Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 140 - 148)



  140. That is the point I am making. You broke away from the three-years; you set a single-year target of 14.6, but the result was 0.5 so somebody got it wrong.
  (Miss Johnson) Yes, but it was informed at the time by the Mint's own corporate plan. It was not the case that it was set by the Treasury in isolation from the Mint. As I explained, a lot of the difficulties of the major investment programme and the changes that were necessary which are now bedding down satisfactorily have caused the situation that we have got here.

  141. The Mint told us they were now—and I think you presented an order to Parliament to allow them to do this—moving into the area of doing gifts and collectibles and trinkets of all kinds. If we do not have this kind of information in the annual report about marketing and overheads and so on, it is very difficult to assess whether it is really right for a state organisation to be competing against the private sector by producing trinkets like this. Should the Royal Mint really be doing this?
  (Miss Johnson) The shareholder panel certainly believes that it is a good development. It has been enthusiastic about it and would like to see it extended which is interesting because they obviously all have extensive private sector backgrounds and are recently appointed. I think to call it trinkets is unfortunate. They are and have always had a collectible coins division, as it were, or in recent times did, which is obviously not producing coinage as such but producing purely for collectors: they produce a number of coins both for the UK and for overseas contracts which are never going to be part of the standard coinage but are only for collectors, and they have been extending this business because it has been a good business and a profitable one. It is appropriate for them to be undertaking this in a more commercial setting, which is the one we believe they need to be operating in, and we feel it is one of the right ways for them to develop for the future. As I said, that view is strongly shared by the shareholder panel too.

  142. But do you see the danger in them engaging in that activity? Essentially these commercial trinkets, gifts, should be produced by other businesses, and there must be a point at which a state organisation should not be allowed, in a cross-subsidised way that is not properly reported in its accounts, to get into that kind of market place?
  (Miss Johnson) What they are producing is associated with their role as a Mint still. Clearly it does not make sense for them to produce items that have no connection whatsoever with their own collector coin customer base and does not resonate with the Royal Mint. It is within that framework that the business is being developed.


  143. In answering various questions which you have kindly answered for us today, you have identified, it seems to me, at least four roles for the Treasury: the shareholder, the customer, the controller of investment, as Mr Kidney pointed out, and also it has just been introduced as the protector of competition, with respect to the Mint. You have said that these various functions can somehow be kept behind Chinese walls, if Chinese walls are allowed in the Treasury, and you are confident that that is the case.
  (Miss Johnson) I have identified two prime roles: you may wish to make further distinctions but I am not sure I particularly recognise them. Some of the matters you are talking about are very much shareholder extensions of the shareholder role, and there is a basic distinction between the Treasury's role as a shareholder and its role as a customer. That is recognised organisationally between the fact that if I am dealing with one side of the Mint I will normally have one set of officials, Paul and his colleagues, coming to see me and advising me and if I am dealing with the other aspects of the Mint it will be Peter Schofield and his colleagues who will come to advise me. They are completely separate, therefore, and I think the arrangement is working well, and there are not the number of focuses which you have tried to suggest there might be.

  144. Surely the competition element has to be in the mind of the Treasury ministers. If the Royal Mint really did decide to go berserk on its trinkets and produce chocolates, for example, the Treasury would presumably have a view about that?
  (Miss Johnson) They cannot cross-subsidise because we do take the profit and so it cannot.

  145. So you are saying it can do anything so long as it is not cross-subsidising? Is that what you are saying?
  (Mr Schofield) In terms of the movement into different types of market there are two things I would say. The first thing is that these are competitive markets that it is moving into. From the point of view of shareholder I think the key issue for us is the degree of commercial risk that it would be taking on in doing so. In terms of looking at proposals that they have put forward, we take a robust and rigorous look at the proposals they put forward as part of the corporate plan. With the expertise of the shareholder panel we will assess if this is the sort of business that the Mint should be moving into. We look at that as a shareholder, we also look at it as a funder, as a banker in that sense.

  146. I can see you looking at both those roles and I can see there is a distinction made between them, although I have a question to ask about the credibility of that distinction. The question still remains that neither the shareholder or funder is the proper person to answer as to how far it can stray into competitive markets in a way that most people would assume is unfair competition. That must be a concern of the Treasury. That is at least one other dimension that the Treasury is concerned with.
  (Dr Mills) I would ask why you would say it is unfair competition in one sense because we have now moved to a situation where if the Mint does borrow from government it is going to be charged a commercial rate as if it were in the private sector. It is not allowed to retain huge amounts of profits that it is not investing and so it cannot use retained profits from other contracts to then cross-subsidise other business.

  147. I am aware that time is running out and I do not think a long-scale philosophical discussion about whether the state is borrowing fairly or unfairly against private companies is quite in order, but it is certainly an open question. The final question I have got does specifically relate to this distinction between the shareholder and the customer. Although you have provided us with examples of two representatives within the Treasury it ultimately comes to the Minister. How credible really is it in people's minds that there is this distinction between customer and shareholder? At the end of the day the buck stops with you, Minister, and you are one person.
  (Miss Johnson) Yes, and a balancing act has always had to be done on this front by Ministers over years. Nothing is different from what it has always been with respect to the Mint in this regard. There is nothing new about the situation at a ministerial level from what it has been, I will not say for time immemorial but for some time before, because clearly what has always happened is that there is a tension between the taxpayer getting a very good deal and the Mint as a supplier of coin to the Government, and that tension is always going to continue to exist. But that is a tension on which I do have good independent advice from both sides in arriving at the judgment about what the balance at the end of the day is to be held on.

  148. It is precisely when that tension becomes too extreme that governments around the world have found it easier to split off the two functions.
  (Miss Johnson) A large number of governments have their own mints but I have not done a survey globally of it.

  Chairman: Thank you very much indeed.

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