Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 114 - 119)

THURSDAY 1 MARCH 2001

MISS MELANIE JOHNSON, DR PAUL MILLS, MR PETER SCHOFIELD AND MR MICHAEL SWAN

Chairman

  114. Good morning.
  (Miss Johnson) Good morning. Could I explain, first, that the reason why Peter Schofield and Paul Mills are both here is that they represent the two sides of the Treasury's engagement with the Mint. We have split our engagement with the Mint and Paul Mills represents the client of the Mint, as it were, and Peter Schofield represents the shareholder interest that the Treasury has in the Mint.

  115. Beginning with a general question, as you know we held evidence in Cardiff with the Royal Mint so a number of questions have arisen out of that session. Given the fact that the Royal Mint is essentially a commercial operation and has trading fund status, and given that it would seem to be doing its commercial work with decreasing success, if I can put it in those terms, why should it remain a state-run operation? Why not privatise it?
  (Miss Johnson) It has become an increasingly commercial organisation and it is certainly our aspiration for it to be a very commercial organisation, but the fact is that I think a few years ago it was not running on a very commercial basis and we have been making moves to put it on a more commercial footing. There were a variety of reasons for not privatising it but one of the key reasons was that it was not on a significant commercial footing at the time. I think a number of reasons went into that. The Mint's status was reviewed last in 1998-99: and the decision was that we should concentrate more on making the Mint more commercial and more effective in the public sector; that privatisation would have been difficult because the Mint had a large change programme and a large degree of investment that was about to start or had started, of which you will be aware, and it was hard, therefore, for investors to factor the result of that investment into any possible privatisation. Of course, also, the Treasury does have a customer relationship with the Mint as well and that needs to be taken into consideration too. There have been similar reviews I understand in 1990 and 1993-94 which reached the same conclusion: that it was not appropriate to privatise.

  116. That is very interesting answer because it suggests that some of the barriers to privatisation, namely its commercial status and the big investment programme and the effect of that, have now been removed. Would it be true to say that the door is more open to privatisation now?
  (Miss Johnson) No. That would be to speculate. The next quinquennial review of the Mint will be in 2003-04 and at that time, as with all these quinquennial reviews, we will fundamentally go through all the options that could conceivably face the organisation. Those routinely include the option of privatisation and it will be looked at in just the same way that it has been looked at before. It is true that the Mint will be—and hopefully already is—on a more commercial footing than it has been but it is also true that we see it at the moment continuing in the public sector but on a more commercial footing.

  117. You did mention that the lack of commercialisation or the embryonic commercialisation was a major factor in determining that it will remain in the state sector. Will you concede that that is now less of a factor?
  (Miss Johnson) I agree they are becoming more commercial; there is still some way to go but we have made progress on that. That is one of a number of factors which led us in the 1998-99 review to come to the conclusion that we came to. At the moment our considered view is that the Mint has a continuing role in the public sector but on a more commercial footing than in the past. As I said, it will be looked at again—as it routinely is on the quinquennial review basis.

  Chairman: Perhaps we should look at how successfully it has been operating in the public sector and come back to that question.

Mr Fallon

  118. Minister, you set the key performance targets for the Mint. Why was the key target for the rate of return on capital employed not set until well into the current operating year?
  (Miss Johnson) The Mint has gone through a period of substantial change and, if you visited it, you will have seen the results of a lot of that change in Llantrisant. The Mint had a period of substantial investment going on and it therefore seemed sensible to make sure that we were aware of what issues were arising out of that before the targets were actually set. Ideally targets ought to be set at this time of year and that is certainly what we are planning in this present year.

  119. In effect, for the current year you lowered the target for the previous year when it was 14 per cent and the Mint only made 0.5 per cent. You have lowered it now to 7 per cent. Do you expect them to meet that?
  (Miss Johnson) We do, yes, of course. There is no sense in setting a target unless we expect the organisation to hit it.


 
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