Osborne in 'dirty tricks' storm over AV referendum

George Osborne was at the centre of a legal row last night after his attack on voting reform backfired. The Chancellor was accused of demeaning his position, and lawyers were called in to separate the opposing sides in the impending referendum on changing how MPs are elected.

Mr Osborne claimed that the Yes campaign to scrap the first-past-the-post voting system was involved in "dodgy shenanigans" in funding – raising the temperature in an increasingly acrimonious contest. Electoral reformers called in solicitors to try to stop the dispute escalating any further, ahead of the 5 May ballot on whether to switch to the alternative vote for Westminster elections. The Yes campaign has pointed to the many wealthy Conservatives handing large sums to the opponents of electoral reform.

Backed by Mr Osborne, No to AV countered by alleging that the Electoral Reform Society (ERS), which has given £1.1m to the pro-AV campaign, faced a financial conflict of interest in pressing for a Yes vote. No to AV claimed that the society and its subsidiaries had received more than £15m in contracts from the public purse over the past three years.

Mr Osborne, in his first foray into the battle over the voting system, gave interviews supporting the attack, claiming that the link between the society and Yes to AV "really stinks".

He added: "The Electoral Reform Society – which is running some of the referendum ballots – stands to benefit if AV comes in because it could be one of the people who provide these electronic voting machines. That is exactly the sort of dodgy, behind-the-scenes shenanigans that people don't like about politics and politicians."

Sian Roberts, the chief executive of the ERS business arm, Electoral Reform Services Ltd, accused the Chancellor of getting his facts wrong as the company supplies voting papers and not counting machines. Solicitors acting for the company warned they were considering legal action as they issued a detailed rebuttal of No to AV's "wholly untrue" and "misleading" claims.

They said a change in the voting system would make no difference to the company's income and added that practically every British company earned some money from the state sector. The firm's solicitors added: "It is, for example, practically certain that every one of the Tory businessmen financially backing the No campaign has earned money from the public sector."

They said claims it had made £15m from taxpayers were misleading as it paid corporation tax on profits and handed a dividend from its income after its costs to the Electoral Reform Society.

John Denham, the shadow Business Secretary, said: "It is demeaning for the Chancellor of the Exchequer to allow himself to be dragged into smears rather than debating the real arguments. There is panic in the No camp because they are losing the arguments."

The two sides have clashed repeatedly over how their opponents have raised funds. Yes to AV has pressed for several weeks for the No campaign to disclose its funding. Last Friday, while the attention of much of the media was focused on the latest developments in the News of the World phone-hacking scandal, the No campaign disclosed the names of a series of wealthy Conservative supporters bankrolling opposition to electoral reform. Yes to AV said the disclosure demonstrated that 99 per cent of the No campaign's money came from long-standing Tory donors.

A spokesman for Mr Osborne said the Chancellor stood by his comments.

Propaganda war: No punches pulled as rival campaigns vie for supremacy

The demise of the political poster – seemingly a relic of less sophisticated times – has long been forecast by pundits. But the array of striking images produced by both sides of the electoral reform argument demonstrates that old-fashioned techniques are very much alive.

Given that next month's AV referendum has yet to capture the public imagination, the rewards for whoever does manage to come up with a memorable message could be high.

The No campaign, whose advertising is masterminded by Edinburgh ad agency Family, has arguably had the greater early success by highlighting the fiercely contested claim that a switch to AV would cost the country £250m.

It hammered home the claim with advertisements showing a screaming newborn, with the slogan: "She needs a maternity unit NOT an alternative voting system." Another carried a picture of a soldier, with the message that £250m would be better spent on body armour.

The No side is also playing heavily on the unpopularity of Nick Clegg, AV's highest-profile proponent. The Yes campaign, whose brief is being handled by London agency Iris, is also playing on a politician's unpopularity – in this case, Nick Griffin. It carries a picture of the BNP leader with the words: "He's voting 'no'. How about you?"

The Yes campaign also highlights votes wasted under the current system, with ballot papers being thrown into a bin.