Select Committee on Treasury Appendices to the Minutes of Evidence


APPENDIX 6

Memorandum from the Royal Mint Trade Union Site

INTRODUCTION

  1.  This submission has been prepared on behalf of the non-industrial trade unions with membership at the Royal Mint: the Public and Commercial Services Union (PCS) and the Institution of Professionals, Managers, and Specialists (IPMS). Together, PCS and IPMS represent over 300 non-industrial staff.

  2.  The intent of this submission is to outline the concerns of the trade unions and our members about recent problems at the Mint. We want, however, to underline our commitment to the success of the organisation. Despite the recent predicaments, the Royal Mint continues its long history as a world leader in the production of coins. We also wish to restate our support for the Government's decision in 1999 to retain the Royal Mint in the public sector but with more commercial freedom.

  3.  The Royal Mint has over 1,000 years of history. It has been a huge success as a public sector enterprise, expanding from its base in the UK into wider markets, by building on its reputation for high quality, security and flexibility. In recent years, it was afforded Trading Fund status in 1975, and in 1990 it became an Executive Agency. Following the Treasury status review, which was completed two years ago, the Mint's remit was changed to enable it to diversify into other products. These moves established the Mint as a commercial enterprise, employing best practice from the private sector.

  4.  In 1968, the Royal Mint was relocated from Central London to South Wales. It now employs 1,140 people and is a very important contributor to the local economy. Ensuring the long-term success of the Royal Mint is crucial for the economy of South Wales.

NO CHANGE TO OWNERSHIP STATUS

  5.  While unions have serious concerns over the recent performance of the Royal Mint, we strongly believe that it is vital to the future success of the organisation that it remain in the public sector. Not withstanding the previous two years, the Mint has had a long history of growth as a public sector organisation to become a world leader in coin production. Even now, the Royal Mint continues to run at a profit, and is therefore a net contributor to the Treasury. Reopening discussion of the Mint's status would endanger its future, as well as that of the local community. It is worth noting that privatisation of the Mint was rejected not only by this Government, but also following two reviews conducted by the previous Conservative government.

  6.  The Mint has had considerable success in building up its share of the world coin market to become an international leader in minting. 55 per cent of its sales are in exports. Sixty-four countries, including Hong Kong, New Zealand, France and Jamaica have their coins minted, and/or blanks cast, by the Royal Mint. In addition, the Mint is a leader in the production of the new Euro coins. It has won contracts with five of the eleven first-round sintgle currency participants; and is gearing up to produce the middle three denominations. Without doubt, whatever decision is made as to the future of the Mint, its leading position in the European and international coin markets cannot be undermined.

  7.  The nature of the Mint's business, producing blanks for coins to be used as legal tender for the UK and foreign customers, requires a high level of security. Foreign customers must be confident that the blanks for their coins are secure from counterfeiters. We remain concerned that renewed deliberations over a possible change in status would undermine the confidence which foreign customers would have in the security of the Mint.

  8.  While it is possible to incorporate within contracts between the government and private sector, minimum standards of security to which the contractor must adhere, it is difficult to minimise risk, particularly where the threat (in this case, the counterfeiting of a national currency) has such great economical and political ramifications.

  9.  If foreign customers have doubt about the level of security in the Mint, the majority of its business will be put into jeopardy. This will no doubt further destabilise the Mint's standing.

WIDER IMPACT

  10.  Consideration also needs to be given to the potential impact that privatisation or similar change in status would have more widely, such as on the circulation of coins, and on the economy nationally and locally.

  11.  We are very concerned that privatisation will have a negative impact on the smooth circulation of coins. Currently, as two public sector bodies, the Royal Mint and the Bank of England can interact over and above contractual terms. Accordingly, it the Bank requires more coins minted than originally requisitioned, the Mint is able to focus production on meeting the Bank's requirement. We understand from our members that shifts in production of coins can occur on a weekly basis.

  12.  Privatisation would formalise the relationship which the Mint will have with other public sector entities, including the Bank. The management of the Mint will not have a public service mandate, but an imperative to maximise profits for shareholders. Accordingly, the only way in which the government will be able to guarantee that the Mint will be able to meet the needs of the Bank, and in a larger sense the UK economy, is to formalise sufficiently robust contracts with a privatised Mint which guarantees that these priorities will be met.

  13.  We believe that the development of a more formal contractual relationship between the Bank and the Mint will have an adverse effect on the circulation of coins in Britain. Privatisation will remove the public interest element from the Mint's mandate. Accordingly, the resulting relationship which the Mint has with the public sector, and the Bank of England in particular, we fear, to become less flexible.

OUR RECOMMENDATIONS

  14.  Following a review of the Royal Mint's status in 1999, the Treasury recommended the setting up of a Treasury advisory panel to help sharpen the Mint's commercial operations. The Treasury also appointed private sector non-executive directors on the Mint's Executive board.

  15.  The trade union side is aware that these changes have not yet been given the opportunity to develop. We believe that the Mint can benefit significantly from external influence, and these measures will help the Mint acquire best practice from other organisations.

  16.  Additionally, we believe that there is a strong case for reserving a seat on the Executive board for a trade union nominee who will be best placed to provide shop floor expertise. The perception of employees is that management exhibits an over-reliance on the advice of external consultants who lack in-depth expertise of the unique operations of the Mint. While recognising that, like other large businesses, the Royal Mint uses consultants to improve operations, the workforce believes that their expertise is being under-utilised. Union members are committed to the success of the business. They believe that they are well placed to identify problems and suggest remedies.

  17.  Union members believe that there is scope for co-operation between management and trade union side in working together to improve the operations of the Mint. We want to look for ways to develop a more productive approach to the industrial relationship, both at the board and shop floor levels. The Cabinet Office has recently agreed with Civil Service unions a partnership framework covering all departments and executive agencies, including the Royal Mint. The intent of the Civil Service partnership agreement is to facilitate a joint approach to enabling the success of public organisations, which in turn will ensure employment security for the workforce. The trade unions want to stress our commitment to the success of the Royal Mint, and want to work with management in developing a co-operative approach to resolving the current problems.

  18.  In summary, the trade union side shares with management great concern over recent financial and organisational problems manifest over the previous two years. However, we believe that these can be addressed successfully without a further review of the Mint's status which would only lead to further destabilisation. The unions are committed to the success of the Royal Mint and want to work in a spirit of partnership with management in ensuring the long-term future of the Royal Mint.

January 2001


 
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