Examination of Witnesses (Questions 80
TUESDAY 13 FEBRUARY 2001
80. When you said earlier that the Shareholder
Panel had an impact in advising the Treasury, you do not regard
them as particularly having an impact in contributing directly
to the work of the Mint?
(Mr Holmes) Yes, that is not their main purpose in
life. They advise the Treasury on their shareholder role.
81. So you do not anticipate there being benefits
to the work of the Mint from the panel?
(Mr Holmes) There may be. They advise the Treasury
on how to be a more knowledgeable shareholder in terms of understanding
the private sector, return on capital and that sort of thing.
That is fine. There may also be spin-offs. We meet the Shareholder
Panel occasionally and we are able to discuss our business with
them. Their basic role is to advise the Treasury and not the Mint.
82. How do you anticipate that affecting the
issues previously raised with you by David Kidney about target
setting and such like? Would you expect the Shareholder Panel
to have a direct impact in that area? How would you expect that
to work. Would you be there negotiating with the Shareholder Panel
rather than with the Treasury?
(Mr Holmes) No. Essentially our dialogue is with Treasury
officials and, ultimately, with the Economic Secretary. The Shareholder
Panel will meet with the Treasury officials and, ultimately, with
the Economic Secretary and give them advice. A major aspect of
that advice will be on target setting and we have no problem with
that. On that Shareholder Panel, bringing that level of private
sector expertise to bear, is a venture capitalist, a City analyst
and a general businessman. I am sure that their advice will be
83. On the non-executives, you were a trading
fund and then you became an executive agency. So you have five
non-executives. Are they real non-executives? There is no reference
in your annual report as to the responsibilities that they exercise
or whether they serve on any remuneration committees. Are they
real? Can they fire you?
(Mr Holmes) They are certainly real in the sense that
their contribution to board discussions is major. We have an audit
committee and a remuneration committee operating in practice.
We do not make a big thing of it in the annual report. The remuneration
committee is made up of the non-executive directors plus myself
and it is now chaired by a non-executive director, David Stark,
and the audit committee is made up of the non-executive directors
plus our director of finance, Graham Davies, and myself. We try
to operate as closely as possible in line with the modern standards
of corporate governance. There is a slight difference with a public
sector body. I am the accounting officer to Parliament. Obviously,
the directors do not have the same kind of statutory responsibilities
that they would in a company.
84. Normally that would be worth putting in
the report. That may be something that you would like to consider
putting in the report. Can the non-executive directors change
(Mr Holmes) On their own, no. My appointment is a
Treasury appointment, but they advise the Treasury on my remuneration
and, therefore, they could no doubt advise the Treasury on my
continuing employment. In any case, my contract expires at the
end of the year.
85. On targets, there are targets on the outturn
to individual UK parameters, but there are no targets on your
sales to Central Bank, or to trade customers. I think you were
asked earlier whether there should be targets in those areas.
Do you think that there should be targets in those areas? It is
a big chunk of your work, but there are no specific targets.
(Mr Holmes) I accept that that is a gap. My only point
was that it is quite difficult to set a meaningful quantitative
target but making sure that we keep our overseas central bank
customers happy is a major concern for us.
86. We have had evidence from the Royal National
Institute for the Blind. They comment that our coins are more
user-friendly to those with difficulties in identifying coins
than those in a number of other countries. There is some doubt
whether you regard the need to provide coins in a way that is
easily understandable by all customers as being one of your prime
objectives. How far do you take that into account and are you
always conscious that people in this country need to be able to
identify the coins that they are using?
(Mr Holmes) We are very conscious of that. Whenever
we introduce a public consultation process about any possible
change of the coinage we include organisations representing the
blind and a whole range of like organisations. We take their views
into account and we talk to them. We carry out tests as well.
People who have been blind for a long time are very good at recognising
the differences between coins, but the partially sighted or even
well-sighted people struggling in the dark in the backs of taxis
and so on are not so good. In recent coin reviews over the past
10 years or so we have had a university running tests for us on
how quickly people can distinguish the different coins that we
have. That is before we settle on any new coin specifications.
So we regard the principle of being able to distinguish coins
by anybody as being very important.
87. So why does the RNIB say that that should
be set down as a specific objective with a clear obligation to
consult? Does that suggest that there has been a lack of consultation
in the past or perhaps that you have not done as much as you should
(Mr Holmes) We have had a lot of dealings with the
RNIB. I have been at the Mint eight years and I cannot remember
the RNIB ever criticising us about anything. I suppose they may
want to say, "Let us put this on a more formal basis".
I have not seen the memorandum, but I would imagine that could
be the thrust of what they are saying.
88. They feel that in the discussions around
the euromaybe because there has not been a decision in
this countrythat they have not been as fully involved in
some of the work that has been done.
(Mr Holmes) Those discussions took place at a European
level rather than at a national level.
89. A specific issue was raised with us in relation
to the quality control problems with the £2 coin. The British
Amusement Catering Trades Association told us that that had created
considerable difficulties for them. What went wrong and how can
similar problems be avoided in the future?
(Mr Holmes) It is a long story.
90. Perhaps we can have the brief version.
(Mr Holmes) When we produce a two-part or bi-coloured
coin we have to join the outer and inner coils together and the
junction resistance where the two pieces meet has a tendency to
influence the readings on vending machines. When we first issued
samples to the vending industry of the £2 coin that we were
going to launch, they expressed some concern about the impact
of that junction resistance on the readings that they were taking,
and on their abilities to set narrow windows to avoid any counterfeits
coming through. As a result, we held back the launch of the £2
coins for six months in order to sort out the problems. We found
a way of controlling that junction resistance better than we thought
that we would be able to. We then launched the coin in June 1998
and the coin has generally been well received by the vending industry.
They greatly appreciated the fact that we had held back the launch
and sought to fix the problems. Although some older machines have
difficulties with the £2 coin, most modern vending machines,
if they are changed to accept it, will adjust to do so.
91. Earlier today when we toured the Mint we
saw large quantities of blanks being produced for the new euro
currency for the EU member states that will use them from next
January. To what extent is that a temporary line of business and
to what extent will there be a lasting opportunity there for you?
(Mr Holmes) The volume at which we produce blanks
for the first wave euro countries is particularly good because
of the size of the demand. They have to make 50 billion coins
by 1 January 2002. After that their volume will fall as the level
of demand reverts to a more normal level. We hope that we shall
be able to stay in that market. We have not had much chance to
penetrate the Western European markets for blanks prior to the
euro. Having succeeded in getting into a number of those we hope
that we shall stay in, albeit at somewhat lower volumes.
92. From your experience of this business, to
what extent will there be pressure for consolidation of mints
within the EU member states? They all have one mint each at the
moment, but may there be fewer because of the single currency?
(Mr Holmes) That is possible. I would not like to
speculate on that. Each country has its own reasons for having
a mint and those could remain. It will be interesting to see what
happens once everyone has completed the task of producing the
new coins. Incidentally, the task will not totally be completed
by 1 January 2002 because most countries are acquiring a certain
quantity for that date and once they have seen how the launch
goes, they will top up afterwards. The demand will not plummet
immediately, but it will ease down as we go through 2002 and beyond.
93. On the matter of whether there will be fewer
mints, will that have any consequences for your strategic planning
for the future?
(Mr Holmes) Yes. Obviously, we shall look at the whole
matter of what will happen with our various competitors and colleagues
around the world. It is difficult to predict because the decisions
that may be taken will not be taken entirely on commercial grounds.
Although some mints around the world, not necessarily in Europe,
are small, for national reasons countries may want to keep them
going. We shall have to wait and see. Sometimes that is more a
political decision than a commercial one.
94. Speaking of "wait and see", what
are you doing about the possibility of Britain joining the euro?
(Mr Holmes) We are involved in the euro preparation
process, as described in the National Outline Changeover Plan
that has been published. We talk extensively to the banks and
retailers about the outline plans for how that will be done and
we try to identify how many coins the UK will need at a launch
date, if there is one, and how long it would take to produce them.
At the moment we are not focusing on spending serious money on
this issue at all, but we are looking at the experience of the
first wave countries to see what we can learn from that, as they
roll out their distribution plans and approach the launch date
of 1 January 2002.
95. You provide all the UK's currency coins,
do you not?
(Mr Holmes) Yes.
96. Would you expect to produce all the new
euro coins if the UK joined the single currency?
(Mr Holmes) Not necessarily. That would depend upon
the amount of time that we were given to produce them and a number
of other factors, including how many UK sterling coins we would
continue to have to produce during the transition period. We are
open-minded on that. If the UK had to buy in additional coins
from elsewhere to supplement its requirements, that could be done.
97. We know the amount of time because it is
in the National Outline Changeover Plan.
(Mr Holmes) Yes. The transition period is set at 24
to 30 months. Six months is a big difference when you are producing
at the rate at which we shall have to produce. That is one of
the factors that will determine to what extent the coins will
have to be bought in.
98. Did you have any input into that changeover
(Mr Holmes) Yes, we did. It is natural that options
need to be kept open as to the exact length of time.
99. What have you told the Government? Have
you told them that if the time period is two years that you cannot
produce all the coins, but if it is two-and-a-half years that
(Mr Holmes) It is more complex than that. The estimate
that exists at the moment of around 14 billion coins for launch
date in the UK itself depends on a number of factors like what
time of the year the coins may be introduced. There need to be
further discussions with the banks because the numbers are constantly
reviewed and so on. Clearly, the shorter the timescale, the more
coins that will have to be bought in.