Examination of Witnesses (Questions 140
- 148)
THURSDAY 1 MARCH 2001
MISS MELANIE
JOHNSON, DR
PAUL MILLS,
MR PETER
SCHOFIELD AND
MR MICHAEL
SWAN
140. That is the point I am making. You broke
away from the three-years; you set a single-year target of 14.6,
but the result was 0.5 so somebody got it wrong.
(Miss Johnson) Yes, but it was informed at the time
by the Mint's own corporate plan. It was not the case that it
was set by the Treasury in isolation from the Mint. As I explained,
a lot of the difficulties of the major investment programme and
the changes that were necessary which are now bedding down satisfactorily
have caused the situation that we have got here.
141. The Mint told us they were now—and
I think you presented an order to Parliament to allow them to
do this—moving into the area of doing gifts and collectibles
and trinkets of all kinds. If we do not have this kind of information
in the annual report about marketing and overheads and so on,
it is very difficult to assess whether it is really right for
a state organisation to be competing against the private sector
by producing trinkets like this. Should the Royal Mint really
be doing this?
(Miss Johnson) The shareholder panel certainly believes
that it is a good development. It has been enthusiastic about
it and would like to see it extended which is interesting because
they obviously all have extensive private sector backgrounds and
are recently appointed. I think to call it trinkets is unfortunate.
They are and have always had a collectible coins division, as
it were, or in recent times did, which is obviously not producing
coinage as such but producing purely for collectors: they produce
a number of coins both for the UK and for overseas contracts which
are never going to be part of the standard coinage but are only
for collectors, and they have been extending this business because
it has been a good business and a profitable one. It is appropriate
for them to be undertaking this in a more commercial setting,
which is the one we believe they need to be operating in, and
we feel it is one of the right ways for them to develop for the
future. As I said, that view is strongly shared by the shareholder
panel too.
142. But do you see the danger in them engaging
in that activity? Essentially these commercial trinkets, gifts,
should be produced by other businesses, and there must be a point
at which a state organisation should not be allowed, in a cross-subsidised
way that is not properly reported in its accounts, to get into
that kind of market place?
(Miss Johnson) What they are producing is associated
with their role as a Mint still. Clearly it does not make sense
for them to produce items that have no connection whatsoever with
their own collector coin customer base and does not resonate with
the Royal Mint. It is within that framework that the business
is being developed.
Chairman
143. In answering various questions which you
have kindly answered for us today, you have identified, it seems
to me, at least four roles for the Treasury: the shareholder,
the customer, the controller of investment, as Mr Kidney pointed
out, and also it has just been introduced as the protector of
competition, with respect to the Mint. You have said that these
various functions can somehow be kept behind Chinese walls, if
Chinese walls are allowed in the Treasury, and you are confident
that that is the case.
(Miss Johnson) I have identified two prime roles:
you may wish to make further distinctions but I am not sure I
particularly recognise them. Some of the matters you are talking
about are very much shareholder extensions of the shareholder
role, and there is a basic distinction between the Treasury's
role as a shareholder and its role as a customer. That is recognised
organisationally between the fact that if I am dealing with one
side of the Mint I will normally have one set of officials, Paul
and his colleagues, coming to see me and advising me and if I
am dealing with the other aspects of the Mint it will be Peter
Schofield and his colleagues who will come to advise me. They
are completely separate, therefore, and I think the arrangement
is working well, and there are not the number of focuses which
you have tried to suggest there might be.
144. Surely the competition element has to be
in the mind of the Treasury ministers. If the Royal Mint really
did decide to go berserk on its trinkets and produce chocolates,
for example, the Treasury would presumably have a view about that?
(Miss Johnson) They cannot cross-subsidise because
we do take the profit and so it cannot.
145. So you are saying it can do anything so
long as it is not cross-subsidising? Is that what you are saying?
(Mr Schofield) In terms of the movement into different
types of market there are two things I would say. The first thing
is that these are competitive markets that it is moving into.
From the point of view of shareholder I think the key issue for
us is the degree of commercial risk that it would be taking on
in doing so. In terms of looking at proposals that they have put
forward, we take a robust and rigorous look at the proposals they
put forward as part of the corporate plan. With the expertise
of the shareholder panel we will assess if this is the sort of
business that the Mint should be moving into. We look at that
as a shareholder, we also look at it as a funder, as a banker
in that sense.
146. I can see you looking at both those roles
and I can see there is a distinction made between them, although
I have a question to ask about the credibility of that distinction.
The question still remains that neither the shareholder or funder
is the proper person to answer as to how far it can stray into
competitive markets in a way that most people would assume is
unfair competition. That must be a concern of the Treasury. That
is at least one other dimension that the Treasury is concerned
with.
(Dr Mills) I would ask why you would say it is unfair
competition in one sense because we have now moved to a situation
where if the Mint does borrow from government it is going to be
charged a commercial rate as if it were in the private sector.
It is not allowed to retain huge amounts of profits that it is
not investing and so it cannot use retained profits from other
contracts to then cross-subsidise other business.
147. I am aware that time is running out and
I do not think a long-scale philosophical discussion about whether
the state is borrowing fairly or unfairly against private companies
is quite in order, but it is certainly an open question. The final
question I have got does specifically relate to this distinction
between the shareholder and the customer. Although you have provided
us with examples of two representatives within the Treasury it
ultimately comes to the Minister. How credible really is it in
people's minds that there is this distinction between customer
and shareholder? At the end of the day the buck stops with you,
Minister, and you are one person.
(Miss Johnson) Yes, and a balancing act has always
had to be done on this front by Ministers over years. Nothing
is different from what it has always been with respect to the
Mint in this regard. There is nothing new about the situation
at a ministerial level from what it has been, I will not say for
time immemorial but for some time before, because clearly what
has always happened is that there is a tension between the taxpayer
getting a very good deal and the Mint as a supplier of coin to
the Government, and that tension is always going to continue to
exist. But that is a tension on which I do have good independent
advice from both sides in arriving at the judgment about what
the balance at the end of the day is to be held on.
148. It is precisely when that tension becomes
too extreme that governments around the world have found it easier
to split off the two functions.
(Miss Johnson) A large number of governments have
their own mints but I have not done a survey globally of it.
Chairman: Thank you very much indeed.
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