Examination of Witnesses (Questions 140
- 152)
WEDNESDAY 21 OCTOBER 2009
MR ANDREW
STAFFORD AND
MR ADAM
LAWRENCE
Q140 Sir Peter Viggers:
The problem is, of course, that no one has ownership of identifying
counterfeit coins. The people who have got counterfeit coins,
if they find they have got one it becomes valueless and it is
not in your interest or in anyone's interest to damage confidence
in the currency system. Do you think that someone should be given
responsibility for screening counterfeit coins? Who should be
responsible?
Mr Stafford: The people responsible
are the banks because they are the people who actually circulate
the coins through the system and they have a clear responsibility
in their cash centres to identify the counterfeit and the machinery
is there that is capable of doing it, and we also have to ensure
that the public is well-educated and our task with the Treasury
is to provide the education so that people know how to identify
counterfeits. It is not our task to remove them.
Q141 Mr Brady:
What is your long-term assessment of the demand for circulating
coin in this country and in other countries?
Mr Stafford: Our long-term view
is that demand for the UK circulation is remarkably robust. If
you go back over the last decade, then demand has been almost
without exception consistently around 1.3 billion coins per annum.
The principal drivers for that demand are (a) removal of coins
from circulation because people lose them, either down the backs
of their sofas or in jam jars, and also because when a new store
opens, when Tesco opens a new branch, for example, there is the
requirement for an injection of more coins into the system. If
you look at those two principal drivers, they have been remarkably
consistent. We have undertaken some quite detailed research to
try and extrapolate what we see the long-term demand being and
we can see nothing that is going to materially alter that demand.
Q142 Mr Brady:
You do not see a threat from technology, different methods of
payment?
Mr Stafford: No, because most
transactions involving coins are for values less than £10
and in those situations even the Oystercard, frankly, becomes
less attractive. It is really where things like a £5 and
£10 note is involved that the crossover takes place.
Q143 Chairman:
Can you explain to the Sub-Committee why you have changed the
way in which your target one is measured?
Mr Stafford: Yes, it is to make
sure we have a more realistic method of calculating the terms
for shareholders. I will let the Finance Director who was responsible
for recommending that change explain it.
Mr Lawrence: We use bullion to
finance our precious metals and the question was asked before
about supplying precious blanks from overseas. It is a very effective
way of financing our bullion, which can be 20, 30, £40 million
at any given time. To put it in perspective, the rates we are
pay on that are less than half a per cent per annum, so it is
a very effective way of financing our bullion purchases. If we
did not change our method of calculation and we came to this Committee
and were measured on our performance, we would actually start
making some pretty poor decisions. So this actually allows the
business to make the best business decision for the business.
Q144 Chairman:
Is it in fact easier or harder to increase your average rate of
return on the average capital implied?
Mr Lawrence: Technically, when
we did the calculation for the prior year we made our target slightly
harder, but it is the right decision for the business.
Q145 Chairman:
Why did your Target 3 performance decline?
Mr Stafford: Target 3—
Mr Lawrence: Is the delivery of
commemorative coins.
Q146 Chairman:
Commemorative coin delivery in the UK.
Mr Lawrence: The primary reason
is that in the first part of the year we released the new coins,
the new reverses, which was the Heraldic symbol, and we had such
a fantastic demand for that that it actually put us in a backorder
situation and that drove us in the first part of the year to mean
that we actually couldn't achieve our targets for the whole year.
Q147 Chairman:
Why have your debtor numbers nearly doubled?
Mr Lawrence: Again, a very good
reason. We had a very, very, very strong quarter four and the
relationship in our quarter four, we had a high level of overseas
debtors so our business was largely dominated by overseas customers,
who typically pay us on 30, 60 day terms, and that was the reason
for our increase in debtors. It's just that we had a very good
last quarter of the year.
Q148 Chairman:
You made quite a well-publicised mistake with the new 20 pence
coins. How was that spotted?
Mr Stafford: It was brought to
our attention by a coin collector, who identified it. We immediately
went through the records to identify how this could have happened
and it transpired that on the first day of production of the new
reverses on one machine they had replaced the reverse design,
i.e. the piece with the new design on it, but they had failed
to recognise that on the 20p because of the nature of the design
the date had had to be moved from the reverse to the obverse where
the Queen's head is. Of course, they first looked and recognised
that it still had a right Queen's head on the obverse but failed
to recognise that that one needed to be replaced with one with
the date on it. It happened on one machine for one shift.
Q149 Chairman:
But why did nobody spot it in your organisation?
Mr Stafford: Because the person
responsible checked that the dye still had a right Queen's head
image on it but failed to identify—so it was an operator
error. It caused one machine to produce it on one shift and it
was then replaced, so it resulted in from 8.00 am until 1.00 pm
on one shift—
Q150 Chairman:
How many coins was that?
Mr Stafford: Approximately 200,000.
Q151 Chairman:
I understand the operator error, but why did nobody check it?
Why did it take a collector to spot it?
Mr Stafford: The answer is because
on the initial inspection if you have got the right Queen's image—and
all the other denominations did not involve moving the date from
the reverse to the obverse, the 20p did, and it was an operator
error which should have been spotted. Steps have now been taken
to make sure that all obverse dyes involving the 20p have the
Queen's image with the date on it.
Q152 Chairman:
You have got the 200,00 back? Did you take them out of circulation?
Mr Stafford: No, they are out
in circulation. There is nothing wrong with them in circulation,
they are perfectly legal tender. It is a bit of a storm in a tea
cup.
Chairman: All right, we are going to
leave it there. Thank you very much for your evidence today. If
we have further questions we may follow up in writing before our
report. Thank you both very much.
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