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 beand hopefully already ison
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 againas 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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