Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 1-19)

MR DAVID BARRASS

1 NOVEMBER 2006

  Q1 Chairman: Welcome to the Sub-Committee, Mr Barrass. Can you formally introduce yourself for the benefit of the shorthand writer?

  Mr Barrass: I am David Barrass. I am the Interim Chief Executive of the Royal Mint.

  Q2 Chairman: Mr Barrass, you were appointed as Interim Chief Executive back on 16 January.

  Mr Barrass: That is correct.

  Q3  Chairman: Why are you still the Interim Chief Executive? What is going on with the real one?

  Mr Barrass: The recruitment process for my permanent successor is still ongoing. The appropriate candidate has not been discovered yet.

  Q4  Chairman: How often has it been advertised?

  Mr Barrass: It was advertised once towards the end of June and the recruitment process has carried on through the summer period, which obviously delayed things a little bit. Final interviews were towards the end of September and it was decided that there was not a suitable candidate that came through the interview process.

  Q5  Chairman: Is it being re-advertised? What is the plan?

  Mr Barrass: It will be. The Treasury and the shareholder executive at the moment are reviewing what we did through the first cycle, if you will, to see if there is any trick that we missed and to see if we can improve it to get a better and a quicker result the second time round.

  Q6  Chairman: On what basis therefore are you being employed?

  Mr Barrass: I am employed on a very short-term basis, possibly here today, gone tomorrow.

  Q7  Chairman: But for nine months?

  Mr Barrass: It was not expected to be nine months. I was expecting something like a six- or eight-month assignment. I am still here at the moment and I have committed to the Treasury to stay as long as it takes to find my successor and to ensure a smooth handover.

  Q8  Chairman: Your predecessor, I see from the accounts, received a pay-out of £229,000 on his resignation at the end of a period when the Mint seems to have missed every single one of its targets. Who approved that payment?

  Mr Barrass: It is not correct to say that the payment was £229,000. That amount is a combination of payments that he did receive and payments which he may receive under certain circumstances going forward, and those have not been paid to date. That was approved by the Treasury.

  Q9  Chairman: That same note also refers to a separate figure of £46,000 worth of other operating charges associated with the resignation. What is that?

  Mr Barrass: Mainly the legal fees associated with drawing up the compromise agreement.

  Q10  Chairman: The Chancellor set the Mint the target of achieving an 11% rate of return by 2006 over the five-year period. The rate of return in fact has been nowhere near that. Is that the position?

  Mr Barrass: That was the position all the way up to the annual report that I think is the subject for today, particularly the last two years, where in fact not only have we not hit the 11% but we have not actually made any money or any return at all.

  Q11  Chairman: So why have you been doing so badly?

  Mr Barrass: To some extent, the market has been against us, but I think we have to hold our hands up and say that we need to drive much harder for productivity actions. We need to get our cost base more in line with the range of products that we sell. That process has been ongoing for the last two or three years, but it clearly needed accelerating after we missed two years in a row. During my time there I have put various initiatives in place which are now bearing fruit and we are making considerable improvement.

  Q12  Chairman: When we last took evidence from the Mint in 2003, your predecessor described the management team as "young, aggressive and determined to meet the Mint's targets." They have failed in that, and half of them now seem to be interim directors.

  Mr Barrass: We have three interim directors, executive directors, out of six. I can understand my predecessor saying that at the time. The results have not come through in the way that anyone expected or wanted. Due to various circumstances, we now have three interims, including myself, as executive directors, and I have to say that we are taking advantage of that in bringing two high-calibre interim directors in and using their broad breadth of experience to really make a difference at the Mint. So although it does not look ideal from the outside, in fact I think we have a window of opportunity here where the sort of level of expertise we have during this interim period, if I can call it that, is really bringing results for the Mint.

  Q13  Chairman: How can you retain credibility on that when you have failed so dismally in the last five years? Why should we believe you now?

  Mr Barrass: When I describe to you the business improvement programme that we have put in place this year and the results that we are already getting from that, I think that will give you some confidence that we are genuinely making progress this time.

  Chairman: We will be coming to some of the detail of that.

  Q14  John McFall: You mentioned the issue of productivity, but I note from the annual report the Chairman's Statement, Hugh Beevor, where he praises Gerald Sheehan for focusing the management of the business and raising productivity with clear performance targets, but that was against what you are saying in your statement, because you have not achieved the productivity targets at all.

  Mr Barrass: We have not achieved productivity targets that will enable us to make a profit but I think you can see in the last two years, although we have lost money in both years, there has been a reduction in the loss, so there has been some level of improvement there; it just has not been coming through quickly enough. We need to accelerate that and first of all get into the black and then get up to what you might think of as sensible, industrial targets for a manufacturing operation.

  Q15  John McFall: Would you call the Royal Mint, from the management perspective, a bit of a shambles?

  Mr Barrass: No, certainly I would not describe it as a shambles. It is a unique business in a lot of ways, which is a bit of a double-edged sword for it, being where it is and the profile of the work force that we have. The management team—and I am not just talking about my direct reports but all the way down through the organisation now—are all pulling in the same direction on the rope and we really are taking the business forward.

  Q16  Chairman: One final specific question from me on the issue of the retention of foreign coin dies. The Financial Secretary answered a question of mine last week and said that there were cases outside contractual arrangements where the Royal Mint chose to retain certain master tools or production dies after production had ceased. What is the legal basis for that?

  Mr Barrass: It is not a legal basis; it is more custom and practice. When we make coins for overseas customers we will retain dies or master tools for a period. These customers often come back to us within 18 months or two years and ask us to do another run of coins, and after that, if they are not used or not recalled by the customer, we will destroy them. In one or two cases, one during my tenure, they have asked for the master tools to be returned to themselves, which of course we have done.[1]


  Q17 Chairman: If you retain them, do you tell the foreign government that you are retaining them?

  Mr Barrass: They are aware. You can look at it the other way: when they come back to us and say "Could you do another 200 million coins for us" they do not say "And here's a set of dies for them." It's "We know you've got them locked away somewhere. Can you get them out and do another production run for us."

  Q18  Mr Gauke: When the target for the Mint's rate of return was set in 2001, had any benchmarking been done at that point or has any benchmarking been done subsequently to compare with wider industry and international competitors, even accepting your point about the unique nature of the Mint?

  Mr Barrass: If I can answer that in two ways, in terms of benchmarking, we have done benchmarking since in terms of circulating coinage. It is very difficult, as you can probably imagine, to get publicly available information which helps us on that, but we went through a fairly major exercise two or three years ago when we went round all the world mints, had access to them and drew up our own report, which said that we still had some way to go but in fact we were not behind the ball by a long way at all. In terms of target-setting, it is unique but we have to recognise that we are a manufacturing business in south Wales and, as a rough rule of thumb, you can compare us with other manufacturing businesses in south Wales. From that point of view, I do not see the 11% as either rigorous or unachievable. We have to look back at the last five years' performance and say at best it was very disappointing.

  Q19  Mr Gauke: You would not say that the 11% it was unrealistic?

  Mr Barrass: No.


1   Note from Witness: This statement is correct in relation to dies. However, a selection of master tools is retained for an indefinite period, but would be returned to the country concerned if requested. Back


 
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