Examination of Witnesses (Questions 1-19)|
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
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
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
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 teamand I am not just talking about my direct
reports but all the way down through the organisation noware
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
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.
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