Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 40-59)



  Q40  Mr Mudie: No, we are not arguing with that. The specific question is, where do you envisage the casual work force reductions ending? At what level? You will obviously have to have room for peaks and troughs but you have had these people for some time by the look of the annual report. What is the figure?

  Mr Barrass: If you push me, I would have to say there are probably another 30-35 casuals in addition to the 46 so far. Of the casuals that will then remain, a small number we will take on to the permanent payroll because over time they have become key to our processes, and the rest of them would be volume-related and, depending on which month you measured them in, that would either be a high number or a close to zero number.

  Q41  Mr Mudie: In your Finance Director's scoping, he mentioned employing Knox D'Arcy for 40 weeks at a cost of £1.7 million. Have you gone ahead with that?

  Mr Barrass: We are employing Knox D'Arcy as our advisers on this and we are working very closely with them. That programme was triggered at the beginning of August.

  Q42  Mr Mudie: Is the figure of £1.7 million accurate?

  Mr Barrass: I would not want to give you an answer in public as to exactly what our commercial terms are with them. They are clearly commercially sensitive as far as Knox D'Arcy are concerned.

  Q43  Mr Mudie: The Western Mail got the £1.7 million from Peter's document so it must be there.

  Mr Barrass: As a scope number, yes, they did.

  Q44  Mr Mudie: Scoped again?

  Mr Barrass: A scoped number, yes.

  Q45  Mr Mudie: This scope figure is a new factor in financial affairs. What on earth are Knox D'Arcy doing for you that your bright young executive board cannot do?

  Mr Barrass: While my bright young executive board are running the business, we have taken seven of our much younger, probably much brighter junior people out of their full-time jobs, trained them in terms of the business improvement programme and they are working alongside a team from Knox D'Arcy so we have a team of about 14-15 people who are working on this programme for us. What are they doing? They are assessing everything that we do in minute detail, challenging it, looking at different ways that we could...

  Q46  Mr Mudie: This Committee would have done it for nothing. No, do not go there!

  Mr Barrass: No. I have been told that you guys do the jokes and I have to be very serious. These guys are assessing every aspect of the way we do business. Although I guess we would refer to them as consultants, they are an outside agency, it is not consultants in the way I think those of us who are cynical about consultants—and I am one of those—would imagine their work to be. They are not just looking at things, telling me where the problems are and then charging me a bill for it. They are looking in great detail at what we are doing, how we could do it differently, then training our people to do it differently, helping us rewrite the procedures and the manuals, so that once we have these changes in place, we embed them in the organisation and do not lose them so that we do not have to come back in two or three years' time and go through the same exercise again. They are much more than consultants. Within the real commercial number—your number is a scoped £1.7 million—there is a significant amount of hands-on training of our work force, a lot of which we have undergone already. The feedback from all levels of the work force who have undergone this training is very positive.

  Q47  Mr Mudie: But, as you said, you have made some progress in the financial year in as much as you have halved the deficit down to £1.6 million.

  Mr Barrass: Yes.

  Q48  Mr Mudie: Even though you are reluctant to tell us the figure, trying to get £1.6 million, you put £1.7 million back in, or a figure that you will not divulge for consultants straight away, which from outside looks strange. In this atmosphere with the trade unions, with people losing their jobs, and it is Wales and an area where this is an important employer, this is all bad news, yet a remuneration committee is set up and their first act is to increase directors' salaries by, I reckon, over 15%. Do you think that is sensible in the atmosphere that "We are all in this together" and people are losing their jobs and the remuneration committee award a 15% increase to directors?

  Mr Barrass: I understand exactly what you are saying, and if that recommendation came through from a remuneration committee now, as chief accounting officer, I would have a major problem with it. In terms of the timing on that, we are looking at the senior management change happening during that financial year. We are now looking at a situation halfway through the following financial year, and I think the number will be a fairly small number of compulsory redundancies.

  Q49  Mr Mudie: When you look at when that decision was recommended and implemented, you had lost £3.5 million. If it were coming this year, there is an argument to say you have halved the deficit, you have worked well, but they were facing a £3.5 million deficit in the financial year. How on earth can you justify directors getting that sort of increase?

  Mr Barrass: What the remuneration committee did was they had each of the jobs appraised, they went through Hay—another set of consultants, unfortunately, as you have to—to have them evaluated, and they then compared them with other public service sector workers doing as comparable jobs as we could find—obviously, there is not another mint in the public sector. Similar responsibilities, similar Hay evaluation points, if you will, and all those increases did was to bring the directors up to the level that was in existence at that time. So we are already almost two years out of date on that.

  Q50  Mr Mudie: Disgraceful really, but then you bring in a bonus scheme. It is a short-term bonus scheme. How short-term is it? Why is it named "short-term" and what does "short-term" mean, so we know in future years what the life of it is?

  Mr Barrass: The short-term bonus scheme that we ran during the financial year that the annual report covers is literally a 12-month scheme. It had a shelf life of 12 months. The result of that bonus scheme was that there were zero bonuses paid out under that scheme because it was very specific in terms of the pay-out clauses and, as you can see, we lost £1.6 million that year. There were no bonuses paid in that year.

  Q51  Mr Mudie: No, but you are skilfully, if not deliberately avoiding the question. Is the answer that each year you are going to have a new short-term bonus scheme?

  Mr Barrass: That would be the intention, to have a specific and specifically targeted to recognise . . .

  Q52  Mr Mudie: But the permanent features of it would be that, at chairman level or chief executive level, he or she could earn up to 30% of their salary in bonuses and the other directors 20%.

  Mr Barrass: Yes.

  Q53  Mr Mudie: On the surface, I can see why you did not pay money out last year, except they did better than the year before, but the bonus scheme, as I see it, is divided into two. It is divided into corporate and individual. How does this bonus scheme work?

  Mr Barrass: I am sorry I do not have the details of the schemes here, but you are absolutely right; there are corporate and personal elements to any proper bonus scheme at this sort of level. The way that the scheme worked in that particular year for all of the bonus schemes that we were running at the Mint, with the exception of the sales force, was a gate that you had to go through before any calculation was made, and that gate was that the company had to make money. If the company lost £1, then none of the bonuses became payable. Clearly, we lost significantly more than £1 and therefore all of the bonuses became non-payable in the year.

  Q54  Mr Mudie: Do you set individual targets on a personal level? Did you set for the financial year in question individual targets for that part of the bonus scheme for these individuals?

  Mr Barrass: I do not believe my predecessor set specific individual targets for the guys, but their individual performance would have been recognised through the piece.

  Q55  Mr Mudie: They got nothing, so clearly none of them met even their individual targets.

  Mr Barrass: No. We could have had some guys who performed very well against their individual targets but, because the company did not break through that first threshold of not losing money, everything was null and void.

  Q56  Mr Mudie: Staff resistance. There is a very interesting thing the Royal Mint spokesman is again saying: "On this occasion staff and unions have been involved from the start." That implies that in the past this has not happened. This better working programme—is that a joint programme, and are these seven people that have been put on representative of the whole work force?

  Mr Barrass: I think maybe I have confused you with the seven people, if I can just clear it up. Those seven people are not part of the consulting group. Those seven people are actually part of the task force team who are out there in the Mint, day after day, striving to make these improvements. The consultation group is a group of eight people. That is myself, the HR director, one regional representative from each of the three trade unions that are there, and three of the Mint employees who were also the trade union senior shop stewards. So that eight is the consultation group. What the spokesman meant by that was right from the launch of this better working programme on 1 August, that very afternoon, we had our first consultation group as those eight and we have kept the unions up to date and consulted with them and taken their input. We have had three or four meetings with them to date and the next meeting is already timetabled in to continue that process.

  Q57  Mr Mudie: One last question, which you can duck if you like, because this is a question on last year's report. We are over halfway through the financial year now. What can you tell us? What is it looking like financially for this year?

  Mr Barrass: I am quite happy to give you a feel for it. I would not be happy to give you the numbers. We have six months in the can and I have an early view of what month seven looks like because we have really speeded up the reporting. The first six months look very positive. There is a health warning coming at the end of this. We are ahead of plan, ahead of forecast, and at this point we are profitable. The health warning is that we have had a rather unusual occurrence this year in that the call-off of UK coinage usually happens across the first three quarters of our financial year and, for various reasons nothing to do with the Mint, there has been a much heavier than usual call-off in the first six months and we have benefited from that because we invoice out our coinage as it is delivered. So we know that some of that benefit is phasing and we should be expecting it in the third quarter but we have already banked it in the second quarter. Notwithstanding that, we are in a very positive position. We are ahead of where we benchmarked ourselves to be and, with the benefit of the better working programme, which is not in the plan or the forecast, the two plus 10 forecast that we were working on, with the benefit of that still to come in the fourth quarter, I am hoping to hold that position that we have at the first half and build on it through the second half, but the second half is going to be trickier than it normally would be because we have already taken the benefit of UK coinage.

  Q58  Mr Mudie: Do you think your executives will be out of bonuses this year?

  Mr Barrass: The executives currently do not have the bonus scheme laid out for them because at the beginning of the year what I was going to do, knowing the things I was likely to have to do, it was going to be very difficult to lay out numeric targets for the guys because they were either going to be very easy, depending on the success of whatever programmes I put in place, or they were going to be totally unachievable, again, depending on the programmes. My own personal philosophy on bonuses is that they have to be stretched but achievable and even today I am uncomfortable in putting targets down for these guys but there is a remuneration committee next week and I know those guys are going to be putting me under pressure to put something in place.

  Q59  John McFall: Given that it seemed that the targets which the previous remuneration committee had were quite easy to achieve, could you share with us the information from that remuneration committee and what you will be doing as a result of that?

  Mr Barrass: I am not sure what you mean by the targets were easy to achieve.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2007
Prepared 7 February 2007