncertainty on business and the economy?

Owen Kelly: I can pick up very quickly on a couple of points from a financial services perspective. My understanding from talking to people who were there at the time, and also from talking to my opposite numbers-these were informal conversations relating to Montreal-is that it was negative. A number of the largest life companies moved ahead of the first referendum. Then of course there was a whole carry-on until the Canadian Clarity Act. It is interesting that the federal Government then felt that it had to introduce an Act of Parliament to make sure that any referendum was conclusive. My understanding is that the prolonged uncertainty, with a series of referendums, was not positive for financial services. I think people would say that from Montreal.

Iain McMillan: My understanding is exactly the same. There was an exit of some business from Quebec to other parts of Canada ahead of the referendums, but it is quite a long time ago now and I do not know what the extent of it was. That is what we have been told by businesses over in Canada at the time.

David Lonsdale: Certainly a small number of businesses have told us that they are embarking on quite a detailed risk analysis. They have said that the location of their company headquarters is something they are looking at.

Q544 Lindsay Roy: Can I ask what risk mitigation measures some companies might take?

David Lonsdale: As I alluded to, they are embarking on this piece of work. In most instances I am not aware of companies who have completed that work. As Owen and Iain have both alluded to, there are a lot of areas where there is a serious gap in knowledge about not just what independence might mean but what the business environment would be like in a post-independent Scotland. There are a lot of areas. We have obviously touched on things like employment, taxes and regulation.

Q545 Lindsay Roy: There is quite an investment of time and talent in investigating this, when it might otherwise be promoting the business itself, its growth strategy and so on. Is that a fair summary?

Iain McMillan: Certainly it is exercising minds that could be exercised in different ways-in growing the business and so on.

Q546 Lindsay Roy: Particularly at a time of high unemployment.

Iain McMillan: Particularly at a time of high unemployment. We could argue that, if the threat of secession was not there, we would all be doing better things with our time as well.

Owen Kelly: Iain makes the perfect point. Just to be fair, in our industry, the eurozone probably takes the prize at the moment for the main source of uncertainty in work of that kind. As Iain rightly says, had this issue not grown in salience in the last couple of months, there are people having to do work on this who of course would be doing other things.

Q547 Lindsay Roy: There are known unknowns and unknown unknowns.

Owen Kelly: Indeed.

Q548 Iain McKenzie: What are your main concerns in terms of the potential economic impact of, first, devo-max and, secondly, separation? You have drawn the short straw.

Iain McMillan: Let me answer your question in my own way here. CBI Scotland has had a long position that supports Scotland remaining part of the United Kingdom. That support is not ideological. It is about what is good for Scotland’s economy and business in Scotland. Our view is that the UK offers businesses located in Scotland a very large single market. There is something in the order of magnitude of 70 million consumers in one nation state and jurisdiction with a macro-economy, and the laws and rules governing the operation of our businesses and economic affairs are mainly uniform. That level playing field of a single market is highly prized.

Independence would need to make Scotland a better place for business and the economy, and a place to do cross-border trade. Because of that, all the advantages that we see in the Union would have to be outweighed by the advantages of independence that would compensate for the loss of these advantages. There are real issues here. There is the issue of the Scottish public finances. It seems to us that the case for secession is heavily dependent on oil revenues, for example.

We know that oil and gas output peaked in 1999. There were 4.5 million barrels of oil and gas equivalent a day. That was down to 3.3 million in 2005, and 2.2 million barrels of oil and gas equivalent a day in 2010. While there are many reserves left in the North sea, the trend is fairly clear, yet without the contribution of oil and gas reserves, Scotland’s public finances and its spending power on business could be a very serious problem for an independent Scotland.

There are then all the questions that we have raised in the past. Owen has raised some. His chairman raised some very legitimate questions at their annual dinner last year on some of the things we have been talking about here. There is fiscal co-ordination, the currency, the costs of doing business across the Anglo-Scottish border and the risk of divergence of laws and rules so that companies on one side of the border have to be regulated or comply with different laws south of the border. All of that makes cross-border trade and growing businesses much more challenging. That is where we come from in all of this. We agree with Ms Nash that it is incumbent on those who propose secession to make the case that doing so would make Scotland a better place for business and the economy. It is quite a difficult case to make.

Owen Kelly: I have a quick comment on the devo-max question. From our industry’s point of view-maybe not all industries-there are almost as many questions about something like devo-max in terms of impact and cost. We did a little bit of work simply on the question of whether corporation tax should be devolved, because that was the issue of the day six months ago. We produced a list of questions that we talked to the Scottish Parliament about, but-like Iain, I suppose-we have not had any answers.

From our industry’s point of view, these were not small questions. A good example is double taxation treaties. These are the international treaties under which tax is paid in different jurisdictions. These are very important for those international companies who are operating in Scotland. Those kinds of questions are equally prominent for devo-max as they are for independence. On some of the bigger questions like EU membership and financial regulation, I am not sure where that sits under a devo-max model, but then devo-max can be all things to all people anyway.

My final observation at the moment on devo-max is that there have been various initiatives to talk more about devo-plus or devo-max, all of which we have not become involved in at all. The reason is that the question for the referendum remains a matter of political disagreement between London and Edinburgh, with certainly an aspiration or at least an openness on the pro-independence side of the argument to have some question around devo-max. We do not want to get involved in something that still seems to us to be a political lightning conductor for wider differences between the two Governments.

Iain McMillan: I did not refer to devo-max. I would just echo what Owen has said there. A purist would regard devo-max as Scotland raising all its own taxes and then remitting a sum of money for those matters that would take it into separate tax systems. There would be significant complexities associated with that and resultant costs.

Owen Kelly: It might take it into separate tax systems and all sorts of things.

Q549 Chair: Have you also submitted to the Scottish Government or the SNP the same shopping list of items requiring clarification as the CBI?

Owen Kelly: I do not think our list is as long. We have four big ones, which I have already mentioned, and we have indeed put them to the Scottish Government. As I say, for the reasons I have already explained, we are cautious about accepting assurances in response to those questions, which can sometimes be driven by a desire to promote a particular side of the argument.

Q550 Chair: Working on the basis that you are not daft, you could presumably identify that. If these things then raise further questions, again it is a question of an iterative process. Have you then responded? I am not clear about what we could look at. In due course, we are going to be speaking to representatives of the Bank of England, the Treasury and various Government Departments. It would be helpful to us if we knew there had been exchanges and where those advocating separation had reached, so that we could clarify the case. Most of us were not aware that the Czech/Slovak currency union had lasted five weeks until it was raised with us. Therefore, the assurances we have been given about keeping the pound are perhaps not quite as solid as they might appear. We will have to consider ourselves how we explore what led to that break and what needs to be done to avoid it.

As you know more about these things that you specialise in than we do, it would be helpful, just as we asked Iain for a shopping list of items that require clarification, if you were also able to give us something that we in turn can raise with Westminster representatives to try and seek clarification.

Owen Kelly: I am very happy to do that in writing.

Q551 Chair: In writing is preferable. If you just tell us, I am not sure we will understand. These are complex matters and we need to study them. Martin Wolf and others gave evidence last week. I pointed out that I had a qualification in economics but it was O-Grade, and therefore we would need to take advice on some of the points made.

Owen Kelly: I did want to say-and now is the time to say it-for the next stage of your inquiry, when you are seeking further issues, we will simply give you that list to add to that list of issues.

Chair: That would be very helpful.

Q552 Mr Reid: This is more for the CBI. You raised 11 questions with the Scottish Government. Would some of them be more important than others? Can you tell us what you think are the really important ones out of the 11?

Iain McMillan: They were all important, of course; that is why we put the questions to them. The fate of Scotland’s position in Europe and the currency issue are very important matters. For example, we have heard in the public domain in the debate that there is some expert opinion that says Scotland would have automatic entry to the European Union, that it would inherit the United Kingdom’s opt-outs and so on. There is other expert opinion in the public domain that says no, Scotland would need to apply as the seceding state and, if admitted to the EU, would have to accept the acquis communautaire-in other words, all the laws and rules that pertain.

The treaties do not provide for the division of a nation state in this way. Therefore, we have asked the Scottish Government whether they have approached the European authorities to ask for an opinion from them. If the answer is that the treaties do not provide for this and it would be a decision for the European Council, then at least we know that there is an uncertainty there. We do not know what conditions the European Council would place on admitting Scotland.

Q553 Mr Reid: Do you think that would need a unanimous decision by every member state?

Iain McMillan: I believe so.

Owen Kelly: Any treaty change would require every capital to sign up.

Q554 Chair: And possibly a referendum as well in some of them. There was the question of Ireland where there was certainly some evidence.

Owen Kelly: Yes.

Chair: We are hoping to get people here who will confuse us further on these complex matters.

Q555 Mr Reid: On currency, if, for example, we ended up in a situation where Scotland and England had different currencies, are you able to quantify what sort of costs would be involved?

Iain McMillan: No. We are not able to do that. We have asked the Scottish Government as the proponents of independence to let us know what they have quantified these costs to be. They would be considerable. If the currencies north and south of the border were different, then that would introduce exchange rate risk into transactions. There would be the costs of hedging to protect against exchange rate risk and the costs of moving from one country to another. These are very important questions to which we do not have answers other than the Scottish Government’s view that they will remain with the pound sterling.

Q556 Mr Reid: In the Czech and Slovak situation, what appeared to happen was that because people in Slovakia were worried that the currency union would break down, they moved money into the Czech part before the break-up to get a better deal. Is that something you might see firms doing in a separate Scotland, even if we were initially using the same currency as England?

Iain McMillan: Some firms might and some firms might not. There are firms in Scotland that account in the US dollar. That may or may not be an issue for them. It would depend on the view of the company and the nature of their business and transactions. For some, yes, they could well do.

Q557 Mr Reid: What type of business do you think would be worst affected in that sort of uncertain situation?

Owen Kelly: As Iain says, if you were really contemplating a separate currency-as I understand the SNP’s position, they are not saying that is something they are contemplating-

Iain McMillan: No.

Owen Kelly: As Iain has already articulated, there are lots of questions that then follow about how you would use sterling and what the basis of that would be. In so far as we know at the moment, there is no suggestion that we have currency risk built in. As Iain rightly says, if you did have currency risk, then that would be a significant question for a number of financial services companies as to how they dealt with that emerging risk.

Iain McMillan: And what would be the fate of the value of the two currencies after they broke apart? If one was likely to rise and the other to fall, a number of company treasurers could well decide to move money into the currency that they regarded as the strongest, but these are all "what ifs".

Q558 Mr Reid: What is the practical impact on business if currency movements like that happen?

Iain McMillan: If that currency movement happened, it would depend which way the currency moved. If, for example, a Scottish pound fell below the level of sterling, then they could find that exporting into the rest of the UK and to other jurisdictions could make them more competitive, but it could make their input costs higher if they were inputting raw materials from other parts of the world than Scotland. Alan, you are quite right to ask these questions, but, again, they are very difficult to answer until one is in that situation, which makes it all the more risky.

Q559 Mr Reid: I will carry on probing to flag up some possible complications. Say, for example, that oil revenues meant the Scottish pound actually went up very high, compared to the English pound. What consequences would that have for businesses?

Iain McMillan: It is interesting you should ask that, because that was a question that was asked in the 1970s when the pound sterling became a petrocurrency. There was a concern that an independent Scotland’s currency could rise dramatically as a petrocurrency and make its exports in many other industries very uncompetitive. Of course, there was also the issue that an independent Scotland with, say, 90% or 95% of the oil revenues could have left the rest of the United Kingdom at that particular time pretty well impoverished. Of course that did not happen.

Q560 Mr Reid: If the rest of the UK becomes relatively impoverished, does that have an implication for any company in Scotland that is selling to England?

Iain McMillan: It could do, but of course the 1970s is a long time ago. The contribution of the oil revenue proportionately to England is a lot smaller to the whole of the UK than it is to Scotland. Yes, indeed, if a Scottish pound rose, then it could make exports of other goods and services more expensive, although it would make the input costs less. There are costs and risks either way.

Q561 Mr Reid: Are you able to identify particular sectors that would be worst affected if we had a situation of separate currencies?

Iain McMillan: Probably those sectors that need to manufacture goods in one jurisdiction for another. Those businesses in the service sector, on one side of the border or the other, where they are creating the service in the jurisdiction where it is being offered might be less affected. I would need to give this a lot more thought than I have done. It would mainly affect the cross-border physical movement of goods, and perhaps also financial and other services where the product is created in one place and sold in another.

Q562 Mr Reid: Are you talking about the whisky industry?

Iain McMillan: The whisky industry is a global industry these days. If the Committee was to invite representatives of that sector to ask them, they could do a better job of it than I can.

Chair: You are too modest.

Mr Reid: You have done very well.

David Lonsdale: The Scottish Government’s Global Connections Survey is published every year. The most recent one was published in January. It has sectoral detail of sectors selling into the rest of the UK. It is worth somewhere in the region of £44 billion or £45 billion to the Scottish economy. International exports outwith the UK are somewhere in the region of £22 billion. Owen’s sector is one of the largest into the rest of the UK. It is somewhere in the region of £10 billion or £11 billion.

Owen Kelly: I would just make two quick points on currency. This is reflecting the fact perhaps that, so far, no one is really arguing for a separate currency. Our focus has been very much on how the use of sterling in an independent Scotland would need to be run. Going back to my point about understanding the limits of what is even possible, there is a strong connection between the management of the currency and the central bank, the lender of last resort to the banking system, and also the prudential regulation. That is the big picture regulation of how much debt is in the banking system.

I am simply going on what I have heard the First Minister and other Ministers in the SNP Government say. My understanding is that, if it is the case that sterling is used in an independent Scotland, it will be used with the UK still as the central bank. As I said before, it strikes me that these will be decisions for the UK authorities. It seems to me that there might be a process of negotiation, but at the end of the day the people who run the currency are the people who run the currency. The question then is whether there would be any involvement for a Scottish Government in the setting of interest rates and other monetary policy decisions. I suggest to the Committee that the people who could tell you the parameters of that debate are probably the UK Treasury.

Q563 Mr Reid: For a while, between the 1920s and 1970s, Ireland effectively was a sterling area. Do you know if the Irish Government were consulted by the Bank of England every time they took decisions?

Owen Kelly: I am not an expert on that period, but I know that there are plenty of other countries in the world-they have popped up in some of the political debate in Scotland-where a currency is used on what is technically called a "dollarized" basis. That is nothing to do with dollars; it is just the name for using someone else’s currency. The Irish did have that system, but I do not think it was a currency union. I do not think there was any monetary policy involvement. I think it was a peg.

Chair: It was pegged; I am sure it was pegged.

Mr Reid: Yes, it was pegged.

Owen Kelly: Iain is absolutely right on everything he said about the currency. One currency issue Iain did not touch on is the European interest. For example, Denmark has its own currency but it is pegged against the euro. That is a very solid peg and all of their economic decisions are based around that peg. As I say, nobody seems to be arguing for this at the moment, but, if you were to have a separate currency on a pegged basis, that would still introduce an element of currency risk because it is a separate currency, even if it is pegged. There are these different models, but, as I say, I think the parameters of the possible will be set by the UK authorities.

Chair: The reason why we are exploring, quite rightly, the question of a separate currency is that until six months ago, the question was that Scotland would join the euro. That seemed to be quite clear, and then the euro went belly up. The line changed suddenly and it was a question that it would always be sterling. Where will we be in six months? Until about three weeks ago we did not know that the Czech and Slovak currency union had only lasted five weeks. So there are a whole number of issues there that we still need to explore.

Q564 Pamela Nash: Just before I move on to my final question, I wanted to pick up on the topic that Simon and Lindsay raised. Each of you went on to speak about the uncertainty and ill-effect that that could have on business. I want to be very clear before we move on. Have any of your members told you that they will not publicly discuss their fears about separation or the length of time until the referendum because they are frightened that they might be labelled as anti-Scottish or lose public or other contracts?

Iain McMillan: A number of our members have said that they will not enter the debate-at least for now. They have customers or shareholders that may support independence or support the Union, and therefore they have to have regard to that. Yes, there are a number of companies that have said, "Look, it is not in our interest to fall foul of any Government in this debate, and therefore we will take decisions that are right for the business over time as a result of what happens, but to enter the debate would be extremely difficult for us."

Owen Kelly: To be clear, none of our members has said that for the reasons you mention.

Chair: One of the concerns for us is that we are not necessarily getting an accurate and fair representation of all views, simply because some people are being bullied and intimidated into silence. They recognise that, if they put their heads above the parapet, the cybernats and others will just simply attack them with a character assassination. We have seen it in Scotland for a while. Pamela, you had a formal question.

Q565 Pamela Nash: Clearly we need time for legislation to be passed and we need time for public debate on these issues and clarification. That is what our inquiry is about. I would ask each of you to take into consideration that, if this uncertainty is causing concern for Scotland’s businesses, how long do you think we should wait until we have the referendum? If you had to put a date on when the referendum should be, when would that be?

Owen Kelly: I will go first. The two Governments have yet to agree on a date, so I am afraid I am not going to pluck a date. All I would say is that there may be other arguments, but I cannot think of any business arguments for taking longer than is necessary to achieve a conclusive result.

Q566 Pamela Nash: That is very diplomatic of you.

Iain McMillan: Our members’ position is the same. Some members take the view that the date of autumn 2014 will provide time for a proper debate and so on, but the prevailing view is that the referendum should be held sooner rather than later. Our members are not parliamentarians. They saw that the 1997 referendum on devolution happened fairly quickly. The referendum on AV happened very quickly. Therefore, from a rather uninformed position, they cannot see why this referendum cannot be held sooner rather than later. As I say, our members are not parliamentarians and, therefore, it is not a totally informed view. Nevertheless that is the prevailing view: sooner rather than later.

Pamela Nash: There are very many informed people who have that view also.

Q567 Fiona Bruce: I have a final question, gentlemen. CBI Scotland, in its response to the UK Government’s consultation, said that "further changes to the devolution settlement beyond the current Scotland Bill should lie outside the scope of the referendum".

Iain McMillan: Yes.

Q568 Fiona Bruce: We are interested to know what you think would be the most appropriate means of progressing further devolution.

Iain McMillan: There is a consensus here. The Commission on Scottish Devolution was set up by a vote of the then Scottish Parliament and the Ministers in the UK Government. There seemed to be cross-party consensus for the establishment of the Commission, and then there were manifesto commitments to implement most of the Commission’s findings and recommendations. Going forward, I think the statements of the current Secretary of State for Scotland have been that changes to the Scottish Parliament’s power should move forward by consensus. That is probably the right way to do it. It might mean moving forward some kind of commission. There was the Calman Report in 2009. This will not be the end of the devolution story. Matters will move between jurisdictions. It has to be done in agreement between two Governments and two Parliaments. If Scotland secedes from the Union, that’s it; there will be secession negotiations and we will go our separate ways. By that, we mean that a devolved Scottish Government cannot impose its will on the UK Government or Parliament by saying, "We want these matters devolved". It can only be done by agreement. That is why our members believe that needs to be outside the scope of the referendum.

Q569 Chair: That is very helpful. We are drawing this matter to a close. You will let us have additional shopping lists and let us know what things have been clarified. While you are here, we have spoken to you before about banks and the extent to which they have been willing to lend to companies in Scotland. There was the agreement about Merlin and all the rest of it. Are we now in a position where companies in Scotland that you would recognise as being worthy of being the recipients of loans are getting them, or are there still impediments in the system?

Owen Kelly: This is really a question for Iain with his broader membership, but from our point of view I have two quick points. We have members, banks, who literally say, "If you hear from anybody who can’t get a loan, give them my number." The banks are very much in the business of lending. When they say that there is an absence of demand, they are definitely not saying that for any other reason than the fact that there is a bit of an absence of demand. It is probably a more competitive market than it has been in the past. We have Santander, Barclays and HSBC. They are very keen to be lending. That does not mean that the prices of loans are going to be the same as they were four or five years ago, but then we know the consequences of that. There has been an economic change and everybody knows that.

In answer to your question, I would say that the desire is absolutely there to serve these customers on the part of the banks. Whether the price works for everyone is probably something that only a lender and a borrower can determine. The appetite of the banks to be engaged in this business is very strong.

Iain McMillan: I would agree with that. We know over the decades that, when the country goes into an economic downturn, bank impairments in terms of the defaults on loans tend to rise. The risk appetite that banks have in the good times is lessened during periods of economic downturn. That has certainly been a characteristic of the downturn that we have seen, and we are hopefully climbing out of that now.

In addition to that, there are capital adequacy requirements on banks that have increased. When that capital adequacy requirement rises, the funds that are available for lending tend to get restricted as well. It is a very difficult circle to square. Owen is right also that businesses, where they have not had to borrow, have tried not to borrow because of the economic downturns. I think it is getting better, and of course the current UK Government have put some measures in place to try and improve the situation. We just need to monitor that going forward.

Q570 Chair: So it would be fair to say that everybody will be happy.

Iain McMillan: I was a banker for 23 years, and not everybody is happy all of the time. There are small business people who go to the banks and they are declined. There will always be some business people who will feel that they have been unfairly treated.

Q571 Chair: I put it in that way because we had various meetings with the road haulage people, the construction people and the video games folk. At that time, all of them felt that the banks did not love them or understand them. I am trying to clarify whether or not that has improved. There is a feeling obviously that some projects will be turned down, but, in general, the banks have a greater degree of understanding and are more willing to lend for viable propositions. As I said, we just want everybody to be happy. We do not want to have sessions where people come along and complain to us. We just want to hear that things are going fine and that you are getting on with it.

Owen Kelly: I saw the chairman of RBS being challenged because he said that 90% of loans were being agreed. That seems to me a pretty high figure. In answer to your question, "Is everyone happy?", in the economic circumstances we are all having to live in I don’t think everybody is going to be happy, no. That is because of the economic circumstances. I do not think it is because of some sort of unwillingness or effort on the part of the banks to be unhelpful. They really are bending over backwards to be helpful. As I say, I have members who say, "If you hear from people, let me know and I can put them in touch with these people who are looking for the business."

Q572 Chair: So you’re the man.

Owen Kelly: It depends what you mean by that, but people are keen to talk.

Q573 Chair: That is very helpful. We do want to explore a couple of things about the banks. What is your view as to whether or not a seceded Scotland would have been able to sustain the Royal Bank of Scotland and HBOS had they collapsed after independence? What would have happened there in your view?

Owen Kelly: It is very difficult, of course, because we are speculating against a situation that is completely theoretical. The numbers show that, all other things being equal, it would not have been possible. That does not, however, mean-and I am being even-handed here-that the circumstances at the point of that decision being taken would necessarily have been the same, but if you think that they were, then the sums only point one way.

Iain McMillan: The sums involved were very large indeed. I do not think I am being partisan by saying that the Scottish public finances of an independent Scotland would have been overwhelmed.

Q574 Chair: Under separation, who gets the debt of the banks?

Owen Kelly: I would simply say that that is a very good example of the kind of thing that it is very difficult to know in advance. Until it gets down to negotiation it is hard to say. We will all have assertions on either side of the argument. If it were possible to get clarity on an issue like that ahead of the referendum, that would be fantastic. Maybe it should be on our list. I suppose my fear is that that is going to be something we simply cannot know ahead of a negotiation process.

Iain McMillan: Yes, indeed. In terms of time scale, who knows? Maybe these debts will have evaporated by that time. I have no idea. The UK Government, quite rightly, want these sums of money back for the taxpayer. It might not arise, but there would need to be negotiation about the division of the sums owed.

Chair: When you said that the debt might not arise, I did look out the window to see if there was a pig flying by. I suspect that is not entirely likely. Lindsay, you wanted to make a point.

Q575 Lindsay Roy: Unless you have some vital information, it is very difficult to make an informed choice. Therefore, to some extent you are almost writing a blank cheque in the way you vote. You would be basing it on a lack of information; you would not know what to trust and what not to trust.

David Lonsdale: As I said earlier on, there are serious gaps in the information available about what the business environment would look like post an independence referendum on the terms of separation negotiated between the two Governments. There is a lot of uncertainty. Any clarity and certainty that this Committee can bring to the debate would be most valuable.

Iain McMillan: That is absolutely right. Lindsay, one of the questions that needs to be answered going forward by the Scottish Government, as far as they can, is: what will the full cost of statehood be, taking all these factors into account, and how can that be supported?

Q576 Chair: Do you have any view on the way of dealing with this pig-in-a-poke argument suggested by some of the academics we have had in front of us? They said that there would have to be a second referendum, because the SNP will put forward the case for separation, but all of that will be a wish list, and it will then be subject to negotiation, with nobody knowing how those negotiations will turn out. Since it might end up with a settlement that is wildly different from what was sought, that in itself would require to be ratified by the people at a further referendum. That is not a question that has crossed your radar.

Owen Kelly: I can only give a personal view, because we have not consulted our members. There is a real logic to that point of view. If you have a vote and then a negotiation process that leads to a radically different outcome from what the expectations might have been, you need to deal with that somehow.

Q577 Lindsay Roy: But that would lead to a much longer period of uncertainty.

Iain McMillan: It would. I agree with Owen that there is a certain logic to that. There is also a certain logic that, come the referendum in 2014, it is to be hoped that the Scottish people would have enough information to take an informed decision, and that they will not be in a pig-in-a-poke position.

Q578 Chair: The worry is that, if your questions are not being answered, there is a pig in a poke then. That is the nature of it. Is it just a cap?

Iain McMillan: That is absolutely right. There is the risk of a pig in a poke. That is why CBI Scotland has made it clear that, for now, the Scottish Government’s proposals for secession cannot be supported.

Chair: I will bring this session to a close. Thank you very much for coming along. We all hope that you do not get unduly abused for the answers you have given us today. Let us hope that the cybernats have not been watching, and don’t decide to character assassinate you.

Examination of Witnesses

Witnesses: Dr Matt Qvortrup, Senior Lecturer of Comparative Politics, Centre for International Security and Resilience, Daran Hill, Managing Director, Positif Politics (yes campaign), and Rachel Banner, True Wales (no campaign), gave evidence.

Q579 Chair: Lady and gentlemen, I welcome you to this meeting of the Scottish Affairs Select Committee. I apologise for being slightly late in starting; our previous session overran. Only one of you was in for the previous session. We probably have to ask you at the beginning whether or not you are anti-Scottish. It tends to be the situation in Scottish politics at the moment that anybody who says anything that is disliked by one particular side is then denounced as being anti-Scottish, so I suppose I have to ask you whether you are now, or have ever been, anti-Scottish.

First of all, could you introduce yourselves and say which organisation you are representing? In the case of the two campaigners, would you say a little bit about the groups of which you are part?

Daran Hill: My name is Daran Hill. I am a political consultant. I was the Campaign Director of Yes for Wales last year and also the national organiser of Yes for Wales in the 1997 referendum. Yes for Wales is an umbrella organisation with representation from all four political parties. Outside the political spectrum, there was campaigning for a yes vote in last year’s referendum on the extension of Assembly powers.

Dr Qvortrup: My name is Matt Qvortrup. I am a political scientist by training. I have been writing about referendums for about 20 years now, which makes me slightly unique. I am currently at Cranfield university, but I am also affiliated to the Centre for Policy Studies, which is a think-tank here in London.

Rachel Banner: My name is Rachel Banner. I represent True Wales, the No Campaign in last year’s referendum. We were a cross-party-even no-party-group of ordinary people who got together because we were concerned about the direction in which devolution was going. We felt it was all going too far. We came from all different backgrounds and were just ordinary people.

Q580 Chair: We have a number of questions directed to the two campaign groups, and then we will come to you, Dr Qvortrup, if that is acceptable to you. If there is anything in particular that you want to add from your 500 years of experience of studying referendums, then obviously you can do so. Similarly, if the two campaigners want to add anything while you are doing it, we can manage that. The focus in the first section is intended to be about the campaigns, and then we will come on to you, Dr Qvortrup.

I would ask the two campaigners first of all about their views on the existing regulatory framework governing referendums. Is it fair and effective from your experience?

Daran Hill: Having played a key role in two referendums, I would certainly prefer the experience of 2011 to the experience of 1997. The PPERA sets a certain number of ground rules that enable both sides of a campaign to approach the issue on a more even and structured basis. It makes you think harder about a sense of accountability, both financially and politically, and, with the existence of the Electoral Commission, there is a reference point in order to pose questions or to seek advice, though that advice is not always as clear as one might anticipate it would be when you are asking the question.

Chair: We will maybe come back to that.

Rachel Banner: I think it is very difficult under the PPERA for a group of ordinary people to take part in a referendum and to accept the funding. I know we had problems over the funding that affected the Yes Campaign as well. The regulations meant that it was impossible financially, because you could only spend money on infrastructure-offices and pot plants or whatever. You could not spend it on campaign literature. In a modern society, where communications tend to take place over the internet anyway, why waste so much money on infrastructure costs when the money should really be spent on information to help people understand the issues? I do not think there is a problem with it if you have yes and no sides equally funded, in terms of information.

The other problem is that if you have an umbrella group-the Yes Campaign was comprised of politicians, the third sector, organisations and, I think, the unions-we did not have any of that. We were ordinary people. There was no way we were going to be able to afford rents for properties for the referendum period, particularly since the money does not get released until the referendum virtually starts. It is not really suitable from a financial viewpoint.

When you think about referendums, very often they are supposed to be about people getting involved in politics. That is the very basis in theory, although I know that very often it does not work like that. It was impossible for us and those funding implications had an impact on the whole campaign.

Q581 Chair: Daran, do you accept that?

Daran Hill: No. Overall, I think the rules are a positive benefit. To an extent I would agree with you on the point about the literature. If I was to change one thing, I think the PPERA should be relaxed over what you can and can’t spend on. It is very prescriptive. Quite frankly, either side in a referendum would be hard pushed to spend the entire amount of money allocated to the things that you could spend it on. As you say, it was pot plants, offices premises and so on. I would relax it when it came to the literature, but overall it does set up a clear framework and allows parity for both sides, in terms of a mail drop, national broadcasting and seeking to have balance in the way that people communicate.

The point you make about gathering finance is an interesting one, Rachel. We certainly fundraised to the tune of about £80,000 or £90,000. You fundraised to the tune of about £4,000. I compare that to the experience back in 1997, when the Yes for Wales campaign at that time, without the PPERA, was able to raise £140,000 and the No Campaign raised £100,000. I am not criticising you personally, but there was a better way of fundraising than your side did, and you would have had more parity if that had happened.

Q582 Chair: What we want to do in this session is learn from your experience. It is much better if you have an argument among yourselves or disagree. If you are just agreeing about stuff, then we are not necessarily getting as much illumination as we might otherwise do. I would encourage you to fight as much as possible, if you think it might help.

Daran Hill: We have not seen each other for a year since the referendum, so there are a lot of buried tensions.

Chair: Excellent, excellent. Let’s have it all out, then. Rachel, you wanted to say something.

Rachel Banner: As you know, I was present in the earlier session. You made the comment, "Are you anti-Scottish?" I am very used to being called anti-Welsh. Although we joined the campaign, took part in it and promoted debate in that campaign because we care about our country and were concerned about the direction in which things were going, we were accused of being anti-Welsh. We approached certain people in business whom we knew were against further powers, and every single one of them said they were concerned about the impact it might have on them, so they would not give us outright support on that basis. We were shut off from funding from that viewpoint.

We did not have the unions because the unions are quite close, in my opinion, to the Cardiff Bay political class. The third sector is funded by the Assembly, and therefore there are perhaps certain interests that had an impact on the way people decided to give their support. It was inevitable that it was going to be incredibly difficult for us. I know that when Glyn Mathias was in charge of the Electoral Commission, he predicted that it would be very difficult for a No Campaign in any future referendum. That was one of the things that we came across. It was one of the barriers. People were concerned about being perceived in a certain way. There were companies who had funding from the Assembly Government, who were concerned that they might lose that, so there is an issue of fear as well.

Q583 Chair: Before I let Alan in, do you recognise that, Daran, as having taken place? Were there people who felt that they could not contribute because of difficulties?

Daran Hill: They only raised £4,000 or £5,000, so there was obviously something going on. You are in a better position to describe what happened on that side. Certainly I do not think there was some sort of culture of fear, or a culture of giving, linked into patronage from the Government side, in terms of the Yes Campaign. The vast bulk of money that we collected was from ordinary individuals sending out anything from £5 to £1,000. We have disclosed all our funding sources. They were individual people who wanted to be part of the campaign.

Rachel Banner: But you did get funding from organisations like AWEMA, for example, and third sector organisations.

Daran Hill: We had two third sector donations, both of which are disclosed in our accounts. One was from the Parliament for Wales campaign and the other one was from AWEMA. It was up to both of those organisations to decide whether it was within their charitable aims to make those donations, but they were not hugely significant.

Rachel Banner: There is also the question of time, is there not, and how much work time was donated? We know that translation was done by AWEMA too, don’t we? Translation costs would not be declared, but it is that work time-

Daran Hill: It is up to AWEMA to make their disclosure as one of the yes campaigners. They certainly did not translate stuff that was used by the central campaign. You cannot answer for the other myriad campaign groups that were campaigning for the no vote, can you? You were just one part of it.

Rachel Banner: We were ordinary people from different organisations.

Daran Hill: No, but, if you understand the point that I make, you were not responsible for that guy from the Monster Raving Loony party who spoke at the end of the referendum in Klingon. Neither am I responsible for that.

Rachel Banner: No; that is true. That is a fair point. No, you are not responsible for that.

Q584 Chair: I am going to ask the Electoral Commission about the costs of translating into Klingon when we have them in front of us. Do you recognise the point that was made about some people on the no side being accused of being anti-Welsh?

Daran Hill: They certainly were not accused by the official Yes Campaign.

Q585 Chair: No; I was not suggesting that.

Daran Hill: I would imagine that certain people’s viewpoints are so narrow in the way they perceive a nationality or the rightness or wrongness of a cause that some people get carried away.

Q586 Mr Reid: Did you have to declare every donation you got, or was there a limit up to which the donation could remain anonymous?

Daran Hill: The guidance said £500, as I remember.

Q587 Mr Reid: For donating to a national political party it is a lot higher than that. Off the top of my head, I think it is about £7,500, although I would not swear to that figure. If the limit was increased to some comparable figure for donations where you did not have to declare the source, do you think that would have helped your fundraising?

Rachel Banner: I think our problem was that people just did not feel comfortable about being visible on the no side.

Q588 Mr Reid: Even if the donation could have been anonymous? Would that have made a difference?

Rachel Banner: Yes, perhaps it would have made a difference. Actually, yes, I think I can answer definitely on that one.

Q589 Chair: Can I just clarify who AWEMA are?

Daran Hill: They are the All Wales Ethnic Minority Association. It is an umbrella charitable body, which made a donation to the Yes for Wales campaign. They have been in the news in recent months in Wales for financial mispractice, which is perhaps why Rachel put them on the table today.

Chair: I have never heard of them. There is no direct Scottish equivalent, as far as I am aware. Alan, do you want to pick it up?

Q590 Mr Reid: Do you have any views on the significance of the framing of the question for the referendum?

Rachel Banner: I certainly do. We all felt, as soon as the question was framed, that it was misleading because of the reference to tax. That should never have been put in. We all knew last year, before the referendum and before the question was framed, that the coalition Government had agreed that, in the event of a yes vote, tax powers would be discussed. There would be a new Calman-style commission on tax powers for Wales. We feel that it was completely inappropriate for that part of the question to be included.

The other thing that concerned us about the question was the tidying-up exercise aspect. It was not being perceived as a tidying-up exercise by politicians behind the scenes. It was all very technical. On the one hand, there was an underestimate of the impact that a yes vote would have. On the other hand, it was boring for the people. You would go out on the streets and tell them what the question was going to be, and they were bored by it. That had something to do with the fact that a lot of people did not go out to vote. I am sure that had an impact.

In Scotland, if there were a question on separation, that would be a very emotive question. It is clear, there is no obfuscation, and people are more likely to go and vote on that than if it were a technical question about devo-max or devo-plus, for example.

Q591 Mr Reid: What would you have liked the question to be?

Rachel Banner: What we proposed was, "Should the National Assembly for Wales have direct law-making power?"

Q592 Mr Reid: What role did the Electoral Commission play in deciding the final wording of the question?

Rachel Banner: They were involved in it. I know there was a board, which discussed the question. The Secretary of State for Wales, Cheryl Gillan, was involved in that as well. I do not understand why, but the Electoral Commission accepted the tax aspect into the question.

Q593 Mr Reid: Was there a consultation exercise before the question?

Rachel Banner: There was a consultation exercise. We went and made our representation. We were not involved on the board. In fact, we did complain at the time that we were not involved in the proper consultation, because we felt that the people who were involved would probably be more inclined to the yes side, and we were concerned that the question was fundamental. We did not want it to provoke a yes answer just by virtue of being the question that they asked.

I must say that we did get listened to in the earlier part of the consultation. The original question proposed was, "Do you agree that", or that was an idea that was mooted. We said that we did not believe that "Do you agree" should be part of the question, because that invited a yes answer. The Electoral Commission accepted that.

Q594 Mr Reid: Do you have any suggestions to make to change the process for deciding the question?

Rachel Banner: It needs to include both sides properly. There need to be a number of representatives from both of the arguments. Equal weight needs to be given to the suggestions. That would help. I know that there is a bit of an impasse because there is this discussion about whether an option on devo-max should be included. I personally feel that is a complication of the question. It just needs to be something like, "Should Scotland separate from the UK?" or "Should it stay a part of the UK?", with a yes-or-no answer.

Q595 Mr Reid: Who do you think should have the final say on what the question is?

Rachel Banner: There should be consultation between the UK and the Scottish Government. There has to be some sort of agreement. I know that could be very difficult indeed. It affects all of us. It will affect us in Wales and the whole of the UK. It is important that the UK Government have an important role in the framing of the question, but it has to be done in consultation with the Scottish Government.

Q596 Mr Reid: Daran, do you have anything to add?

Daran Hill: Looking back to the two sets of experiences in 1997 and 2011, I found 2011 to be a far preferable process in terms of openness. You have already illustrated one aspect where you were able to influence and change the question being posed. Thinking back to 1997, the question that was posed was entirely within the hands of the then Labour Government. There was no consultation; there was nothing. It was essentially drafted in a certain sort of political way. I did not feel that the question that was posed last year was drafted in a political or particularly leading way. It was a deathly dull question, but it was a deathly dull proposition that was being put to the Welsh people.

Q597 Mr Reid: Would you have preferred a question that was less dull?

Daran Hill: I do not think you could fairly ask a question that was less dull. The whole point of the referendum was to deal with an immensely dull issue. It was not a big proposition in the same way that the questions of 1997 were and in the way that the questions that face the Scottish people will be.

Q598 Mr Reid: The process was fine, was it?

Daran Hill: The process was fine; it was fair, consultative and deliberative.

Q599 Mr Reid: Do you have any suggestions for improvement or are you happy with the way it is?

Daran Hill: In terms of setting the question, I am absolutely confident with the involvement of the Electoral Commission and the Secretary of State for Wales, Cheryl Gillan, who maintained a strict neutrality throughout the campaign. The way the question was phrased, I think, added immense value.

Q600 Lindsay Roy: I want to clarify this. Was "Do you agree" in the original proposed question and then withdrawn in consultation with the Electoral Commission?

Rachel Banner: Sorry. Could you repeat that?

Lindsay Roy: Was there a clause, "Do you agree", in the original question, and was it then withdrawn on the advice of the Electoral Commission?

Rachel Banner: I am not sure. It was one of the things that was suggested during the consultation period. We said that we did not support it. They were very fair on that particular matter.

Q601 Lindsay Roy: Was the Electoral Commission a party to that discussion?

Rachel Banner: It was, yes. We were all there in the room talking about "Do you agree", and we also submitted a written piece saying why we felt that it would have been inappropriate to put "Do you agree".

Q602 Lindsay Roy: Was there unanimity that it should be withdrawn? Did all sides agree to that?

Rachel Banner: I do not know. I was not party to that.

Daran Hill: I would not know the answer. It is probably worth speaking to the Electoral Commission of Wales on the way that they framed the question and the advice they shared with the Secretary of State.

Q603 Iain McKenzie: On the subject of campaign expenditure, do you think the controls on campaign expenditure were effective, or do you think they could be tighter?

Rachel Banner: They were quite effective, although I think that if the limit had been higher then it probably would have been better. Since every single party in Wales was in favour of direct law-making power, they got their separate funding allowances as well. That could have made it unfair. Daran knows more about this. In the event, I do not know how much they actually gave.

Daran Hill: It was three parties in favour, and all of them made separate and open disclosure, post-referendum. Operating in the context of PPERA is a much more transparent process than that which existed previously in 1997. It places a huge onus and burden on those people who are organising a campaign to account for everything-both donations in kind and actual physical donations. Setting a value of £500 or thereabouts is a good thing because it promotes transparency as to where money for a political campaign comes from.

Q604 Chair: Were people discouraged from giving donations because they thought they might end up getting hostile responses, which would be an argument for moving it slightly up a bit?

Daran Hill: That is Rachel’s argument; it is certainly not my experience. People made donations openly and we notified-

Q605 Chair: I understand that, but you were on the winning side. You were on the side that would want to be known as winning. You were unlikely ever to be denounced for being anti-Welsh, whereas for those who are in a minority and accepted as being in a minority, and who are possibly going to be bullied, then maybe they need some protection. Is that something that you considered?

Daran Hill: My mind was fixated on winning the referendum and maximising the amount of donations we could get in for the Yes Campaign. It is up to the No Campaign to fund themselves in an appropriate manner. I fail to see what changed in Wales between 1997 and 2011 that meant that a No Campaign at one time could raise £100,000 and then 14 years later could only raise about £5,000.

Q606 Chair: Do you want to respond to that?

Rachel Banner: We have a devolution industry now. Devolution in many ways is a good thing, but I do not think it can be denied that there is a bit of an industry that has grown up with it. You have lots of interest groups who are heavily involved with the Assembly, who are not going to want to be seen campaigning against and in whose interests it is to actually campaign for.

Daran Hill: I have already indicated that only two charities made a donation to us. The vast bulk of money that we received came from individuals.

Rachel Banner: The unions as well, Daran.

Daran Hill: It is all there in the disclosure, Rachel. There is a relatively small amount from the trade union sector. I think it is £2,000 or £3,000 in the grand scheme of the money that we collected. The vast bulk that we collected came from individuals.

Q607 Chair: Matt, you wanted to come in. It is just as well you are sitting in the middle.

Dr Qvortrup: It brings me back to my time as a boxing referee, which was quite enjoyable. There are just two points here, being very pro-Welsh both ways. It is interesting; in international research, there is some indication, if you compare American states, that some have very elaborate disclosure laws and others do not. The ones that have elaborate disclosure laws tend to be the ones where less money goes into referendum campaigns. There is a noticeable impact on the regulatory framework, as a matter of fact, from the American experience. Whether that applies here is questionable.

Q608 Chair: In terms of the disclosure rules, though, is the difference between looser and tighter jurisdictions about the bottom level at which things have to be disclosed, or is it different?

Dr Qvortrup: It is more whether you can give money without people finding out who is behind a particular campaign and things like that.

Q609 Chair: Is there anything, though, from your knowledge of international experience, that would tend to suggest-this is one of Rachel’s points-that raising the level at which donations could be made would allow quite a considerable number of people to donate in a way that they would not if they were going to be identified, if it was only a relatively modest increase?

Dr Qvortrup: There is some evidence to suggest that also from European countries. Scandinavia, for instance, previously did not have very elaborate disclosure laws. People felt that they could not give money because they would be outed as being, say, anti-EU. That is a relevant comparison, I suppose. In Denmark and Norway, the establishment took a particular view. We have some evidence from Ireland as well. People did not feel that they could take that view if they were a business. It is not rocket science and it is not cast-iron certainties that we are dealing with here, but some evidence in that direction might be found.

Rachel Banner: I would make another point. More important than money is the fact that people did not feel they could speak out. That was far more important than the financial aspect. We could manage to an extent, money-wise, and we had very fair treatment by the press in many ways because we were given equal time, but one of the things that handicapped us was the fact that so many people just did not feel they could speak out. If it had just been a question of money, I do not think it would have mattered too much. What people told us was, "If we speak out as a business, people might not buy from us, or we might lose our Assembly funding."

Q610 Chair: Did the same apply to individuals rather than just businesses?

Rachel Banner: We had a lot of individuals who did not want to speak out.

Q611 Chair: That has to be a worry for us. It shows that intimidation and bullying does work. We clearly have a bullying campaign going on in Scotland, and being actively organised. It is quite an anxiety for us that that seems to be effective and was effective in Wales. That is something we will obviously have to reflect on.

Matt, what is your international experience on this question of bullying and intimidation? You mentioned the anti-EU example. Is that a consistent pattern in some cases, or is it just odd isolated examples?

Dr Qvortrup: Most referendum and election campaigns are like contact sports. You have a relatively short period in which you have the campaign. Most countries in Europe and other comparable jurisdictions are not used to having referendums, so they are not quite sure how to handle them. Bullying is often a tactic that people resort to. We have seen it in Canada-in Quebec twice, where they have had referendums. Especially in the last one, in 1995, there was a lot of, "If you are not voting yes, you are anti-French or anti-Québécois." On anecdotal evidence, it was one of the reasons why the Yes Campaign almost caught up, having been quite far behind in the polls in 1995. Whether you call it bullying or whether it is part of the game is debatable, but in the Québécois case it was certainly a thing that was used to great effect.

Q612 Chair: I want to pursue this, just to be clear. There is of course a difference between robust argument and abuse. In Scotland we are a bit worried by the abuse that some people are taking if they raise their heads above the parapet. I want to clarify whether or not you are talking about robust argument or abuse and intimidation in the Canadian and other experiences. We as practitioners recognise that elections are contact sports as well, but we generally recognise that they are not conducted in such an abusive atmosphere as seems to be prevalent in some parts of Scotland at the moment.

Dr Qvortrup: There was also another Canadian referendum in 1992, where they voted on a constitution for the whole of Canada. To cut a long story short, the question there was that Quebec was not given recognition as a distinct society. The French speakers felt that was unfair. In that campaign, as well as in the referendum campaign on independence in 1995, there was a suggestion, which was never quite explicitly stated by the political class, that you should not be eligible to vote if you were an English speaker living in Quebec. It was more than just a robust bare-knuckle fight. There was an element, an undertone, of certain anti-Anglophone sentiments that were mentioned there. It was cleverly done, of course. They sometimes talk about colonels and lieutenants, where the colonel would stand back and say, "I never said it", and he would get one of his lieutenants to say it. That phrase was coined in Canada in this particular case. The Quebec example is a good example of an element that was probably more bullying than bad advice.

Chair: I do not know if you have been reading many of the products of the cybernats in Scotland. There is an analysis there to be done by a combination of political scientists and psychiatrists about some of the things that are being said.

Q613 Lindsay Roy: We have covered a lot of territory, so perhaps you could just summarise what the key lessons are that you have drawn from the handling of the AV referendum and its outcome in relation to the proposed referendum in Scotland.

Rachel Banner: It should be a clear question, which is properly debated. I know that in Wales our debates were shut down, really. We tried to say, "This is going to lead on to other things, step by step-to separation" and so on, but it was always, "Ah, but it is not about that; it is a tidying-up exercise." It is important that the question is very clear. As I say, one that relates to separation would be the ideal. That is the most important thing. The question should be clear.

Daran Hill: I believe the question that was posed last year was clear. It was come up with in a deliberative fashion involving both a neutral Secretary of State and the Electoral Commission. I do not buy into this idea of a culture of fear that existed on one side of the campaign. That was certainly not my experience. Lots of your colleagues were quite direct and quite robust in the way that they expressed themselves as well, Rachel.

In terms of shutting a debate down, the single biggest thing that happened to shut the debate down was when True Wales decided not to go for official designation as the No Campaign. That stopped both sides having a mailshot to every house in Wales and it stopped the use of a referendum broadcast, which would have heightened awareness and the level of information. I trust that, when the Scottish people are asked a question, both sides act responsibly and take on board the democratic responsibility of official designation.

Rachel Banner: That has to be made possible by provisions within the PPERA, which it was not, as I have laid out in my written evidence. It was impossible for us. Something needs to change if there is to be a similar campaign. I assume in Scotland it will be different, because I hope that politicians will get involved on the anti-separation side.

Chair: In relation to politics in Scotland, there are clearly leadership figures on both sides. We do not have quite the same circumstances as you had.

Q614 Lindsay Roy: How does the regulatory framework impact on each of the different methods of campaigning-for example, leafleting, press coverage and media broadcasts?

Daran Hill: The media were scrupulous in maintaining balance for both sides. I think we would both agree on that. As to the use of literature, both sides needed to account for the use of literature. We prioritised the production of literature in terms of our campaign spending and that is where the bulk of our money went. We were disappointed, as I say, when we did not have the opportunity of a national mailshot to enable a piece of literature to arrive at every door in Wales. Instead of moaning about that when we did not get official designation, we mobilised networks of thousands of people and managed to get a million to a million and a half newspapers delivered through doors.

Q615 Lindsay Roy: How vital was the funding?

Daran Hill: Funding is absolutely critical. We always prioritise funding. We went out there from the start to collect money from individuals. It was £5 right the way up to £1,000 from individuals who committed to our side of the campaign.

Q616 Lindsay Roy: Can you clarify again what the differential was between the war chests of the Yes and No Campaigns?

Daran Hill: We probably collected about £80,000 to £90,000. They collected about £5,000. As I say, in 1997 the disparity was much less. It was £140,000 to £100,000. The figures are all in the public domain. They were released to the Electoral Commission.

Q617 Lindsay Roy: How important do you think it is that there should be a balance in terms of funding between the sides?

Daran Hill: If both sides are officially designated, you get a cash injection, in essence, to create the infrastructure of a yes and no campaign. That would have been hugely beneficial to the No Campaign if they had actually taken that leap, but we will never agree on that.

Rachel Banner: The infrastructure would have been hopeless, really. We started off our campaign by leafleting and going around Wales. We worked very hard at that. We went to every area in Wales; we worked incredibly hard as foot soldiers. Our money similarly went on leaflets. The single biggest thing that would have changed our campaign would have been if we could have used the money from the Electoral Commission on leaflets.

Daran Hill: I agree with you on that point. There could be a relaxation of the rules.

Rachel Banner: Daran has mentioned the postal situation. With regard to one of the figures involved in the Institute of Welsh Affairs, John Osmond calculated that posting 1.3 million leaflets to every Welsh household would cost in the region of £24,000. As you can imagine, there is no way we could do that. It would have made no difference to us. We could not have afforded the leaflets that would have been needed.

Q618 Chair: If the money that was available from the Electoral Commission had been usable for that purpose, that would have overcome that, would it not?

Rachel Banner: Exactly. That is precisely it, and we would not have been interested in offices or pot plants or anything like that. We would only have been interested in money for information, so that we could inform the public.

Q619 Chair: I have never been persuaded that pot plants are a particular bonus in an election campaign. You presumably both made this point subsequent to the referendum to the Electoral Commission. We will pursue that as well. Have you had any response back from them?

Daran Hill: They were very particular in terms of setting out the guidance around the rules as they stood. They were not interested in how those rules might be changed in the future.

Chair: That is helpful. We will raise that with them.

Q620 Mr Reid: It is often said that in referendums the voters are not answering the question on the ballot paper but answering another question, such as, "What are your views on the Government of the day?" Did you find that a problem in the Welsh referendum?

Rachel Banner: Personally I think it was worth answering the question on the paper. Unfortunately, the question on the paper was not the relevant aspect, because the question itself is now being interpreted by politicians as a green light to introduce further devolution. The tax powers will come in and there is now also a new commission on a separate legal jurisdiction. The First Minister is in favour of that. There is a lot of debate about the devolution of youth justice, criminal justice and so on. One of the things that we argued during the referendum was that the actual debate should be broadened out so that these things would be discussed and, when people voted yes, then their assent would have been given to those things that politicians are actively pursuing now, whereas that did not happen. On 3 March it was a tidying-up exercise. On 4 March it was a green light to do pretty much anything and a massive endorsement of the devolution record to date. I strongly believe that the question has to reflect what is likely to happen after the referendum date. It should not be something completely different. I do not think politicians should distort things to make the aftermath of the referendum something that people did not vote for.

Daran Hill: The question was set in a very neutral way. We particularly campaigned on the issue set out in the question. I have to say it was a very different experience in 1997 where, for example, on polling day the Yes Campaign paid for an aeroplane to fly over the valleys of South Wales with a banner behind it saying, "Vote Yes, Vote Blair". That certainly was not a proposition that was on the ballot paper.

Mr Reid: And they voted yes, did they?

Daran Hill: They did vote yes.

Chair: They did then, remember. Changed days. I bet they would not do that now.

Q621 Mr Reid: Is there anything that you would change?

Daran Hill: It is a much fairer and more open system now, having experienced the two. The question was definitely dull, but, as I say, it was definitely a dull proposition.

Rachel Banner: In many ways it was at the wrong time, was it not, because 2006 was when things started happening and when law-making was introduced? The question was just far too technical. It did not capture people’s imagination when you went on the streets.

Q622 Pamela Nash: Everyone, in response to Lindsay’s question, was very clear that there was balanced media coverage. Who ensured that that was the case?

Daran Hill: In terms of broadcast media, the BBC and ITV treated it as if it was a general election. There was huge balance. Reflecting back on the 1997 experience, the no campaigners from that particular time went on the record as having said, "The media made our campaign." Without the equal balance that was given to both sides, the No Campaign at that time would not have had as much traction as it did.

The print media was somewhat different. We had far more favourable treatment in the Western Mail than you did, Rachel, but then that reaches 25,000 people.

Rachel Banner: They decided to take a stance on the issue. They supported a yes vote. In saying that, although the journalists criticised us-which is fine, because you expect to be criticised; it is right and it is part of a democratic society to have a free press that criticises whoever is campaigning-and even though they took that stance in favour of the yes side, they were fair in terms of amount of coverage. Perhaps not so much towards the end of the referendum period but certainly leading up to it, the journalists were pretty fair. There was a lot of free publicity in the Yes Campaign at the end, was there not?

Q623 Pamela Nash: Do you think there could have been an improvement in the print media?

Rachel Banner: That is an excellent question because in Wales we just do not have enough media. I know in Scotland it is a much stronger press. In Wales we do not have that, and that is something that needs to be developed. It would have been wonderful if we could have had a number of Welsh papers that were taking a yes or no stance. As it was, we have one national paper that decided to take the yes viewpoint.

Q624 Chair: You have one national paper, the Western Mail, and it only sells 25,000 copies.

Rachel Banner: Yes.

Q625 Chair: What is everybody else buying?

Daran Hill: UK newspapers that do not have Welsh editions.

Q626 Chair: They don’t have Welsh editions?

Daran Hill: We have a very different print and broadcast framework than you have in Scotland. I am sure the people of Scotland are going to be much better informed.

Rachel Banner: We had so little coverage also from the UK.

Daran Hill: The UK press just wasn’t interested.

Rachel Banner: There was a little bit in The Guardian.

Daran Hill: Even on St David’s day, two days before the referendum itself, we found it very difficult to engage the UK press in the issue.

Rachel Banner: The Mirror put an article in, but it was only promoting the yes side. They did not approach us at all.

Q627 Chair: In my experience, local papers are very often desperate for material. Surely they would carry lots of stuff.

Rachel Banner: Yes, I think they did.

Daran Hill: We had a branch network and they particularly focused on getting electors and copying to local newspapers. That was another way of reaching people.

Rachel Banner: With the local newspapers, when we discovered that there was a yes article and that they had not asked us, we got on to them and they were pretty fair. They did put both sides of the argument on the whole.

Q628 Pamela Nash: This follows on from the wording of the question and what is behind it in the detail. Do you think there is a case for the publication of objective and unbiased public information that does not come from either of the campaigns? I would be interested in your view on this as well, Matt.

Dr Qvortrup: We have just come back to the question of the question, so to speak. It is interesting when you look at examples from overseas, where you have sometimes had blatantly biased questions that have actually resulted in the opposite. An interesting fact is that the focus group was more or less invented in the late 1970s by the campaigners who designed the question for the Canadian referendum in 1980.

Chair: Sorry; could I ask you to speak up? The crowds that this meeting has attracted are not able to hear at the back.

Dr Qvortrup: I will say it again then. It is interesting, as a matter of fact, that a lot of times when you have had questions that have been enormously biased, they have not succeeded in convincing the public. As I was saying before when they could not hear me, the focus group was more or less invented in Canada in the late 1970s. When, through focus groups, they tried to come up with the right question, they came up with the suggestion for a sovereignty association. They thought that the voters would like that. It was pointed out by the no campaign that this was something else, and then there was a huge backlash.

Pinochet, who does not have an unblemished record of democratic excellence, had a referendum towards the end of his term, where he basically said, "Do you want to end civilisation as we know it?" People endorsed that massively in order to see the back of him, because you had a fairly long campaign. In Northern Ireland, of course, it was a vote on a Command Paper 3883, and most people would not be aware of what it was. In a referendum campaign, it is very much about winning the argument and setting the agenda, which you might be able to do if you got more money, but even that might not be the case. The question itself is rarely what people vote on. It is whoever captures the agenda. Sometimes you are able to capture the agenda if you have a very strong argument. If you don’t, then it is less likely. Money and the question are things that are often mentioned but are rarely the things that decide a referendum.

Q629 Pamela Nash: In that case, would you need someone to publish unbiased information on whichever referendum?

Dr Qvortrup: The problem with that is that it ends up gathering dust. You send out all this material and people say, "Oh, that’s just the typical kind of thing." In California they have the legislative analyst, who is an individual who analyses the pros and the cons of certain referendum provisions. If you are very keen you might read that, but that is like the minority who listen to the "Today" programme and read The Guardian and all the rest of it. They are the ones who would know what it is about anyway. It might have a marginal effect, but I do not think it will have a tremendous effect on the outcome. What is important is that the question is seen to be fair by both sides of the argument.

I am using an outlandish example here, but that is what I am here for. In Montenegro, when they voted for independence there, they had a representative from the yes side, a representative from the no side and then a neutral person-I believe a Supreme Court judge- to sit between them. They then came up with a question they could all agree on.

Q630 Pamela Nash: I do not just mean the wording of the question. I mean, as with the example you gave in California, to give people that information that is not coming from a side that is biased either by just their opinion or-

Dr Qvortrup: A bigger case can be made for having an individual who is totally unblemished, but then again there will always be, "But you would say that, wouldn’t you?" Even the legislative analyst, as he is called in California, would then be accused of being with the governor or with the organisation.

Q631 Pamela Nash: Are you saying that it is not possible to have someone who is seen as unbiased?

Dr Qvortrup: The Irish referendums are quite common. They have an ad hoc Electoral Referendum Commission, which is normally three lawyers or judges. Typically, a retired Supreme Court judge heads that. They have a pretty good track record of being seen as fair and unbiased.

Daran Hill: The Electoral Commission put out a piece of literature to every household in Wales during last year’s referendum. To my mind it was both scrupulously fair and turgid beyond belief.

Q632 Chair: I wanted to raise that point. In referendums, if something comes out that is official, it is usually turgid and people lose the will to live halfway through it. Therefore, even though it might in principle be seen to be a good idea, does it actually work? From your international experience, is it necessary to have something published that is fair and impartial, or does the argument depend upon the two sides putting forward their case and only sad people read the official documents?

Dr Qvortrup: If you don’t put information out, that is often a very strong argument for the no side to say, "They are hiding it and we don’t know what it is all about. There is a conspiracy here." The 1992 and 1993 referendums in Denmark on the Maastricht Treaty are examples of that. In 1992 the Government of Denmark said, "We are not going to spend any money on that because nobody will read it." Then the no campaign said, "You are not playing honest here, and you want to sell us something that we don’t know the consequences of."

When they had the re-run, with a bit of window-dressing in between and certain concessions, in the second referendum the Government, which was in favour of the Maastricht Treaty, basically said that any document that the European Committee of the Danish Parliament had seen would be available to anybody who requested it. If you wanted to, you could get a whole bundle of things. The argument that there was a conspiracy then did not have a lot of currency. The availability of it was certainly beneficial to the yes campaign. It does have an effect, if you see what I mean, but you would not expect it to be sent out to everyone. I think, here, it was upon request.

Q633 Chair: I am trying to remember what happened with the AV referendum here. It was sent out, was it not?

Dr Qvortrup: The 1975 referendum?

Q634 Chair: The one we have just had about AV.

Dr Qvortrup: There was a small booklet sent out trying to explain what the AV system was about. That was accused by both sides of being unfair and unbalanced, but the no side were probably able to make the better argument. They found something in there that could be seen as factually wrong and they ran with it. That is slightly different from the Danish situation, where it was all the material you could possibly have.

Rachel Banner: In our case the Electoral Commission leaflet was a good thing. I agree with Daran that it was scrupulously fair. It was a bit boring but it was not too long. People, if they picked it up, would be more likely just to look at it and see the date of the referendum and so on. It also gives a neutral view, if you can get that neutrality. You have your yes arguments and no arguments from the yes and no camps, hopefully well funded, and the neutral leaflet is possibly a useful thing to have.

Q635 Pamela Nash: You have said it was okay to have it, but is it essential and helpful? Was the Electoral Commission the right body to produce that?

Rachel Banner: In our case it was useful. I do not know whether it would be as useful in Scotland’s case in a separation referendum. I hope that there will be two sides that are equal in terms of who is involved with them.

Q636 Pamela Nash: Let me explore that further. On an issue that is extremely emotive and political with different parties and different sides, do you not think it is essential that you have a neutral document?

Rachel Banner: In which case it would be a very good thing, yes. If that is the case-and I suppose it will be-that those emotions will be running high, then probably it is a good idea to have a neutral and calm response, as long as it can be neutral. I would say the Electoral Commission were able to produce a neutral leaflet during that referendum last year, which explained things pretty well according to the question. If something like that was done, then I think probably it would be a good thing.

Daran Hill: The Electoral Commission is the right body to take that sort of role. It is one of the things it is required to do under law. One of the things that will have changed between last year and the time that the question or questions are posed to the Scottish people is the experience of the Electoral Commission in dealing with referendums. Its only experience prior to the Welsh referendum was the referendum in the north-east. In the last year it has had to deal with two additional referendums, so it is probably a more informed and experienced body now than it was.

Q637 Chair: I want to turn now to questions for Dr Qvortrup. We want to have a referendum decision that is clear and decisive. What do you have to do to get that? What are the two or three things that have to be done to make sure that not only do you have it clear and decisive but also that the losers accept it as having been fair?

Dr Qvortrup: The important thing is that the process is seen to be fair. The key to that is that you have a body that is respected to organise and run the referendum. The Electoral Commission might be that body, but it is sometimes a bit of a neutral body; they do not have a strong figurehead. For that reason, to run a very effective campaign, it is sometimes better to have a smaller body that is ad hoc but has a figurehead who is somebody seen to be above the fray, if you like. The most important thing in a referendum campaign is that the process is run by an organisation that is seen as being totally unbiased and unblemished in any way.

The second thing that is important in a referendum campaign is that there is access in theory to all the relevant material. You do not need to send out a leaflet, because then people say, "Why did you edit out this particular bit?" There should be access to all the relevant material such as the legal argument on both sides and what you think the implications would be. These are typically background papers. What voters sometimes feel in referendums is that they say, "This is an elite decision and some people in either Edinburgh or London have made this decision. They have put it out to us but we don’t have the same sort of information as they have. We, being the law-makers, should also have-at least in theory- access to that." If people are able to access that information, then it is very difficult to come back later and say, "I made a decision on the basis of wrong information."

I would say you need a neutral umpire, a recognised umpire, and access to information that will enable you to make an informed decision.

Q638 Chair: I understand the first one. Let me be clear on the second one. There is so much in the Scottish situation that is almost unknown and in many cases unknowable. The Scottish Government are saying that they will keep the pound. It is not clear what conditions the UK Government will apply to the keeping of the pound and whether or not they would be willing to be the bank of last resort and so on.

Given that many of these things will not be known until after negotiations have taken place after a successful referendum, how is it possible to have these known unknowns clarified?

Dr Qvortrup: I will take an example, which is always best. In Sweden, when they had the referendum in 2003 about joining the euro, there was all sorts of speculation as to what it would be. There were economists who said it was going to be doom and gloom and Volvo was going to go bust. There would be the other ones who would say the opposite. The Finance Committee in the Swedish Parliament then took evidence, just like you are doing today and over the last few weeks, from various experts, some of whom would have one particular view and others who would have another view. Upon request you could then get access to-in this case- information about the consequences of joining the euro. If you were extremely eager and wanted to know that, it was possible for the Swedish Joe Public to access information about very complicated econometric calculations one way or the other. In theory, it was possible to get that information. You would probably need a lot of training to understand all this evidence, but the fact that in principle it is possible to get both sides of the argument is very important.

If I may finish this particular point, what is typical in referendum campaigns is that the Yes and the No Campaign will talk about the gloomy scenarios if you vote the way that they don’t vote. In the Netherlands in 2005, when they voted on what was the European Treaty, they had pictures of German soldiers and the words, "If you vote no." That was probably slightly over-egging the pudding. If you have access to the information that the politicians have, then it is possible for the voters to say, "That argument seems very persuasive but I am not so persuaded by that argument or that expert." It is out in the open, and then they can make up their minds as they see fit.

Q639 Chair: Even though lots of these things will still remain unknown. We were discussing earlier separatists saying that they wanted to keep sterling and so on. We also had our attention drawn to the fact that the Czech/Slovak monetary union lasted for five weeks. It is easy to see in those circumstances that people might not necessarily believe what they are being told. Surely it is not possible to clarify lots of these things, because even though you know the two negotiating positions, you do not know how these negotiations are going to come out, and therefore you are effectively, on both sides, to some extent, voting for pigs in pokes.

Dr Qvortrup: That is perfectly true, but I think the same would apply if you look at candidate elections. You can vote for a particular political party and then something happens. They might not enact their election manifesto because they go into a coalition. I do not need to educate you about that.

Chair: Perish the thought.

Dr Qvortrup: There are a lot of unknown unknowns in all sorts of politics, but, again, that is part of it. You have to go with the side that you trust the most, which is one of the reasons why you have a campaign-so that the most trustworthy is in a position to make the better argument.

Q640 Chair: Or the one that you distrust the least.

Dr Qvortrup: Indeed.

Q641 Pamela Nash: I want to explore this a bit further. We do not know what the options on the ballot paper are going to be yet. How well defined do you think they should be before we have the referendum?

Dr Qvortrup: Coming back to the thing about the ballot paper, it is not so much about what is on the ballot paper or what it actually says. It is more about the campaign afterwards. Obviously it is better to have a fairly clear and neutral "Do you agree or disagree with". Even that might be contentious. The simpler the question, the better. That is more for public relations. The more convoluted the question the better, for the no side, as a general rule.

Q642 Pamela Nash: But that means the question does matter.

Dr Qvortrup: It does, not so much because of the actual question but because you can kick up a lot of dirt about, "What are they trying to sell us? They are not really telling us the truth." In that sense it does matter. A long campaign will normally weed that out. As I understand it, there is going to be a long campaign, and whoever sets the agenda there will be likely to win the argument.

Having said that, the longer the campaign, the more votes you tend to lose if you are on the yes side. A shorter campaign is normally the thing that benefits the yes side the most, all other things being equal.

Daran Hill: The media of course have a critical role to play in scrutinising and explaining the issues. I would imagine, bearing in mind the amount of coverage the future of Scotland has already had in the UK media platform as well as within the Scottish press, that there would be absolutely no problem with a robust examination of both sides of the argument over the coming years.

Q643 Chair: Do you agree that any question that begins with "Do you agree" is a loaded question?

Dr Qvortrup: There have been "Do you agree" referendums that have been lost. In that sense it is not necessarily loaded, no.

Q644 Chair: But would they have been lost by even more had they not had a "Do you agree" question?

Dr Qvortrup: It is difficult to answer. Some "Do you agree" questions were probably doomed anyway. It is more to do with the campaign. If one were to conduct a statistical study-which I have not done; that is one of the things I probably should do-to correlate "Do you agree" with the number of yes votes, it is quite common for referendum campaigns to start with a "Do you agree" question. Roughly speaking, if we look at referendums that have taken place in Europe since 1945, 51% of them have resulted in a yes vote and 49% have resulted in a no vote. Many of them have had the "agree" kind of thing. It is really in the balance.

Q645 Chair: You mentioned there a percentage for yes and a percentage for no. Is there any advantage in having referendums that are yes/no as compared to "Tick which of two alternative statements"? That is effectively the same as yes/no, but it is giving two sides of a different issue. You actually have to tick a box. Is there a great advantage in being a yes campaign that is positive and that can be seen as constructive, as opposed to a no campaign that can be seen as negative? There is a contrary argument on the other side, where yes can be seen as adventurous and no can be seen as more status quo and confident in the present situation. We are discussing among ourselves at the moment whether or not we want to have yes/no or two statements. Is there any evidence that one rather than the other gives a better campaign?

Dr Qvortrup: The yes/no ones are the ones that give the better campaign, because it is a clearer run for the money. The idea that it is good to come out with a positive statement does not really apply in referendums. You are marginally more successful if you are on the no side, because the argument is that you know what you’ve got and you don’t know what you are going to get, so in case of doubt vote no. That tends to be the stronger argument in many referendum campaigns. It is not massively so, but there is a tendency in that direction.

Q646 Pamela Nash: Are there any particular points that you think the Scottish people should know before taking this big decision on separation? Are there any key points that should be out there in the campaigns?

Dr Qvortrup: The Scottish voters would want to know how you normally settle national divorce settlements and what the record is on it. If you compare what has happened afterwards with other countries, has there been a clean break? When has it been a clean break? What are the consequences in terms of social security? It is all the practical issues. It would be interesting to look at those things. If I were a voter in the Scottish referendum, I would want to know the practical details.

Often in referendums they tend to be high politics and about the constitutional position, whereas most voters are interested in mortgages and things like that. The ones who run the most effective campaigns are the ones who focus on those particular issues. Most people are not interested in constitutional politics. I am professionally interested and you are too, and we think it is awfully important, but most people in referendum campaigns are interested in the bottom line-their bank balance, good schools and things like that.

In some cases there have been examples of the issues resolving themselves relatively easily, such as when Iceland separated from Denmark in 1945. Within a year all the schools were run by the Icelanders and they were very practical about it. Examples of that would be quite useful. It is enabling people to make a very important decision.

Of course you cannot be certain about that. It is speculation, but if you look at evidence from similar cases, then those experiences might provide a guide for what is likely to happen if Scotland were to become independent or indeed stay part of the UK.

Q647 Chair: What are the best parallels that you think we should look at? Quebec has often been mentioned.

Dr Qvortrup: Quebec is the one that never happened because every now and then they go back to what, in Canada, is known as a "neverendum". The interesting example is Montenegro, which was part of Yugoslavia. Montenegro and Serbia were together. They had a referendum in the early 1990s when people voted to stay together. After the war, which did not really affect Montenegro, they then had a referendum that resulted in separation by a relatively narrow margin. That referendum is one to look at in terms of the organisation of it. The EU got involved to make sure that it was fair and unbiased. In terms of the practical aspects of how to run a referendum, that is the one that I would certainly look at.

Other examples that are a bit older are Norway separating from Sweden. That was an example of a post-referendum settlement where they got together afterwards and basically divided the spoils. Even though that is an old example, I think one should look at it.

Q648 Chair: As with the other questions we have been asking you, if upon reflection you think, "I wish I had told them such and such", by all means come back to us.

Dr Qvortrup: I will send it in to you.

Q649 Iain McKenzie: Any proposals for further devolution require the agreement of the UK Government. How do you think that should be best obtained?

Dr Qvortrup: In most referendum campaigns it is important that there is an agreement. There are very few referendums where one side has declared unilateral independence by a referendum. The examples of that happening have often led to war. The consensus is a very important issue.

I was involved two years ago in negotiating a Referendum Act for South Sudan. The Northern Sudan, or the regime in Khartoum, wanted there to be a 90% turnout and a 90% yes vote for that to go ahead. The Southern Sudanese thought that was not a very good idea. They then gradually negotiated a settlement. I know that Scotland and the rest of the UK is not Sudan, but that sort of experience of them getting together and having in effect a committee of high-level representatives, speakers of both Parliaments-the local Parliament in South Sudan and the national Parliament in the rest of Sudan-enabled them to reach a negotiated settlement. They also had a mediator whom Obama sent, a retired general, who did not actually do much but was there to do that.

The Montenegro example is another one where you have some external, ex-UN kind of person who is neutral, who comes in and can mediate that. It is often a good way of agreeing a question. George Mitchell’s involvement in Northern Ireland was of the same ilk.

Typically, negotiations are not as successful as mediations. Indeed, if we look at the separation referendums that have taken place that have not resulted in war in the past 20 years-there have been roughly 30 of them-the ones that have not resulted in war have been the ones that have had mediation. I am not suggesting there is going to be war over this, but the practical solution is often to get somebody from the outside to say, "Well, wait a minute, that seems a bit unfair and surely you can’t mean that."

Q650 Chair: I want to clarify whether or not this mediation took place before a vote.

Dr Qvortrup: Before the vote in Northern Ireland.

Q651 Chair: Apart from the Northern Ireland example, generally, mediation was to establish what exactly the consequences of a yes vote would be, rather than having the yes vote and then mediating about how the prospectus of the separatists would be implemented.

Dr Qvortrup: Yes. In this case it was just mediation as to the referendum law. In the case of Sudan, we would meet with representatives, typically in Addis Ababa-because that was a neutral place-and then say, "These are the guidelines for fairly conducted referendums around the world. This is where you want to get to. We know that there is going to be a vote but it has to be a fair one. You can choose what you want from this menu, but you have to agree in the end." That option seemed to be quite efficient because, with the mediator coming from the outside, it was possible to-

Q652 Chair: But that was on the process.

Dr Qvortrup: That was just on the vote: what date it is going to be on, who is allowed to vote, what the ballot paper should look like, whether we should have text-

Q653 Chair: We might end up needing the mediator on the question of process. At the moment we are addressing the question of content and what the package is that people get if they vote yes. The UK Government will presumably have to accept or reject some of the things that the separatists are suggesting in Scotland. How is that negotiation best handled?

Dr Qvortrup: Again, it really depends. There is no fixed way of doing it. There have been examples of everything pretty much being agreed beforehand, then the vote takes place, and then there are things that you had not actually thought about. In East Timor, when they had a referendum in 1999, they thought that everything had been covered, and then after that they realised that things had not actually been covered. All these things led to quite a lot of disagreement and distrust. The process was in no way ideal.

I apologise if I am not answering the question precisely. Maybe you could just repeat it again so that I am sure what I am answering.

Q654 Iain McKenzie: Further devolution would need the agreement of the UK Government. We are asking what the best way or process is to go about that.

Dr Qvortrup: The short answer to that, if they cannot agree immediately, is that some sort of mediation might be a good idea.

Q655 Chair: I want to come back to deal with the question of separation rather than further devolution. Is it reasonable for people in Scotland to expect that most of these issues will be settled before a vote takes place, such as the question of continued monetary union, their place in the EU, trading arrangements, supervision of finance and defence? Should we look at having these issues resolved and clear before the vote, or is it reasonable to look for a vote in principle and then have this haggling and negotiating process afterwards? In that case it does seem very much to me that people will be asked to vote for a pig in a poke. From your international experience, how often is it that matters are resolved before the vote so that it is clear what people are voting for or against?

Dr Qvortrup: In most of the successful referendums-and they are from places that we do not necessarily want to compare ourselves to, such as when Eritrea separated from Ethiopia, South Sudan separating from Sudan, and Montenegro separating from Serbia-people pretty much knew the package before they voted. That also gave them the confidence to vote in a particular way because they knew what was going to happen. It has not become the norm in the legal sense to do it all before, but it is moving in that direction. Referendums on separation and independence tend to be the ones where it is pretty much clear what you are going to get in the event of separation.

Q656 Chair: That is very helpful and significant. At the moment there is an enormous amount of uncertainty. The previous set of witnesses who were from the business and financial community said that they had given a whole host of questions to those who are advocating separation, and answer has come there none. What you are telling us is that good practice would be for as many of these questions to be resolved and clarified before a vote is taken, and, if answers are not forthcoming, then people can draw conclusions that there is something being hidden or it is uncertain or unclear about the separation side of the argument. Is that a fair representation?

Dr Qvortrup: A referendum is a social contract. Normally in a political system you are represented by somebody-it is that trustee relationship-and you have somebody whom you trust who speaks on your behalf. Occasionally that individual, whether it is an attorney or whoever, will come back to you and say, "I have negotiated this particular deal for you. This is a good business proposition and I think you should go with it." Then you want to read the small print instead of just going away and signing the document, trusting your attorney.

A referendum is very much like the trustee relationship or what we call a principal/agent relationship in political science. You as the representative of that individual go back to the individual and say, "I have negotiated this deal. This will have a number of impacts but it will probably make you richer." You really have to trust your stockbroker or your lawyer and sign it without reading the small print, or at least reading only the summary of it. A referendum is very much the same and can be compared to that in legal terms.

Q657 Chair: I am slightly less clear now after that answer than I was from the previous answer.

Dr Qvortrup: The shorter answer, basically, is that you are presented with a deal that you are asked to vote yes or no on.

Q658 Chair: You are presented with a deal where the terms of the deal have been resolved so that questions of monetary union, defence, keeping nuclear weapons in the Clyde and all of these things should be clarified by both the UK Government and the Scottish Government before you vote.

Dr Qvortrup: In so far as they can be. There will always be the unknown unknowns. It is in the nature of politics and in the nature of everything that there are things you have not thought about. The overall principal agreement of the general direction of where you are going should have been settled. I do not know if I should say "should have been settled", but traditionally in other referendums they have tended to be settled.

Q659 Chair: I want to press you on this. It is not just a question of the general direction. The general direction that is being debated in this referendum is the question of separation or independence. That is clear. It is a question of whether, from international experience and good practice, we should expect the vast majority of questions to have been resolved before the vote, accepting that there will always be unknown unknowns that come up subsequently, rather than just saying, "There is the general direction. Vote for me and trust me to work out a deal". Is it the former or the latter?

Dr Qvortrup: If we look at the referendums that pertain to national issues-we have had the Montenegro one that I mentioned and we had one in Cyprus in 2004-in the ones with which we can compare ourselves, most of the foreseeable issues such as defence and monetary issues have been settled in so far as they could be settled.

If we look at the African examples-I mentioned the Eritrean one-that was also settled. They have a coastline. The rest of what was then Ethiopia does not have a coastline; therefore, they get the Navy. That was one of the issues there. Of course they do not have the nuclear subs in the Clyde, but that was a similar kind of matter. They wanted that to be settled before. What is going to happen to all the people who work in the Navy? They are not going to get their jobs because they are going to have to go back to Ethiopia. That was a very concrete question. That was very much debated, but was settled there beforehand.

In the case of Montenegro, there were a number of work permit issues that were settled before, so that people knew they could continue or not continue to work in both places. The practical issues were, in so far as it was possible, settled beforehand.

Q660 Chair: That is immensely helpful. I have a final point on this. There are obviously a number of academics working in this field. I presume you are not the only person who looks at this, even though you are one of the most esteemed. I take it that your view would be shared by your general academic colleagues, or are you way out on a limb somewhere?

Dr Qvortrup: I try never to be out on a limb; that is not very comfortable. It is relatively simple to go back and say, "What did they agree beforehand?" If we take the examples that I have mentioned of Eritrea, Montenegro and Cyprus, it was felt, perhaps because there was international mediation, that you needed to have a clear definition of what the consequences were of what you were voting for. It is not high academics; it is really just going back and looking at the facts.

Chair: Thank you very much. That is very clear and helpful.

Q661 Lindsay Roy: You mentioned earlier a successful referendum. I think you implied that, if people were to guess, that was a success.

Dr Qvortrup: No. What I mean by a successful referendum is one that does not lead to war. I have a book coming out called "From Bullets to Ballots", by the way.

Q662 Lindsay Roy: I note that there have been some multi-option referendums, but your preference would be for a binary referendum. Is that the case?

Dr Qvortrup: Yes. In that book I was trying to advertise a little bit a moment ago-

Lindsay Roy: We will give you another opportunity to tell us about it.

Q663 Chair: What is the title of the book?

Dr Qvortrup: "From Bullets to Ballots".

Q664 Chair: When was it published?

Dr Qvortrup: It will be published at the end of this year.

Q665 Chair: How much is it?

Dr Qvortrup: I think it is £19.99.

Q666 Chair: Is that the paperback edition?

Dr Qvortrup: Yes; it is the paperback edition. It will be published in America, actually, because the Americans take a keen interest in Scotland.

Q667 Lindsay Roy: Why is it that you strongly favour a binary referendum?

Dr Qvortrup: I favour it strongly, but then again I am just a little academic. There have been 222 referendums since Napoleon dealing with national issues. Some, such as that in Wales, deal with more power going to an area and others deal with separation. Of those 222, there have only been three referendums where there has been a genuine multi-option possibility. They have been in Puerto Rico twice, unsuccessfully. They did not go to war, but they did not result in separation, basically because the voting basis was split. Then there has been the example in Newfoundland. That was part of the UK. Then there was the option of Newfoundland becoming independent, remaining with the status quo or joining Canada. There was a first round with two options and one was eliminated, and then there was a run-off phase. It was a bit like the French presidential election.

That system worked reasonably well, but as a general rule, the fact that there have not been many multi-option referendums at all indicates that they are not a good idea. There are some countries where they have had multi-option referendums. For instance, in Sweden they had one on nuclear energy. Two options were very much in favour of nuclear power and the third option was very much against it. They were within a couple of thousand votes because they had three options competing with one another. Sometimes if you have the multi-option referendum, it is a bit like first past the post; the largest minority will win. Whatever one thinks about first past the post, it might work for elections, but it certainly is not a good idea in referendums because this requires a firm, thorough and unquestioned mandate. Multi-option referendums do not deliver that.

Q668 Lindsay Roy: So there is a lack of clarity and decisiveness.

Dr Qvortrup: Yes, and you want to have clarity and decisiveness.

Q669 Lindsay Roy: I take it that you would endorse the views expressed earlier that regulation of the referendum should be by the Electoral Commission.

Dr Qvortrup: Either by the Electoral Commission or perhaps by one of the more streamlined bodies. I quite like the idea they have in Ireland, where there is a public figure who is well known who is in charge of it. An ad hoc referendum commission might also work. The Electoral Commission have now perhaps earned the right to run referendum campaigns. They have been relatively successful. They have perhaps learned from their mistakes. I would not have any objection to the Electoral Commission running the referendum.

Q670 Lindsay Roy: You cited an example in Ireland. Do they perform the same function as the Electoral Commission in terms of advice and questions, for example?

Dr Qvortrup: Yes. Other places could be cited too, for that matter. For the advice and the questions you want somebody who is not, for want of a better word, just a faceless bureaucrat.

Q671 Lindsay Roy: Or an academic.

Dr Qvortrup: I have no problems with the Electoral Commission, but if you have somebody such as a former judge, for instance-in Sweden the Ombudsman is the person who deals with that and in other places you have the Speaker of Parliament-who is seen to be neutral and is recognised as being neutral, that gives more credibility to the overall campaign. The really important thing is that it is seen to be fair. That is more likely to be the case if you have somebody who is beyond reproach.

Q672 Lindsay Roy: Do you have any evidence of Governments or Parliaments rejecting the advice of a body like the Electoral Commission and, if so, what the consequences have been in terms of the referendum?

Dr Qvortrup: In most cases they have accepted it, but that is probably because they have come up with the ground rules themselves.

Q673 Lindsay Roy: And because there might be a penalty and it would be seen as negative if there was a partisan approach.

Dr Qvortrup: That is probably true as well, but I do not have any firm example of that being the case. In most cases that I know of-

Q674 Lindsay Roy: But that is your personal feel for the situation.

Dr Qvortrup: Yes.

Q675 Chair: We are just about drawing this to a close. Can I ask Rachel and Daran whether or not there are any observations from your experience that you can make on Matt’s comments?

Daran Hill: I thought what he said about the Electoral Commission having developed more experience was a particularly important point. During the conduct of referendums you need to be able to turn to an independent body for advice and guidance that can offer that in an impartial way. During last year’s referendum I did not always feel that the Electoral Commission were giving clear enough guidance on highly detailed matters.

Q676 Chair: Why was that?

Daran Hill: Because of the circumstances we found ourselves in. When there was no official designation of the yes and no campaigns, we then had to change our mindset in terms of the way that we were campaigning. One of the key things for us then was that we did not break any of the financial rules. There was a cap put on any campaigning organisation of £100,000. We were able to fundraise so effectively that it actually looked like we were going to breach that ceiling, but it would not have been a problem if we had had official designation. We then sought some quite detailed advice from the Electoral Commission on that issue and whether local campaign groups that were associated with us should be counted as part of our spend or separately. In the end we did get clear advice, but it took quite a number of days to get that clear advice.

Q677 Chair: Why was that? Why did it take them so long?

Daran Hill: That is a question that I pondered over a period of time. It certainly did not make our lives any easier. I would have expected a much more robust response from them in the first instance.

Q678 Chair: Were they risk-averse or were they just indecisive?

Daran Hill: I think there was risk aversion because of their lack of experience. There had only been one referendum conducted under PPERA previously. A body like the Electoral Commission is always going to be risk-averse by the nature of its constitution and its impartiality.

I want to add one more thing. This is a plug for a book in which I do not have a financial interest. There is a book that has just been published called "Wales Says Yes" by Richard Wyn Jones and Roger Scully. It is an account of the events leading up to last year’s referendum. It has lots of academic analysis and lots of interviews with me, Rachel and a number of other people, who provided a lot of information for that book. There is a particular chapter on the actual campaign, which is no more than 15 pages or so. I think that would be beneficial for members of the Committee to read.

Rachel Banner: What Matt was saying about a body that had a figure involved in it, someone who was trusted and so on, is an interesting idea if it can get people involved in the process as well as feeling that they can trust the process. There is a great problem there in finding somebody who can be seen as trustworthy and neutral at the same time. It is an interesting idea.

Q679 Chair: Are there any answers that you had prepared to questions we have not asked you? Is there anything that you are bursting to tell us about?

Dr Qvortrup: One issue that has normally come up whenever I have travelled around the world is: who is eligible to vote? I am slightly surprised that it has not come up here. It has not been mentioned at all. When they had referendums in the other places that I have mentioned, people who were born in that country, even if they lived in the other country they were seceding from, were in certain cases given the opportunity to vote.

I can see the battle and I can see the blogosphere coming out with all sorts of nasty things about me even raising this issue. That is the danger of getting involved here. It is a thing that needs to be looked into. If somebody was born in Edinburgh and moves to England with an intention of going back, should that individual be entitled to vote?

Q680 Chair: What is the international experience?

Dr Qvortrup: The international experience is that they get the vote. For instance, recently we had the example in Sudan. There were people from South Sudan who lived in London, who would go to the Embassy and vote.

Q681 Chair: How far does it extend? As you may know, the Scottish rugby team is not doing particularly well.

Dr Qvortrup: It is only if you are born in that country.

Q682 Chair: It has a grandparent test, so you would not extend it as far as that.

Dr Qvortrup: No. Some people obviously in South Sudan wanted it to go back as long as they possibly could. There have been all sorts of arguments about that. In the Montenegro example, if you were born in Montenegro but happened to live in Belgrade, should you then be allowed to vote because you might want to go back to what would then be the independent country? It is worth looking into because it is a thing that has often come up-not in the rugby team kind of context.

Q683 Chair: You don’t have a Scottish grandparent, by any chance? We are always looking, although of course we did try to get somebody from Wales and the Welsh Rugby Union disqualified them by a piece of underhand behaviour, if I remember correctly. That is possibly a distraction.

Dr Qvortrup: I think I should not play for Scotland, even though I revealed that.

Q684 Lindsay Roy: It is somewhat ironic, though, that you can represent Scotland with a grandparent born in Scotland but be living in Wales, England, France or New Zealand or wherever.

Dr Qvortrup: In rugby terms I don’t want to comment, especially with the Welsh here, who would quite like to talk about rugby. In a fair referendum, it is one of the things that you would want to look into. I do not know how these people would vote. Would they be more nationalistic or less nationalistic? It is just that if places from Montenegro to Sudan have allowed people who live in the diasporas, if you like, to vote, at least that ought to be looked into.

Q685 Chair: Since you have touched on that question, are there any issues that have arisen about people who are living in the country at the time who are not nationals, for example, not being allowed to vote? Everybody within the boundaries would be allowed to vote, even if they were passing through, so to speak.

Dr Qvortrup: People on the Electoral Register tend to be allowed to vote. If you are an EU citizen coming from Poland, that does not give you a vote, but if you are a Polish person with a British passport you would be on the Electoral Register and you would be able to vote.

Q686 Chair: That is one of the issues actually. Some Poles would be on the Electoral Register, and there is a difference between the Scottish Parliament Electoral Register and the Westminster Parliament Electoral Register. The Scottish Parliament has suggested it should be the Scottish Parliament Electoral Register and others have suggested that it should be that for the state, as it were. Since it is a referendum about breaking up the state, it should only be those who are eligible to vote in the state elections-therefore the UK elections. Has there been a parallel anywhere else?

Dr Qvortrup: The parallel has been that those who are eligible to vote for the highest body in the country can vote in this particular-

Q687 Chair: In Scotland, that would mean those who are on the UK Electoral Register but not those who are on the Scottish Parliament Electoral Register.

Dr Qvortrup: That would be correct, yes. Again, if you look at the other comparable jurisdictions, again in the Canadian one, the people who can vote for the Assemblée Nationale can also vote for the Canadian Parliament. There is an overlap there. Most European countries are different because there is a different electoral roll for certain local bodies. The general practice around the world is that, if you are able to vote for the national legislature-ie federal or central-that is the highest legislature of the land, then you are also allowed to vote for independence.

If I can take another outlandish referendum, in 1933, when Western Australia seceded from Australia, they used the register for the national elections. Westminster Parliament forgot to deal with the application and therefore Western Australia is still part of Australia, even if they voted massively to leave. Did you get that, Chairman?

Q688 Chair: Leaving that aside for the moment, if you suddenly remember once you have gone that there is something you should have said and you want to draw it to our attention, we would be grateful if you could let us have it. Your book was "From Bullets to Ballots", was it not?

Dr Qvortrup: Indeed.

Q689 Chair: A film deal hasn’t been arranged, or anything like that, yet?

Dr Qvortrup: Not yet, but I will make sure you star in it.

Chair: We just thought we would give you another mention for it. Thank you all very much for coming along. We have another session now with faceless bureaucrats.

Examination of Witnesses

Witnesses: John McCormick, Electoral Commissioner for Scotland, Andy O’Neill, Head of Office, Lisa Klein, Director of Party and Election Finance, and Andrew Scallan, Director of Electoral Administration, the Electoral Commission, gave evidence.

Q690 Chair: I am sure it was outrageously undeserved to describe you as "faceless bureaucrats", but none the less thank you very much for coming along. I apologise for being somewhat delayed in meeting you. As you have heard, we had a session today that took us into areas that we did not expect, ranging from the South Sudan to film production and stuff like that. I start off by welcoming you and ask you to introduce yourselves and outline your positions.

Andrew Scallan: I am Andrew Scallan. I am Director of Electoral Administration at the Electoral Commission.

Lisa Klein: I am Lisa Klein. I am Director of Party and Election Finance at the Commission.

John McCormick: I am John McCormick, Electoral Commissioner with special responsibility for Scotland.

Andy O’Neill: I am Andy O’Neill, Head of Office, Scotland, for the Electoral Commission.

Q691 Chair: You have said to us before that you are ready and willing to regulate a referendum on separation for Scotland. You have outlined to us why you think you are appropriate for that. The discussion has moved on since we had our discussions some time ago. What debate, meetings or discussions have you had with the Scottish Government about the possible role of yourselves in any future referendum?

John McCormick: We have had discussions with the officials and Ministers in the Scottish Government and the UK Government.

Q692 Chair: What fruit has come from those?

John McCormick: We have been seeking clarification from both of different issues in the consultative paper before we put in our submission.

Q693 Chair: These were on the issues that were in the consultative paper?

John McCormick: There were certain issues in the consultative paper that we have sought clarification on before we made our submission, yes.

Q694 Chair: Clarification was obtained, was it?

John McCormick: Yes.

Q695 Chair: As far as the information that you have available is concerned, you are entirely happy and there are no known unknowns.

John McCormick: As you will see from our submission, we were happy enough to submit our submission on 8 May to both consultations because we had received clarification on the issues that we felt were maybe ambiguous or unclear to us. We would hope to continue to have discussions with both Governments now that our submission has been put in.

Q696 Chair: Last week we had evidence from a number of people about the AV referendum. Today we have had evidence from people about the Welsh referendum. Both groups are making a whole host of what they believe to be positive suggestions about how the situation ought to be improved. Are these suggestions that you generally accept?

John McCormick: I would need a bit more precision about what they have said and how they have said it. We heard a little this afternoon from our Welsh colleagues about the referendum.

Q697 Chair: I thought you would have seen the written evidence that had come in and also the written evidence that was submitted to us last week.

John McCormick: I have not seen that; I do not know if my colleagues have. I have read the Hansard transcript of your recent deliberations. I would say at the outset, Chair, that we believe we have learned lessons from both the referendums last year. In our reports we made a number of recommendations that we hope the UK Government will pay attention to, which we think would improve the process. We have learned a number of lessons from both those referendums.

Q698 Chair: I had not realised that you had not seen the evidence that had been submitted to us last week, particularly by the No to AV Campaign, which produced a pretty comprehensive and thorough paper outlining a whole number of changes that they wanted to see. We wanted to identify with you whether or not you supported the issues that they had identified.

John McCormick: I would be very happy to write in response to that when we obtain it; we will give you our responses in writing.

Q699 Chair: That would be helpful, because we want to try and make sure that, if we are commenting on this, we are picking up their evidence. What sort of lessons do you think you drew as the Electoral Commission from both the AV referendum and the Welsh referendum?

John McCormick: I will ask my colleagues to join in with me. We drew a number of different lessons. One was about the timings of a referendum campaign. We made a recommendation in our report that we believe there should be a clear period of 28 weeks between Royal Assent and a referendum taking place. The first 12 weeks should be to allow the returning officers-the counting officers-to plan and issue planning for the referendum campaign itself, so that there is no doubt about the rules. We recommend a regulated period for the campaign of 16 weeks. We also made detailed recommendations about the question and testing process.

In our experience, in both those referendums, the period for question testing is 12 weeks. We feel in an ideal situation you would leave another period of up to eight weeks because at the end of 12 weeks we would submit our recommendations back to Parliament. If Parliament then asked us to go back round the circuit again, as it were, and test some element of the recommendations, we believe ideally there should be another eight weeks to allow that.

We have said in our submission that as to a timetable we would like to see a period of 20 weeks at the beginning to assess the question and put the question so that Parliament can confirm that they are happy with it, and at the end of the process there should be 28 weeks. That is as far as we went because that is within our competence. That is part of our recommendations.

We also made a number of recommendations relating to focusing on the interest of the voter. These relate to a number of operational matters relating to the information at the polling station, the design of forms and the like, which we would like to see enacted in any future designation. We made recommendations relating to the co-ordination of the poll. We think it is very important that the voter knows there is clear responsibility and accountability for the running of the poll. As you know, we recommended that the Electoral Management Board and the convener of that Electoral Management Board should be the chief counting officer for any referendum in Scotland.

We also recommended that there be real-time monitoring-i.e. during the campaign- of the performance of registration officers and returning officers. We also looked for clarity on the important issue that was mentioned in your previous session about the issue of designation, particularly following the experience in the Welsh referendum. We were concerned in one sense. Since no "no" campaign came forward for designation, the benefits of designation were denied to the "yes" campaign, if I can use that word. That needs to be looked at because it leaves open the possibility that people would not come forward on one side of any referendum and therefore the other side would not be able to benefit from the public funding. That raises issues of fairness.

It is a very complex issue and we do not want to jump to a conclusion. We have said to Government in our report that we would like to open discussions about that and whether there would be times and circumstances where it may be possible to designate on one side. There may be benefits and disadvantages of that. The issue is such-the country has not had that much experience of referendums-that we would like to sit down with Government and officials and discuss the issues because it is very complex. Those are some of the lessons.

Q700 Chair: In Scotland we are not likely to be in a position where we have either a lack of a no side or a lack of a yes side. It is an interesting byway, but I am not sure it is necessarily going to apply to us.

John McCormick: I agree with you, Chair.

Q701 Pamela Nash: If we end up in a scenario where we do not have a clear yes/no question but we might have multiple options that might not be in a single question, how will that work? How are we going to be able to designate key campaigns?

John McCormick: We test the question. We have said in our submission that we do not opine about any question. We put it through a rigorous process of assessment. Then it comes back. We have said in the report that, if there was more than one question, then we would put that through the rigorous testing process. But you are right that it does raise the issue of designation if there is more than one question. My colleague Lisa would like to comment on that.

Lisa Klein: In terms of designation, I am going to speak first about the Political Parties, Elections and Referendums Act-the PPERA framework. In there it is quite clear that, if there are two outcomes, we must designate on each side or not at all. That was the situation that we experienced in Wales. The legislation then goes on to say that, if it is a situation where there may be more than two outcomes, the referendum legislation has to say for which outcomes we would be designating. Again, under the PPERA framework, that legislation specifies that we either designate for one or for both.

Q702 Pamela Nash: When you say "the referendum legislation", do you mean the specific legislation that will be looking at the dates and the question details?

Lisa Klein: That is correct. The Scottish Government proposal does not specify with clarity whether we would be required to designate for both outcomes or all outcomes. It is an area that would need to be looked at going forward.

Q703 Pamela Nash: It is certainly not clear at the moment.

Lisa Klein: Certainly it is in everyone’s interests for there to be exact clarity about the designation issues, especially if there may be more than one outcome. There was a challenge in the UK-wide referendum. We prevailed. It was two weeks before the referendum. We want to avoid any potential successful challenge or any challenge that could bring into doubt the validity of the result of the poll.

Q704 Chair: What is your view of what would be good practice if there are three possible options? How many organisations would you designate?

Lisa Klein: It is not an experience that we have had in the last 2011 experience. We would have to look at that concretely.

Q705 Chair: But presumably you read books as produced by the good professor who was in earlier on and identify what has happened elsewhere. It must be something that you have thought about.

Lisa Klein: Yes.

Q706 Chair: What do you think?

Lisa Klein: We have thought about it and we have probably raised more issues that we need to address than answers. For example, one of the questions that I would have is that, if there is more than one outcome that campaigners might want to campaign for, currently, when you register as a permitted participant, you identify the outcome you are campaigning for. If it is a multiple question type of situation, then how does that designation work and can one enrol, if you will, for more than one outcome as a campaigner? I am afraid today I can bring you more questions; I do not necessarily have the answers for them.

John McCormick: As a Commission, we believe that this is an area that is quite complex and we need clarity at the outset in the legislation as to the outcomes and the designation. I think that is what the voters would want. If you could look at three questions hypothetically, then there may be, as Lisa says, numerous outcomes. The basis on which designation funding was allowed would have to be clear at the beginning. I am afraid, like the question or questions, it would have to be a question of case law-examining what was put forward, looking at all aspects of it and making recommendations for the legislation.

Q707 Chair: We have had various academics in front of us talking about possible options and how to conduct the referendum. There was the dead French guy whose name escapes me for the moment.

John McCormick: Condorcet. I read it with great interest, yes.

Q708 Chair: In those circumstances you had to have three questions, each posed against the other. Presumably in those circumstances you would have yes campaigns and no campaigns for each option. If you have thought about this, you must have developed your thinking to some extent, surely.

Lisa Klein: Perhaps not as much as this Committee would like. We have looked at it and, if you are campaigning for option 1, you may also want to campaign a bit for option 2. It is something that is complex. We will need to be thinking about it when presented with the situation.

Q709 Chair: That is right, but what we are looking for is some advice and guidance from you, because you are, after all, the Electoral Commission. You are meant to think about these things more than those of us who have just walked in off the street, as it were. The SNP would presumably campaign for separation. Some people will campaign for the status quo if it is a binary referendum; that is clear. If there is then a second option about devo-max or the like, if you end up with devo-max posed against separation, but the SNP or the separatists did not want to have that as a second option, presumably there must be some structure that produces material and reflects all that.

John McCormick: Chair, there is not a template that we have that we can give you and say, "This one size fits this situation and this size fits that." It may be unsatisfactory because the hypothetical situation here is that we would test it, and we would test it rigorously. We would not come to any conclusions or any judgments about it until we had done that testing. That would include designation, outcomes and how many outcomes the voter sees coming.

Q710 Chair: How do you test for designation? I understand the point about testing for questions; I understand that completely. The question of a designation is surely not going to be the subject of testing.

John McCormick: I believe myself that when you test for the question, if it is a multi-option referendum, it raises a lot of issues that you may not perceive to be there until you have done the testing. That has been the case in a more modest way with the PVS referendum and the Welsh referendum last year. We learned things that surprised us from the testing process. There will be things that would inform the designation process and that would have to go into the legislation. That is why we want the question testing process to precede the legislation so that it can inform the legislation. If it was a multi-option referendum, I think it would inform us how many perceived outcomes there would be; that would inform the designation decision and that would inform the legislation.

Q711 Chair: Can you tell us some of the complexities that there are about the issues of designation with three possible outcomes, just to inform our thinking? Tell us some of the complexities that there are about designation in circumstances where there are three possible outcomes.

Lisa Klein: First of all, we would have to look at the criteria. We are in a position where we have looked at the rules governing designation for 2011. When there is another referendum, we would go back and revisit the criteria that we applied for that. We would want to be thinking about organisations, objectives, the level of support and how that could possibly be measured, and how the organisation might represent other campaigners as well. We would want to look at the applicant’s campaigning activity and organisational capacity. We have done that and had some experience with that in the context of a two-outcome situation. I am not trying to be difficult in this situation, but in a concrete proposal I would want to be able to assess this, make sure that we have the right criteria and that we are going to be able to apply them well into a new context for us.

Q712 Chair: We are being asked to make recommendations and produce a report on the process of the referendum. One of the issues will be whether there should be two possible options or three. If you are telling us that you cannot give us any advice or information whatsoever on how designation might apply in anything other than a binary referendum, that is not possibly as helpful as it might be.

Lisa Klein: I am not sure that is what I was saying. I am saying that, if you step back, we have some principles. We would be applying those principles to a new area. We are aware of areas where we think the legislation needs to be very clear. We would want to work with officials so that the rules governing the designation process are clear and will deliver a good result.

John McCormick: I have been very wary, Chairman, when people have asked me, even privately, to comment on the question that is in the Scottish Government’s consultative paper. We do not sit around and opine on hypotheticals. We do not sit around at board meetings with one commissioner saying to the other, "What do you think of that situation?" We base it on rigorous testing. That is what we do; that is our job. What we need is clarity. and what the voter wants is clarity about outcomes and clarity about designation. That is why, for us, it is case law. We learn lessons from previous referendums and we apply them to the testing the next time round. It makes it a bit difficult for us to give a template because it would be based on other people’s opinions. We want to test it before we give any advice, and we would like to test it and give advice.

Q713 Lindsay Roy: What does "intelligibility" mean and how do you test it?

John McCormick: "Intelligibility" for us means clarity.

Q714 Lindsay Roy: Other than real issues about clarity in terms of a multi-option referendum.

John McCormick: No doubt there will be issues that will be raised, and that is what we will test. Seemingly, we have learned from the Welsh referendum and the PVS referendum that issues that came up on those two questions surprised us. I presume that any question will raise issues with some sector of the electorate that we will test it with, and with specialists and campaigners. Our testing process is quite a broad process. It goes across people who have literacy issues, people for whom English is not a first language, people who vote and people who do not take any part in voting. As well as the focus groups and the testing with those whom we would regard as voters in different parts of Scotland, we would also be discussing it with campaigners and those on all sides of the referendum, with those who have an interest in it and with academics and plain English specialists. We do not narrow the process. A lot of that goes on in parallel over the 10 to 12-week period. It is a rigorous process and out of that comes, we hope, clarity.

Q715 Lindsay Roy: If it is other than a binary referendum, are you saying that the Electoral Commission would need additional time to clarify all these points?

John McCormick: If it is other than a binary referendum?

Q716 Lindsay Roy: Yes; if it is a multi-option referendum and you have to test for intelligibility.

John McCormick: Ideally, the minimum we need is 12 weeks. We are recommending that we have 20 weeks to test. That is based on the experience last time of testing and re-testing and going back round the circuit again. That is based on experience of the single question referendums last year.

Q717 Lindsay Roy: Are we talking just about intelligibility of question, which you said was clarity, or clarity in terms of outcome? You could have a position where you have 40%, 33% and whatever is left.

John McCormick: We are looking in the question for a result that we would recommend to Parliament would be a question that was easy to understand, to the point and unambiguous. The question avoided leading the voter in one direction or another. It is these kinds of principles that I know-

Q718 Lindsay Roy: And decisive in terms of outcome. Is that part of your role?

John McCormick: Clarity to me would mean that people knew what they were voting for. One of the clear things we talk about is what we mean by clarity and intelligibility. It is that voters get the result they want, so therefore they understand the question and its implications if they vote one way or another. That is part of the question testing process. The issues relating to the campaign substance would come out from the campaigners during the campaign and that informs the process as well. Remember, we are talking about the process before the campaign when we are testing the question. We are looking for clarity about outcomes and clarity about the question, and an unbiased question.

Q719 Lindsay Roy: Say, for example, there was a status quo, devo-max and independence or separation. You could in fact have more than 50% opting for two of the options.

John McCormick: We would have to test that. We are not going to come to any conclusions about hypothetical questions or numbers of questions in advance of testing.

Q720 Chair: Have you not discussed or considered any of this at the moment? We had four academics in front of us, all of them telling us that, if you had three options, then the way in which the questions were posed and the way in which the answers were counted could influence the result. Surely you must have studied all of that already.

John McCormick: I read that evidence with great interest and have spoken to some of those academics, but that is quite different from the Commission taking a view. The Commission will only take a view once it has undertaken its own research on specific questions rather than hypothetical ones. The Government propose a question, questions, or set of questions. We advise and Parliament decides. It is that process, Chairman.

Q721 Chair: I understand the point about testing the intelligibility of particular questions, but it is clear at the moment that there are three possible positions, however the wording goes. There are three possible positions, and then we have a variety of methods presumably of how they might be posed against each other. Are you saying that you have not studied, considered or had any sort of discussion about how that process might be handled?

John McCormick: We have not come to a definitive position about hypothetical situations. We do not do that. Andrew, is there anything you would like to add to that?

Andrew Scallan: The only thing to add is that, if three questions were proposed, then one might reasonably assume that the counting method would also be proposed at the same time. We would then explore, just as we do now, the implications of any voting system. We would talk about the technical issues around the implications for those who are meant to carry out the count of any voting system. We would then explore the suggestion that came for the method of counting and give an opinion on that.

Q722 Chair: But you are not considering any of this at the moment. You are just sitting entirely passive until somebody comes along and puts a proposal in front of you. You are not saying, "If they suggest that, then our response would probably be such and such because of such and such." You are not doing any of that preliminary work. Is that what you are telling me?

Andrew Scallan: There is always work going on understanding all the systems, but we are not going through a range of permutations. There is almost an innumerable range of permutations of questions. With three questions on their own, there are permutations of what the wording of those questions might mean.

Q723 Chair: Leave aside the question of the wording-I understand completely that that has to be tested and you have to wait-the question of how you pose three options against each other in order to get a fair result is presumably something that has occurred to you already and might not be hypothetical. You either have that or you don’t, so it is not a question of you having five options. It is a question of whether or not you have three options. Surely you are considering how that would be handled.

Andrew Scallan: It is currently hypothetical. We are not working through in detail. We are always thinking about a range of options. We are not doing a lot of detailed work on all the permutations of questions that might be asked.

Q724 Chair: If it is not legislation and it is a section 30 order, if the Government approaches you about what should be in this section 30 order in order to expedite matters, will you ever be in a position to give them any advice or will you only wait until after the section 30 order has actually been drawn up?

John McCormick: We would be very happy to be consulted on the legislative basis for the referendum.

Q725 Chair: But if you have not considered it at the moment, then there would be no point in consulting you because, as you have said before, you are not actually prepared to consider hypotheticals.

Andrew Scallan: Our previous response was to a specific question about three questions. If a section 30 order was made, we would expect there to be, as there always is around legislation, close co-operation between Governments and the Commission on the basis for it. We have put out in our referendum report what we think is the key framework that is needed to run a referendum and the changes that we would recommend to the current PPERA framework. We would expect to be consulted.

As an organisation we like to rely on an evidence base. Our reports from the evidence will inform any response to the section 30 order. We think we know what the components of a good referendum are. We have made that very public in all our reports and we would hope to see that reflected in any section 30 order.

Q726 Chair: Should you be asked as an organisation for advice on the formulation of a section 30 order?

Andrew Scallan: Should we be asked? We would be consulted in any event because of the nature of-

Q727 Chair: No, no. You would be consulted at the moment after it has been produced. I am asking whether or not you believe you should be drawn into the process while the section 30 order is being drawn up.

Andrew Scallan: I think I said earlier that we would be surprised if we were not involved in the consultation about how the section 30 order was drawn up because that is very often the way that legislation is drawn up.

Q728 Chair: We are trying to consult you at the moment about the formulation of a section 30 order and we are not getting very far. I would hope you are more forthcoming if Government discuss these matters with you. We are trying to formulate recommendations that we will make to Government about the content of a section 30 order, which is why we are trying to clarify with you what the best way is of ensuring that, if three options come forward, it is least confusing and best expedited. Answer comes there none.

John McCormick: I would expect, Chair, that at the legislative drafting stage we would advise that an extended period should be written in to allow for rigorous testing of a range of options. That is as far as the legislation would go. It would not get any hastily drawn hypothetical conclusions from us without the research and the testing that we have talked about. In the legislation we would want to see, as we recommended last year, a fairly lengthy period put aside for question testing.

Lisa Klein: We have the question assessment and the designation side, but, if I were to go back to the designation side, there is a situation where we can help explore what the options are-for example, whether we designate for each option, whether we designate for some or whether we have to designate on each side or not at all. Those really are not the questions for us to determine, but we can provide a great deal of help in talking through what the issues are and how they can be handled. When a decision is made on which way to go, we have a responsibility and we have some experience that can be brought to bear to make sure that it operates and runs smoothly.

Q729 Chair: I understand that. How would you like to talk through these issues with us just now then, which is what we are trying to do?

Lisa Klein: There are a number of things where we could perhaps inform the Committee about issues that may arise from our experience, but to say whether it should be done in one way or another-

Q730 Chair: Tell us the issues that have arisen from your experience in relation to dealing with the question of designation for three possible options. What can you draw to our attention, based on your experience?

Lisa Klein: In terms of the designation?

Chair: Either.

Lisa Klein: If I limit myself to the issue of designation, if this is not a PPERA framework, then we have to make some decisions about whether or not we should be designating for each relevant outcome; whether we should only be designating for some of the outcomes; or whether we would have to have the situation that we had in Wales, whereby if you designate on one side of one equation, you have to designate on the other side of that outcome equation, and, if there are three options, there may be six possibilities on that. On that one particular issue, that is how I would highlight some of the areas that we would want to explore.

There are other areas to which we should be able to bring our experience. I would like to go back for a moment to something I heard from the prior panel. There was a suggestion that all donations of over £500 are to be reported. That is not what the law requires in a PPERA context. There are two areas. There is a recording, which means that you keep a record of the donation and you have to conduct a permissibility check on that donation. That is at £500. In terms of what is presented for disclosure, reported to us and subsequently made public, it would be donations of over £7,500. That is an important distinction.

One of the areas where we would make a recommendation and would want to work to a resolution, for example, is that under the PPERA regime and the framework all of that is made public after the date of the poll. One of the experiences that we would like to work through with officials is whether there is not scope for the voter to have a right and a need to know who is supporting different campaigns above that level. There could be a way in which there could be a pre-polling disclosure of donations.

There are many different ways we can do that. We have the experience from the election context of what happens before a parliamentary election on a UK-wide basis. That might not be the best fit, but we are ready and prepared to talk through some of the options and the pluses and minuses to them, and what would make sense for the parties and the campaigners so that it is not overly burdensome and still keeps the voters in mind.

On a lot of those issues we have an awful lot to offer both to the Committee and to officials who are going to be working with the legislation.

Q731 Chair: Unless I am mistaken, a lot of that would be good management practice in the sense of running a referendum-all in the context of a binary referendum. We are conscious of all of that. Where we are on new ground and to some extent, understandably, floundering is where there is a possibility of more than two options. That is where I thought we would be able to get some advice and assistance from you, even being pointed in the right direction about what we should be considering. I find it very surprising if you have not even thought about some of these things.

Lisa Klein: We have thought about it, but there are an awful lot of issues that we have raised in our prior referendum report that warrant consideration by the Committee and others that apply, whether it is binary or multi-option.

Q732 Chair: That is right. To be fair, they are already in the public domain and, as I understand it, that is already being discussed. These issues relating to options that are more than two are not nearly as clear to us. That is why we are seeking some assistance from you in terms of being pointed in the right direction.

We heard earlier on about one of the difficulties that one of the Welsh campaigners had. I think you agreed that you were indecisive and risk-averse. You can possibly understand why we might come to the same conclusion. We are having some difficulty here in getting you off the fence about saying anything at all that would be of help to us.

John McCormick: I heard that comment. Maybe being described as risk-averse is the price of being impartial.

Chair: No; I do not think it is the same thing.

Q733 Lindsay Roy: To try and take things forward, in relation to the question of intelligibility, if there are three options, is it just the wording of the question whether or not an option can be delivered and voted on? Do the voters need to know how they will be counted and how a second preference is scored?

Andrew Scallan: As we heard from the previous witnesses, three-option referendums are very unusual. However many questions there are, we would want to make sure that people understood the outcome. If there was to be a novel counting method used, then I think it would be very unlikely that we would not seek to explain the whole process in any materials that were put in the public arena to make sure that people were aware of the outcome. It would be an essential part of understanding the outcome.

John McCormick: I know it may sound tiresome and risk-averse, but what we bring to the process is an evidence-based approach, rather than an opinion-based approach or a hypothetical approach. That is the strength of what we do. It may leave us open to criticisms from others because we are not giving answers on areas that have not been tested, but the strength of what we do is that it is evidence-based.

Q734 Chair: On the other hand, you see, that is an argument against never doing anything new, of course, because there is never any evidence.

John McCormick: No. I am talking about the evidence relating to that. That is why question testing is such an important part of any referendum process and recognised, broadly, to be an important underpinning. We would never recommend a referendum where the question came out and then was on the ballot paper without testing-that is a generally accepted principle of good referendums.

Chair: There are a number of strong arguments against having three options, but the fact that we have never done it before is not necessarily the strongest.

Q735 Mr Reid: The 2004 referendum in the north-east had two questions on the ballot paper. What was the assessment that you made after that referendum of whether both questions had received the right engagement by the electorate?

Andrew Scallan: There was no significant evidence that there was confusion. It appeared that the questions had been understood by the voters.

Q736 Mr Reid: We had evidence last week from one of the panel who had been involved in that campaign. I do not have the exact words in front of me, but he felt that the second question did not really get properly engaged with because most of the emphasis in the media was on the first question. That was not the conclusion that you came to?

Andrew Scallan: I will check and we will write to the Committee if we arrive at a different conclusion from the one I have just reported.

Q737 Lindsay Roy: In your response to both consultations you said, with regard to the assessment of the question: "The relevant legislation must set out clearly and unambiguously who is ultimately responsible for providing this independent advice to Parliament." Why is it important that such advice only comes from one source, and do you make your advice public?

John McCormick: As soon as we complete our assessment, we present it to Parliament and publish it at the same time on our website. We are not saying we are the only people who could do it, but we think that, if you get a multiplicity of sources of advice, it can lead to confusion with the voter and the campaign. We would look for clarity, and clarity to us means that it is an independent source of advice. We would like to be that source. There can be other people who can do it as well, but if you allow multi-sources of advice it allows people to take a pick-and-mix approach.

Q738 Mr Reid: I have found the reference in last week’s session from William Norton, who had been involved in the north-east campaign. He said in his evidence that "the people who were interested in the second question and realised they would lose the second question switched over to the no campaign"-that is the no campaign on the first question-"because the second question did not become operative if they killed off the main one." Do you recognise that concern or did you find out anything that would back that up?

Andrew Scallan: That is not my detailed recollection of the outcome. As I said, I will need to check and get back to the Committee.

Q739 Chair: I want to clarify whether or not there were any lessons in particular that came from the testing of the question on AV that you did not expect. Were there any lessons of significance that you had not anticipated at all that we ought to be aware of?

Andrew Scallan: The very biggest surprise was that people did not understand first past the post.

Q740 Chair: They did not understand the term, or they just did not understand how it worked?

Andrew Scallan: They did not understand the term and they did not understand how, currently, MPs are elected.

Lindsay Roy: So we are now even back to basics.

Q741 Chair: Do you draw any conclusions from that for any forthcoming separation referendum?

Andrew Scallan: The conclusion we draw is that you do not start off with an expectation of people’s level of understanding, which is why we think we need to have rigorous testing to make sure we get a good cross-section of the population involved in the testing, so that we try and understand people’s level of understanding both of the status quo and any suggestion for amendment in a referendum.

Q742 Chair: The fact that people do not understand the system that elects MPs does not stop them voting, though, does it? I am wondering what I take out of that as a lesson going forward for any future referendum.

Andrew Scallan: On the issue about whether or not someone may participate in the referendum, I will take the analogy of taking part in an election if they don’t properly understand the process. If people want to take part in the referendum when they may not fully understand the outcome simply because there is a civic requirement or duty for them to do it, the point we would make is that, if people are going along to vote because that is what they do, we would want to make sure that they were as well equipped as they could be to understand the question, so that they understood the outcome. It is different in an election where people may, for all sorts of reasons, be looking for a straightforward answer, have a sense of voting for a party or for an independent, and understand or think they understand the consequences of that. That is different from the nature of a referendum, which is going to change.

Q743 Chair: But that would tend to suggest, would it not, that, if you have two options, people just need to know whether or not they are yes or no or what they are for or against, without necessarily looking at the detail of the question and without necessarily understanding how the counting would work and all the rest of it? As long as it is explained to them and as long as they can turn up at the polling station with a bit of paper that says, "Vote X for the first one, or B for the second one", or whatever, that in itself is sufficient, is it not? They would not necessarily need to know how the whole system worked. They would just need to know what they were in favour of and what they needed to do to make that take place.

Andrew Scallan: But it is about making sure they do understand the propositions that are before them. That is why we want to go through the rigorous process. Clearly there is going to be campaigning around the referendum. Nevertheless, the question that they are being asked to determine ought to be one that is understandable.

Q744 Chair: Have you been involved in first-past-the-post elections? You have, have you not?

Andrew Scallan: Yes.

Q745 Chair: But you found that people did not understand first-past-the-post elections, even though you had been involved in working on them in the past. The fact that people did not understand what you had been managing did not stop them participating, did it? Therefore, a complete understanding of the system is not absolutely necessary for people to seek to get the outcome they desire.

Andrew Scallan: The Electoral Commission was not here when first past the post was brought in for a voting system.

Q746 Chair: Thank goodness for that, otherwise we would still be debating it. We would still be on the divine right of kings, I suspect, if we were relying on the Electoral Commission.

Andrew Scallan: There may be a contradiction in terms there, Chair. We were not around when first past the post came in. Therefore, where there has been a change and other electoral systems have been brought in, we have done our best to make sure that people understand the voting system and the consequences of what they do. For example, in an STV election, we make very clear what the process is, so that people understand, and then there is further information that explains how the count takes place. The evolution of elections over more than 100 years is one thing, but when there is a potential for change we need to give the public an awareness so that they have a full understanding of the consequences of where they are putting their cross.

John McCormick: What I learned from the process of the testing of the question was that you would not go to the people with a ballot paper that said, "Put an X against the system you want: first past the post or alternative vote", because they did not understand what either of those phrases meant. It is completely different for an election process, where you are going to vote, you know what the campaign is about and you are electing a candidate to become your Member of Parliament or whatever.

Referendums often raise big issues about questions that do not happen in parliamentary elections. You have to explain terms to people who do not use them every day. Again, that is why we come back to the basis on which we do what we do. We have learned to take nothing for granted. We were surprised at the lack of understanding of the term "first past the post" because it is often used journalistically, in the media and so on. We thought it may have got into the public consciousness because this Parliament has been here a long time, operating by first past the post.

Q747 Chair: In that case then, why are you not undertaking some work now that might highlight some possible difficulties further down the road in order to inform any recommendations or discussions you have when Government consult you?

John McCormick: We will undertake that work when we are asked to do it, or when we have something specific to test.

Q748 Chair: I want to clarify this with you. Why are you passively waiting? If there are possibly three options, there are surely going to be a limited number of ways in which these three options can be run. The mathematical complexities are not so enormous. Have you never been tempted even to do some preliminary work about how the dead Frenchman’s proposals might operate in practice, or a gateway system? It just seems to me that simply sitting back passively and waiting for something to happen is missing an opportunity.

John McCormick: I can assure you that we are all becoming world authorities on Monsieur Condorcet. We have been reading about other referendums in New Zealand and the gateway system. We are briefing ourselves on that experience and on the evidence that is coming to this Committee. We await the publication of the responses to the consultations that are taking place. We are well aware at the moment that we have not completed that process yet because the responses to the Scottish Government’s consultation do not end until 11 May. There is a whole lot of material yet to be discussed. As a commissioner, I would say to people that there would be a whole range of hypothetical options. We have to be seen to be testing all of them rather than testing one hypothetical. There are many of them. It is an expensive process. We must do it rigorously and do it completely or not at all.

Q749 Chair: How many options are there with three possibilities?

John McCormick: I don’t know.

Q750 Chair: You have not even considered that.

Andrew Scallan: Depending on how many words there are in each question, there could be any number of permutations. It is not possible to tell you the limitations. The research demonstrates that each word has to be considered in each question to make sure that people understand it.

The other point that goes to the heart of the question you are asking us is that, because we test the question, we think it is inappropriate that we are involved in the formulation of the question. We put out some principles about what we think the question should look like and we publish the material as we test questions. We put material out there so that people understand how people have responded to the formulation of words as originally presented. We do not think it is our job to formulate the question in the first place. That is for Governments to propose. We will then assess it. We think it is inappropriate for us to get involved in formulating the question in the first place if we are to assess it rigorously.

Q751 Chair: Are you saying that if you were asked to formulate a question you would not feel able to do so? If you were asked for advice on the formulation of a question that could subsequently be tested, you would not feel able to do so?

Andrew Scallan: We put out the basic principles for question formulation. We put out the reports on how we have assessed questions in the past. We would not expect to be involved in the formulation of a question, because we are going to assess it.

Q752 Chair: No, I understand you would not expect that. You have made that clear, but if you were, would you decline?

John McCormick: I would think that if the Commission were asked to help formulate the question and if we took part in that process, then we would be strongly recommending that some other body did the testing.

Q753 Chair: Can I ask for some information from you, if you feel able to give it, on the issue of whether or not it is better to have yes/no alternatives or two- statement alternatives? As I understand it, each of those has been tried in the United Kingdom at one time or another. Is there anything that you draw from your experience that would be of use to us?

Andrew Scallan: What we have drawn from our experience is that it depends on the questions.

Q754 Chair: I am losing the will to live. There are times when you just give up. I could be digging the garden at this time. Can I ask whether or not there is any difference between your role as envisaged in PPERA and the role as outlined by the Scottish Government’s paper in regard to regulating campaign spending?

Lisa Klein: The terminology used in the Scottish Government consultation is that we are to police the spending. Under PPERA the language is slightly different. I believe I am quoting. It is to monitor and take steps to ensure compliance with the rules. I am assuming that the role will be what we do under the PPERA regime, which is to provide advice and guidance and ensure compliance with the spending in the reporting requirements. We will handle the publication of donations and campaign expenditure returns.

Q755 Chair: Have you sought clarification from the Scottish Government as to whether or not their term means the same as in the PPERA legislation?

Lisa Klein: Have I sought clarification?

Q756 Chair: Has anybody from the Electoral Commission sought clarification? You said that the wording was different. You seemed to give us the impression that you thought the intention was the same. I am just asking whether or not you have sought clarification as to whether or not the intention is exactly the same.

Lisa Klein: What we have said is that, if we are to do the PPERA regime type of work, then we are going to need to have powers that are going to be very similar to the powers that we have now, so that we can do the function quite well. One of the things that we do currently is the designation. We also do grant provision, but the Scottish Government have said in the consultation document that there will be no public grant. That is one of the functions and powers we would not have.

I am concerned that the role that we have currently has specific powers that enable us to do our job. Those are not specified in the draft Bill and we have raised that matter with the Scottish Government.

Q757 Chair: Have you had a response?

Lisa Klein: We are in a conversation and a discussion and it was acknowledged-

Q758 Chair: We had the CBI in earlier on saying they had raised some matters with the Scottish Government, and on some they have had responses back and on some they have not had responses back. I am just seeking clarification from you whether or not you have had clear responses back from them.

Lisa Klein: This is at an official level-an officer level. We had an acknowledgment that that would be an area to be pursued.

Andy O’Neill: They have said they are currently in a consultation period and will not come back and answer things until after the consultation period ends, which is on 11 May.

Q759 Chair: That clarifies that. You heard the issue being raised about the question of spending and being registered afterwards and all the rest of it. Can you clarify for me whether or not you have made firm recommendations about wanting to have that as an ongoing report? I remember what you said about the possibilities, but I was not quite sure whether or not you had actually recommended an ongoing reporting mechanism.

Lisa Klein: We recommended that consideration be given to pre-poll reporting. There are different ways that that can be worked out, and we are willing to talk with officials and Governments to see what would be the best and most appropriate way to have that done.

Q760 Chair: But in principle you are saying that it should be done, are you?

Lisa Klein: Yes.

Q761 Chair: I am glad we got a straight response on that. Are there any powers that you are seeking that would enable you to do a better job in general with referendums and that could be applicable also to something in Scotland?

Lisa Klein: I am sorry-I did not understand the question.

Q762 Chair: You have a series of existing powers.

Lisa Klein: Yes.

Q763 Chair: Are there extensions or additions to your powers that you are seeking that would, if given, enable you to do a better job in Scotland if those powers were also applied there?

Lisa Klein: Thank you, Chair. As part of the lessons learned and some of the recommendations that we have made, there is one area that involves spending by public bodies in the run-up to a referendum. One of the recommendations that we have made that needs to be addressed is clarity about what that will cover and also an enforcement mechanism. In that sense, it is, from our experience, drawing upon a lacuna in the current law that we think could be addressed and would be different from what we have currently.

Q764 Chair: If those powers were extended, you would also use those in the regulation of a Scottish referendum?

Lisa Klein: Yes.

Q765 Chair: Do you have the statutory powers to regulate a referendum held under an Act of the Scottish Parliament, or would you have to be given powers under a section 30 order?

Lisa Klein: That would be part of the legislation, yes.

Q766 Chair: Would that be covered by a section 30 order?

John McCormick: Or an Act of the Scottish Parliament. In our report, which you will have seen, we recognise an Act of the Scottish Parliament or a section 30 order. We recognise our role in the past under section 10 of PPERA, where we can offer advice and support to relevant organisations, which the Scottish Government and Scottish Parliament are. There is a range of legal mechanisms. What we seek, whichever avenue it is, is clarity.

Q767 Mr Reid: Do you think there should be a public information campaign of balanced, unbiased information before people go to vote?

John McCormick: Yes, we do. We have recommended in our report that there be a public information campaign run by the Electoral Commission. It would be the type of electoral public information campaigns that we are planning at the moment and have just started for the local elections on 3 May, and as we have done for other elections and other referendums. That is about reminding people about registering to vote and the process of voting and so on. It is not campaign material but objective information about the referendum itself. Andy, would you like to add something on that?

Andy O’Neill: I would just add, and I guess it is important, that people can vote with confidence when they are in the polling booth or at the kitchen table with a postal vote. We think public awareness campaigns are essential for elections and referendums.

Q768 Mr Reid: What sort of material did you circulate before the AV referendum?

Andy O’Neill: Last year there was a door-drop leaflet to all 28 million households across the UK. It was regionalised for the various combinations of elections that took place. In Scotland for the Scottish Parliament, when the referendum information came, it varied. It was the same in Wales. Northern Ireland was different; England was different. There was a multimedia advertising campaign. There was TV and radio. Online there was "Victor the Vote Counter", an animation, which explained first past the post and AV. There was press work done throughout the UK. This is what we are currently in the process of doing in Scotland for the Scottish local government elections.

Q769 Mr Reid: Your campaign material explained how first past the post worked and how AV worked. Is that what your material did?

Andy O’Neill: It did for that, yes.

Q770 Mr Reid: We then have a proposal from the Scottish Government for independence. Will your material say what independence actually means?

Andy O’Neill: Currently the proposal in the Scottish Government consultation paper requires us simply to give information on how to register a vote, how to fill in the ballot paper and how to apply for a postal vote.

Q771 Mr Reid: There will be a difference between this referendum and the AV referendum, in that in the AV referendum you were explaining what AV was. Did the Act of Parliament that set up the referendum mandate you to do that, or did you just decide that it was something you ought to do?

Andy O’Neill: It was a requirement. Currently the draft Bill, which is in the Scottish Government consultation paper, does not do that. In a sense, you would find out some of these answers in the testing that you would do for the question assessment. You would find out the knowledge of the electorate currently on the issues.

Q772 Mr Reid: In the testing for the AV referendum you obviously found out that people did not understand how first past the post worked. What actions did you take after receiving that information?

Andy O’Neill: We produced a household leaflet and did all the things I referred to earlier.

Q773 Mr Reid: Say you did your testing on the basis of the Scottish Government’s proposals and you found that people did not, in your opinion, understand what independence meant. What would be your response to finding out that information?

Andy O’Neill: I do not know what the question is or would be.

Q774 Mr Reid: We have a draft question.

Andy O’Neill: In a sense, that would be for the campaigners on the yes and no sides and the political parties to make those cases, and for the media to explain to the electorate what the cases were.

Q775 Mr Reid: Take as a hypothetical case that you find, as a result of your research, that people do not understand the proposition. Are you going to report that publicly or privately to the Scottish Government? What will you do with that information?

Andy O’Neill: Do you mean the information that we get from the question testing?

Q776 Mr Reid: From the testing, yes.

Andy O’Neill: We will publish that.

Q777 Chair: Following on from Alan’s point, we had a discussion in the last hearing about the provision of unbiased and impartial information to groups-whether or not that should be done, and whether or not you were the right organisation to do that. Presumably you would not be able to vet any comments on separation or independence on the ground that it had not been tried and tested. Therefore, presumably, if we wanted somebody to produce an informational booklet, we would have to go to somebody else. Is that correct?

Andy O’Neill: Ultimately we think it is for campaigners to make their case. As I said, it is about the media reporting that. We have a role in terms of policing.

Q778 Chair: But you had a role, did you not, in producing an impartial booklet in relation to the AV referendum. That was produced by you.

Andy O’Neill: We did, but we do not think we have a role in being a truth commission, in a sense, and opining on whether or not what someone is saying is truthful. We think that would bring us into a political debate and basically make us part of that political debate, therefore impinging on our impartiality.

Q779 Chair: That is clear. If we are looking for an organisation that would run a public information campaign and produce some sort of balanced document saying "on the one hand" and "on the other hand", you would say that that should not be you and they would have to get somebody else to do that. Is that correct?

John McCormick: We are aware of the debate. It is another hypothetical. I know where you are going with that question, but there is a line beyond which we cannot go as the impartial Electoral Commission. We are trying to inform the voters so that they make a decision on the question put to them and, hopefully, we give them information to help them fulfil that process and understand the outcome of voting one way or another. That is a broad phrase. We cannot tip over into material that one side or the other would regard as campaigning material. We know there has been a lot of discussion in Scotland recently about contentious information in the public debate-there often is in referendums-some of which may be misleading and some of which may be inaccurate. That is not a job for us. My own personal view is that that material is tested during a long campaign and then people vote on what they see in the campaign, the people they trust and the arguments they support. That is an area we do not go into.

Q780 Chair: Unlike the EU referendum or the AV referendum, you are saying that it is not possible to have an objective statement of the alternatives produced, certainly not by yourselves.

John McCormick: What I am saying is that once we see the question and once we have done the testing-I am sorry, I know it sounds tiresome.

Q781 Chair: We have done all that. Suppose we have a situation where we are not now discussing process but the question of whether or not we should have a public information campaign. It is not simply about the process of, "If you cast your vote this way, this is what this means." It is a question of, "These are the alternatives and this is what they mean." They had that, as I understand it, in Wales. I am trying to clarify whether or not you would be the appropriate people to do that in Scotland. I think you are telling me that you are not.

John McCormick: We will go as far as we can in informing people in the public information campaign about the choices that are going to be put before them without tipping over into an area that would make us partial to one side or the other. That is a difficult area and we will know when we get there where the line is drawn. We will know it when we see it. We knew it in the Welsh referendum when the question came out of the testing. We knew it in the AV referendum when we understood that people did not know the basic terms.

Q782 Chair: So you would see yourselves as potentially an organisation that could produce impartial information on the consequences of the vote.

John McCormick: You are putting words into my mouth, Chairman, and I am resisting it. I know it is tiresome. We will try to put out considered, impartial information about the voting process in the referendum so that people understand the outcomes. We will know that when we see it. I am not going to go into an area that is hypothetical and would lead to us campaigning on one side or the other.

Q783 Lindsay Roy: I want to pick up on the issue of funding for a referendum campaign. What issues do you see surrounding that?

John McCormick: Issues around the funding of the campaigns?

Q784 Lindsay Roy: For example, the length of time of a campaign and so on.

John McCormick: Clearly there is a regulated period and we know there is an issue about the capping-the amounts that could be devoted to the regulated period. Lisa, do you want to add something?

Lisa Klein: I will take them sequentially, perhaps, but do assist if there are other issues that I am not addressing. You asked about the regulated period. We had recommended a four-month regulated period, which has been put forward in the Scottish Government consultation document. That means that campaign spending during that time period would be regulated or would be subject to the limits, whatever those limits may be.

Q785 Lindsay Roy: And these have not been set as yet?

Lisa Klein: No. As it is not a PPERA referendum, we are looking to the Scottish Government consultation for where they are suggesting the limit should be. There is a disagreement there. In looking in the past at what the spending limits should be, when it is in a part of the UK, our principles have been that we want to make sure that there is enough scope for there to be active campaigning, so that the voters can be informed by the campaign organisations of what the issues are and how they want to be informed in terms of the vote. You do not want to have it so excessive that it may replicate other countries, in terms of the amount of money coming in to the campaign. That could create some issues about the validity.

At the same time the other tension, if you look at the spectrum, is that you do not want to set it artificially low so that there is almost an inducement for people to be creative about how they are organising their campaign to circumvent the limits.

When we looked at this in our work for the 2011 referendums, we looked at what the spending limit was for a political party standing candidates in the relevant election. In the Scottish context, if a party were to stand for all seats in the Scottish Parliament, we would look at what that would be. It is roughly £1.5 million with some change in there. We felt that that would be an appropriate limit, or close to that area, for the lead campaigners, because that is what we are assessing.

The Scottish Government proposal is much lower than that. It is 50% of that. If you looked at what the political parties spent, at least two of the political parties at the last Scottish parliamentary election exceeded that 50% limit. That gives you an idea about where it is. We would put it a bit higher at that level. Similarly, with those political parties there is a bit of a different approach. Our approach has been that the spending limit for political parties should reflect the popularity or the vote of the political party in the last relevant election, so that there would be a sliding scale. The Scottish Government proposal has a flat rate for all political parties, which means that a party with very nominal representation would benefit from that set limit.

Moving on to permitted participants and also those who register, I believe there is a limit of £50,000. I should check my notes. If you look at the cost of being able to mount an information campaign, that does feel a bit on the low end to us. We have taken it at either £100,000 or 10% of what the lead organisations are. I am sorry for throwing out so many figures to you at this late hour.

Q786 Lindsay Roy: It is proposed that there is a 20-week regulatory period. Is that what you are saying?

Lisa Klein: 16 weeks.

John McCormick: Sorry, that was me. The 12 weeks is the period between Royal Assent and the planning for the returning officers. Then there is the 16-week regulatory period.

Q787 Lindsay Roy: Given that it is mooted that the referendum date will not be until October 2014, is there not a case for extending that beyond the 16-week period to a much longer period? It has been argued that there may well be some intensive campaigning long before that.

Lisa Klein: It is a very good question. My approach to that would be that regulated periods have been part of the British landscape for a very long time. The issue about the length of it, or the length of any regulated period, which has varied, is important, but we have for a very long time recognised that there would be a non-regulated period that then could occur. You could draw that line at different parts. We have come up with 16 weeks as being appropriate. Reasonable minds could differ.

Q788 Lindsay Roy: There could be an issue, for example, if substantially more money was spent before the regulated period.

Lisa Klein: Absolutely. It has been a long tradition that, if spending occurs before the onset of a regulated period, that spending is not caught by the expenditure rules.

Q789 Lindsay Roy: But traditions are not set in concrete.

John McCormick: They have been set.

Lisa Klein: They are set.

Q790 Chair: What evidence led you to the 16-week proposal?

Lisa Klein: Part of the evidence was that, if you look at the time of designation, it was the ability of campaigners to mount the campaigns and to be able to make effective use of grants. Those were the two strains that I would go to.

John McCormick: We are aware that some of the campaigners-not all of the campaigners in these referendums-would have been active politically or involved, and they have to set up offices and do the groundwork. That may not be the case in Scotland, of course, because the length of the campaign may be different and the people involved may be different. From a standing start, we thought 16 weeks was a fair time to give people to get the arguments deployed.

Q791 Chair: I can understand why you see that period as being 16 weeks out, but Lindsay is pursuing the point about whether or not it should be earlier. In my understanding of spending in elections, is there not some trigger point relating to the calling of the election, which would be paralleled here by the calling of the referendum or the legislation about the referendum, which would make it a much longer period, but people would know it was happening?

Lisa Klein: There are different regulated periods for different elections in the UK. If you take the UK general parliamentary election, historically it has been triggered a year before the election, which has always been interesting because until fixed-term Parliaments people would not know when that is for party spend.

Q792 Chair: The spending has been regulated a year before the expected date of the election?

Lisa Klein: This is for a UK general parliamentary election. The regulated period for the party spend was a year before the election.

Q793 Chair: Why did you not consider having the same here, so that a year before the expected date of a referendum was the regulated period?

Lisa Klein: Interestingly enough, Parliament had decided that they would impose a different regulated period as a result of the 2009 Act, and now we are into fixed-term Parliaments. One of the considerations was the difficulty of not knowing when an election would be. For the Scottish parliamentary election there is a four-month regulated period. This is parallel to the four-month period that exists for the Scottish parliamentary elections.

Q794 Chair: Are there any other periods that could be taken as parallels? I am aware of the one year parallel there and the four-month one. Are there any other elections or voting decisions where there is a period that is controlled and is different from those two?

Lisa Klein: I should say that in the last Scottish parliamentary election the Government followed the UK model for the last general election, which was to have a short campaign period and a long campaign period. I am not quite sure that that proved to be satisfactory to all. Then you have very short campaign periods for local elections. There are various options out there. We came up with the one that was fairly parallel to, and had worked in the context of, the parliamentary elections in Scotland, Northern Ireland and the Welsh Assembly.

Q795 Mr Reid: For party spending, the campaign period is a year. The four months you are referring to is for individual candidate spending at a local level. Surely this referendum will be a national campaign. Is the national one-year period not more appropriate than the four-month individual candidate period?

John McCormick: It would raise certain issues. It would mean a legislative process, a designation and the question testing, so that the campaign could begin, unlike when there are political parties competing for a UK parliamentary election.

Q796 Chair: Apart from the Liberals, who are always slightly confused about matters, most of the other parties know full well what option they are choosing. They could be regulated as from tomorrow.

John McCormick: But there may be other groups, Chair, who would come forward.

Q797 Chair: That is right, but that is a different issue.

John McCormick: The referendum would have to be regulated for that period.

Q798 Chair: But that is not quite the point Alan was making.

John McCormick: Sorry, I misunderstood.

Chair: Alan was making the point about parties.

Q799 Mr Reid: I was saying that with national parties for a UK election or a Scottish election, the spending limit is over a period of a year.

Andy O’Neill: Party spending for a Scottish Parliament election is regulated for four months.

Q800 Mr Reid: I always thought there was legislation that limited the amount that the parties could spend over any one year.

Lisa Klein: No.

Q801 Chair: You made a point about a year. Remind us what that period of a year means.

Lisa Klein: The regulated period for party spend for the UK parliamentary general election had been set at a year.

Q802 Chair: Let me clarify that. Given that that is the election to the state and this is about the future of the state, is it not appropriate to have controls over the parties for the same period-i.e. a year?

Lisa Klein: That is an argument that could be made. One could also equally look at it in terms of the Scottish parliamentary election, and that would be a four-month period.

Q803 Chair: There are two options there that have been identified that we can make a recommendation on once we have-

John McCormick: I am not the specialist in this area at all, Chair. When the 16 weeks came up, we were aware of the 16-week regulated period for the European elections as well as the Scottish Parliament elections, and that informed the discussion.

The point Lisa made earlier is important. To get transparency in the groups that report and the groups that form, we do not want to create a situation where people may divert funding into another organisation that would then be unregulated because the legislation had not been through and so on. That is why I was stressing that, if it was a year that was the regulated period, it would be better if everything else preceded that last year.

Q804 Chair: That is right, but presumably, as soon as the Scottish Government’s consultation completes, if we then have happiness breaking out and agreement between the two Governments, the matter could be proceeded with quickly and regulation could come in almost right away, particularly if it is agreed that it is going to be autumn 2014; otherwise, those who have the deepest pockets can be spending huge amounts of money in a completely unlimited fashion for about 18 months or so.

John McCormick: I am all for happiness breaking out and agreement between the two Governments to clarify the process as quickly as possible.

Q805 Chair: Yes, and the rest of that sentence should say whether or not you thought it might be appropriate for an earlier regulation of spend, if agreement was reached and the process was started.

John McCormick: If this Committee raises that with the Parliament, I am sure the Parliament will take it on board.

Q806 Chair: That is right. That is not something to which you would object, is it?

John McCormick: No. We would not take a view. The regulated period would be a matter for the legislation, and that would be a matter for Parliament.

Q807 Chair: That is helpful. I want to clarify about triggering a regulated period. At the moment what is it that triggers the regulated period? You just work back from the date when the event of the election or the referendum is taking place with a figure that has been assessed. It is not something that happens right away; is that right?

Lisa Klein: It is a hard question for me to answer because I know that for the UK-wide referendum it was the date that the legislation got Royal Assent. There are different triggers. In the context of this it would be set out in legislation.

John McCormick: I think I am right in saying that the Royal Assent for the PVS referendum came just three months before the polling day that had already been published. That was the regulated period.

Q808 Chair: So there is a variety of dates that can be chosen based on precedent and experience. There is no single date that you would identify as being the one that it has to be for any other reason than that a minimum has been identified, and, as long as it is longer than that minimum or that minimum, then from your point of view it does not matter.

John McCormick: We know that the important part in that is the parliamentary process to scrutinise the legislation and get the Royal Assent. That is a matter for the Parliament.

Lindsay Roy: It might be helpful to have written evidence from you on the different regulated periods. We would then have them on the record.

Q809 Chair: We are looking for clarification of this question and from when the spend should be regulated because we do not want to see people buying a referendum. As we asked the previous group, are there any answers that you had prepared, though I suspect that is not the case in your position?

John McCormick: Thanks for the compliment, Chair. I certainly do not have any at this time.

Q810 Chair: Are there any straight bats that you had ready for questions that we have been deterred from asking?

Lisa Klein: From what I could hear of the prior panel when I was sitting at the back, it may be a very minor point, but it was presented by some of the prior panellists that they had a lack of interest from us about the rules on the use of grants. I would encourage the Committee to look at our referendum report on page 97. You will see there that we sought campaigner feedback on this very issue. We reported on it and we had said that we would want to look at that issue afresh.

Q811 Chair: That was on the use of grants.

Lisa Klein: The scope for the use of grants. I would like the record to reflect that.

Q812 Chair: You are now saying that your recommendation is that that should be re-examined and that it could be wider, rather than the obsession with pot plants.

Lisa Klein: It could be. Just for reference, we looked back to the Fifth Report of the Neill Committee on Standards in Public Life. That was the framework where they felt it should go for infrastructure and not for campaigning. They also recommended no spending limits for a referendum. We talked with campaigners. We sought feedback afterwards and we certainly had an open mind on it. We have been on record as saying that we would be willing to look at that again.

Q813 Chair: Since you have brought that up, do you also recognise that the Electoral Commission was the organisation that the campaigner from the yes side indicated was less than helpful in producing speedy answers to questions that they were anxious about?

Lisa Klein: He did raise that. Unfortunately I do not have the opportunity to have him here. I recall that in late January-remember that the referendum occurred in early March-they came to us and we gave some preliminary advice. I think it would be fair to say that we felt that that had not been understood. We sat down and had a further conversation with them to work it through. I am not sure it is quite as black and white as it was portrayed.

What I could say is that one of the things we did-I think very effectively-during the context of the UK-wide referendum is have a single point of contact for the campaigners. We worked very closely with them, so it was almost an immediate hotline. It did not matter whether it pertained to something more on the electoral administration side, to a campaigning issue or to the publication. There was a point of contact within the Commission so we could provide very quick turnaround times. I am not sure I quite share entirely in what was said before, but I would have to go back and see the details.

Q814 Chair: We have to take the witness at his own valuation. Presumably if he did not understand the advice, then maybe that was entirely his fault.

Lisa Klein: We can share in that; perhaps our advice was not clear enough. Sometimes there is additional information. I can say that we have been asked for some very technical advice in areas that are novel. We want to get it right. I am not suggesting that you do that at any cost, but it may be a bit more of a complex picture than what has been described.

Chair: If there are any other points you want to give us written evidence on, or if, after going away, you think you should have raised such and such, or think you might have left us with a false impression, it would be helpful to give us a written addition. It would also be helpful if you were able to have a look at the evidence that came in from the no side, which was quite extensive, and give us your observations and comments on that.

I apologise for being so late in holding you back. I could see Andy looking at his watch a couple of times. I do not know if he has a train or a plane to get, so I am sorry about that. We did have interesting sessions earlier on. Thank you very much.

Prepared 4th May 2012