Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 80 - 99)



  80. When you said earlier that the Shareholder Panel had an impact in advising the Treasury, you do not regard them as particularly having an impact in contributing directly to the work of the Mint?
  (Mr Holmes) Yes, that is not their main purpose in life. They advise the Treasury on their shareholder role.

  81. So you do not anticipate there being benefits to the work of the Mint from the panel?
  (Mr Holmes) There may be. They advise the Treasury on how to be a more knowledgeable shareholder in terms of understanding the private sector, return on capital and that sort of thing. That is fine. There may also be spin-offs. We meet the Shareholder Panel occasionally and we are able to discuss our business with them. Their basic role is to advise the Treasury and not the Mint.

  82. How do you anticipate that affecting the issues previously raised with you by David Kidney about target setting and such like? Would you expect the Shareholder Panel to have a direct impact in that area? How would you expect that to work. Would you be there negotiating with the Shareholder Panel rather than with the Treasury?
  (Mr Holmes) No. Essentially our dialogue is with Treasury officials and, ultimately, with the Economic Secretary. The Shareholder Panel will meet with the Treasury officials and, ultimately, with the Economic Secretary and give them advice. A major aspect of that advice will be on target setting and we have no problem with that. On that Shareholder Panel, bringing that level of private sector expertise to bear, is a venture capitalist, a City analyst and a general businessman. I am sure that their advice will be helpful.

Mr Fallon

  83. On the non-executives, you were a trading fund and then you became an executive agency. So you have five non-executives. Are they real non-executives? There is no reference in your annual report as to the responsibilities that they exercise or whether they serve on any remuneration committees. Are they real? Can they fire you?
  (Mr Holmes) They are certainly real in the sense that their contribution to board discussions is major. We have an audit committee and a remuneration committee operating in practice. We do not make a big thing of it in the annual report. The remuneration committee is made up of the non-executive directors plus myself and it is now chaired by a non-executive director, David Stark, and the audit committee is made up of the non-executive directors plus our director of finance, Graham Davies, and myself. We try to operate as closely as possible in line with the modern standards of corporate governance. There is a slight difference with a public sector body. I am the accounting officer to Parliament. Obviously, the directors do not have the same kind of statutory responsibilities that they would in a company.

  84. Normally that would be worth putting in the report. That may be something that you would like to consider putting in the report. Can the non-executive directors change you?
  (Mr Holmes) On their own, no. My appointment is a Treasury appointment, but they advise the Treasury on my remuneration and, therefore, they could no doubt advise the Treasury on my continuing employment. In any case, my contract expires at the end of the year.

  85. On targets, there are targets on the outturn to individual UK parameters, but there are no targets on your sales to Central Bank, or to trade customers. I think you were asked earlier whether there should be targets in those areas. Do you think that there should be targets in those areas? It is a big chunk of your work, but there are no specific targets.
  (Mr Holmes) I accept that that is a gap. My only point was that it is quite difficult to set a meaningful quantitative target but making sure that we keep our overseas central bank customers happy is a major concern for us.

Judy Mallaber

  86. We have had evidence from the Royal National Institute for the Blind. They comment that our coins are more user-friendly to those with difficulties in identifying coins than those in a number of other countries. There is some doubt whether you regard the need to provide coins in a way that is easily understandable by all customers as being one of your prime objectives. How far do you take that into account and are you always conscious that people in this country need to be able to identify the coins that they are using?
  (Mr Holmes) We are very conscious of that. Whenever we introduce a public consultation process about any possible change of the coinage we include organisations representing the blind and a whole range of like organisations. We take their views into account and we talk to them. We carry out tests as well. People who have been blind for a long time are very good at recognising the differences between coins, but the partially sighted or even well-sighted people struggling in the dark in the backs of taxis and so on are not so good. In recent coin reviews over the past 10 years or so we have had a university running tests for us on how quickly people can distinguish the different coins that we have. That is before we settle on any new coin specifications. So we regard the principle of being able to distinguish coins by anybody as being very important.

  87. So why does the RNIB say that that should be set down as a specific objective with a clear obligation to consult? Does that suggest that there has been a lack of consultation in the past or perhaps that you have not done as much as you should have done?
  (Mr Holmes) We have had a lot of dealings with the RNIB. I have been at the Mint eight years and I cannot remember the RNIB ever criticising us about anything. I suppose they may want to say, "Let us put this on a more formal basis". I have not seen the memorandum, but I would imagine that could be the thrust of what they are saying.

  88. They feel that in the discussions around the euro—maybe because there has not been a decision in this country—that they have not been as fully involved in some of the work that has been done.
  (Mr Holmes) Those discussions took place at a European level rather than at a national level.

  89. A specific issue was raised with us in relation to the quality control problems with the £2 coin. The British Amusement Catering Trades Association told us that that had created considerable difficulties for them. What went wrong and how can similar problems be avoided in the future?
  (Mr Holmes) It is a long story.

  90. Perhaps we can have the brief version.
  (Mr Holmes) When we produce a two-part or bi-coloured coin we have to join the outer and inner coils together and the junction resistance where the two pieces meet has a tendency to influence the readings on vending machines. When we first issued samples to the vending industry of the £2 coin that we were going to launch, they expressed some concern about the impact of that junction resistance on the readings that they were taking, and on their abilities to set narrow windows to avoid any counterfeits coming through. As a result, we held back the launch of the £2 coins for six months in order to sort out the problems. We found a way of controlling that junction resistance better than we thought that we would be able to. We then launched the coin in June 1998 and the coin has generally been well received by the vending industry. They greatly appreciated the fact that we had held back the launch and sought to fix the problems. Although some older machines have difficulties with the £2 coin, most modern vending machines, if they are changed to accept it, will adjust to do so.

Mr Kidney

  91. Earlier today when we toured the Mint we saw large quantities of blanks being produced for the new euro currency for the EU member states that will use them from next January. To what extent is that a temporary line of business and to what extent will there be a lasting opportunity there for you?
  (Mr Holmes) The volume at which we produce blanks for the first wave euro countries is particularly good because of the size of the demand. They have to make 50 billion coins by 1 January 2002. After that their volume will fall as the level of demand reverts to a more normal level. We hope that we shall be able to stay in that market. We have not had much chance to penetrate the Western European markets for blanks prior to the euro. Having succeeded in getting into a number of those we hope that we shall stay in, albeit at somewhat lower volumes.

  92. From your experience of this business, to what extent will there be pressure for consolidation of mints within the EU member states? They all have one mint each at the moment, but may there be fewer because of the single currency?
  (Mr Holmes) That is possible. I would not like to speculate on that. Each country has its own reasons for having a mint and those could remain. It will be interesting to see what happens once everyone has completed the task of producing the new coins. Incidentally, the task will not totally be completed by 1 January 2002 because most countries are acquiring a certain quantity for that date and once they have seen how the launch goes, they will top up afterwards. The demand will not plummet immediately, but it will ease down as we go through 2002 and beyond.

  93. On the matter of whether there will be fewer mints, will that have any consequences for your strategic planning for the future?
  (Mr Holmes) Yes. Obviously, we shall look at the whole matter of what will happen with our various competitors and colleagues around the world. It is difficult to predict because the decisions that may be taken will not be taken entirely on commercial grounds. Although some mints around the world, not necessarily in Europe, are small, for national reasons countries may want to keep them going. We shall have to wait and see. Sometimes that is more a political decision than a commercial one.

  94. Speaking of "wait and see", what are you doing about the possibility of Britain joining the euro?
  (Mr Holmes) We are involved in the euro preparation process, as described in the National Outline Changeover Plan that has been published. We talk extensively to the banks and retailers about the outline plans for how that will be done and we try to identify how many coins the UK will need at a launch date, if there is one, and how long it would take to produce them. At the moment we are not focusing on spending serious money on this issue at all, but we are looking at the experience of the first wave countries to see what we can learn from that, as they roll out their distribution plans and approach the launch date of 1 January 2002.

  95. You provide all the UK's currency coins, do you not?
  (Mr Holmes) Yes.

  96. Would you expect to produce all the new euro coins if the UK joined the single currency?
  (Mr Holmes) Not necessarily. That would depend upon the amount of time that we were given to produce them and a number of other factors, including how many UK sterling coins we would continue to have to produce during the transition period. We are open-minded on that. If the UK had to buy in additional coins from elsewhere to supplement its requirements, that could be done.

  97. We know the amount of time because it is in the National Outline Changeover Plan.
  (Mr Holmes) Yes. The transition period is set at 24 to 30 months. Six months is a big difference when you are producing at the rate at which we shall have to produce. That is one of the factors that will determine to what extent the coins will have to be bought in.

  98. Did you have any input into that changeover plan timetable?
  (Mr Holmes) Yes, we did. It is natural that options need to be kept open as to the exact length of time.

  99. What have you told the Government? Have you told them that if the time period is two years that you cannot produce all the coins, but if it is two-and-a-half years that you can?
  (Mr Holmes) It is more complex than that. The estimate that exists at the moment of around 14 billion coins for launch date in the UK itself depends on a number of factors like what time of the year the coins may be introduced. There need to be further discussions with the banks because the numbers are constantly reviewed and so on. Clearly, the shorter the timescale, the more coins that will have to be bought in.

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