Administration and expenditure of the Chancellor's departments, 2008-09 - Treasury Contents

Examination of Witnesses (Questions 100 - 119)



  Q100  John Thurso: You had, I think, a bit of a spat with the Birmingham Mint, which has now been settled, I understand, for a relatively modest amount of money. In the annual report it says there is no basis for a claim. Why did you choose to settle out of court at all?

  Mr Stafford: The case goes back a long time, it goes back to 2002 when the matter was—when you say we've had a spat, the current management have certainly not had a spat. The Birmingham Mint—

  Q101  John Thurso: They inherited one then?

  Mr Stafford: They inherited a spat. We sought to resolve this to avoid any further cost to the public purse. We were advised that to take this matter to trial would have incurred at least another three-quarters of a million pounds in legal fees, and even if we had won but not been awarded costs then we could have been incurring significant costs. So to settle the whole matter for £100,000 was a very sensible way of settling the matter and avoiding any further risk to the public purse.

  Q102  John Thurso: It was a purely commercial decision?

  Mr Stafford: Yes.

  John Thurso: One last question, if I may.

  Chairman: As briefly as you can, because we are up against the clock.

  John Thurso: In that case, that is fine, I am done.

  Chairman: We are up against the clock today because we have to finish at half past.

  Q103  Jim Cousins: Mr Stafford, I listened very carefully to the answers you gave to the earlier questions, but as I understood it you already have some relationships with private sector banks?

  Mr Stafford: Well, we have some of our banking facilities provided by private sector banks. They are not in any way equity stakes, but we obviously have some of our banking facilities with private sector banks, correct.

  Q104  Jim Cousins: And your Russian contract?

  Mr Stafford: That is an arm's length commercial arrangement with a private sector organisation in Russia which is the supplier to the Russian Mints. So we contract with an organisation called Tenzor, which in itself then contracts for the supply of coins to the Russian Mint.

  Q105  Jim Cousins: So what you are is a trading fund? You are able to enter into these commercial arrangements and in the case of the Russian one, I guess, Russia being Russia—

  Mr Stafford: Forgive me, this is us supplying them with a product. This is nothing to do with the way we finance our balance sheet, this is purely—

  Q106  Jim Cousins: But it is a long-term arrangement with them?

  Mr Stafford: Yes. We have never said we cannot—

  Q107  Jim Cousins: How do you carry the risk of that arrangement?

  Mr Stafford: Forgive me, we receive a payment up front for the goods before we supply it. We have a very large percentage of the goods paid for before we deliver.

  Q108  Jim Cousins: You transferred an unusually large amount of money from your reserves into your profit and loss account last year?

  Mr Stafford: I will ask my Finance Director maybe to answer the technical points if I may.

  Q109  Jim Cousins: You transferred £8 million into your profit and loss account?

  Mr Lawrence: Sorry, that is our profit for the year, so if you look from year to year at our reserves that is the movement in profit.

  Q110  Jim Cousins: And that made the total in your profit and loss account—

  Mr Lawrence: No, no, that's an impact on profit as well, a shift in reserves

  Q111  Jim Cousins: No, no, the total now in your profit and loss account is about £50 million?

  Mr Lawrence: That is our retained profits.

  Q112  Jim Cousins: Yes, so how much of that might you consider investing in these arrangements that you have referred to?

  Mr Lawrence: There is a big difference between retained profits and cash. Retained profits is effectively the built up profits for years and years and years. You wouldn't necessarily reinvest that. That's the shareholders' capital, so if the shareholder wanted that back we could repatriate that back to the shareholder, which we do via dividends every year.

  Q113  Jim Cousins: How much will that be valued at when you become a Government-owned company?

  Mr Lawrence: Well, you typically wouldn't value a company based on the retained earnings.

  Q114  Jim Cousins: No, it would be transferred into it, would it not?

  Mr Lawrence: Probably not. You typically wouldn't do that in this business.

  Q115  Jim Cousins: So does that mean the Government this year will get that money back?

  Mr Lawrence: No, but if the Government wanted to call back their retained earnings they would be able to call that back via dividends and the shareholder would ask us to repay some dividends if they wanted to do that.

  Q116  Jim Cousins: And they have not asked you to do that?

  Mr Lawrence: Well, we do. Every year—for the last couple of years—we have given roughly a £4 million dividend.

  Q117  Jim Cousins: £4 million, but there is £50 million in the—

  Mr Lawrence: But I don't have £50 million of cash to give you. If you want it, I could go and leverage the balance sheet, get a loan and give you some money.

  Q118  Jim Cousins: Do forgive me, Mr Lawrence, Mr Stafford was very proper earlier about his powers vis a vis ministers. You must understand this Committee has no power to compel you to do anything with your money.

  Mr Lawrence: No, I am not meaning you personally, the shareholder. If the shareholder wanted that cash back they could extract it. The way they would have to extract it, though, would be to actually finance up the balance sheet because we don't have enough cash to give you that £50 million.

  Q119  Jim Cousins: Your target for return on capital is 10%?

  Mr Lawrence: Yes.

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