Select Committee on Treasury Appendices to the Minutes of Evidence


Memorandum from Mr Geoffrey Kitchen


  My connection with the Royal Mint started in 1967 when, as a member of the Exchequer and Audit Department, I was posted to the Mint as the resident external auditor. I then joined the Royal Mint, and was a member of the Finance Department for a period of three years before moving to the Marketing and Sales Division which was established in 1971 following Decimalisation.

  I resigned from the Civil Service in 1973, and have spent the time since in the private sector always working in coins. I worked for Spink and Son Ltd for more than 22 years where I was Director of Modern Coins, and during that time I was intimately involved with the creation of many special coins for a large number of governments. During this period, the Royal Mint struck many of the coins as a minting contractor, although one of the very successful collections managed by Spink involved six national mints as suppliers.

  I established my own company in 1999, and continue to devise, manage and finance special coin issues for a number of countries without financial risk to the Governments concerned.


  The Mint's primary role is to supply United Kingdom coinage. It enjoys a monopoly, and its customer is also its shareholder. It also manufactures and distributes UK collector coins, again enjoying a monopoly position although it does sell its products to third parties both in the UK and overseas.

  The Mint also manufactures coins and blanks for overseas Central Banks or similar Issuing Authorities and other mints. It also manufactures and distributes collector coins for its overseas government customers. In addition, it manufactures collector coins for companies that act on behalf of some Issuing Authorities.


  The only information about the Mint's activities available to the general public, and therefore the taxpayer, is to be found in their Annual Report, and the most recent for 1999-2000 again prompts many questions about its most appropriate role, and its performance. The principal activities merit examination under the following heading:

    —  Sales of UK circulating coins.

    —  Sales of UK collector coins with a split between the Mint's own retail sales and those to third parties.

    —  Sales of overseas circulating coins and blanks.

    —  Sales of overseas collector coins to Issuing Authorities or their agents' ie contract minting.

    —  Sales of overseas collector coins with a split between the Mint's retail sales and those to third parties.

  Accepting that the division of some overheads is necessarily arbitrary, gross profit contributions for each of the above should be identified, including separation, where for example the Mint acts as a wholesale supplier of UK and Overseas collector issues.

  The Mint pays royalties on the sale of UK collector coins including those coins distributed through the UK Banks and other similar outlets, but the annual accounts do not record the amount paid to the Treasury. It also pays royalties, where it sells overseas collector coins as principal for Central Banks; again all sales are shown net of such payments.

  The Annual Reports of the last several years reveal that the Mint has substantially increased the size of its mailing list, but the accounts do not identify the marketing expenditure. Coupled with the absence of details of its retail sales, and the attendant staff overheads associated with a sizeable customer service and fulfilment staff, it is not possible to see whether the taxpayer would be better served if coins were sold to third parties who would take on these risks. This may be particularly so for the overseas collector coins.

  As mentioned above, it is impossible to see the true profitability of the various areas of activity but in those years when there were significant issues of UK circulating coins, UK sales were automatically higher and often produced higher profits.

  Figures for production, and issues are not always shown in the Annual Reports and there appear to have been instances in the past when substantial quantities of coins were held in stock at the end of the appropriate period, and sales made later.

  The Mint has had a relationship with the Mint Birmingham Ltd for many years, particularly in the export market. MBL acts as a sub-contractor but the volume and value of the business placed there cannot be identified. It has to be assumed that the sub-contractor quotes lower manufacturing prices than the Royal Mint otherwise no business would be possible.

  The Reports record the Mint's performance against Key Ministerial Targets. Two of these deal only with the outturn to individual UK collectors, and there is no reference to sales to Central Bank, and other trade customers. It is likely that these represent by value, after setting aside UK circulation coin, the bulk of the Mint's sales.

  The sales figure for Overseas for 1999-2000 is the lowest for more than 12 years. The strength of sterling has probably played a part, but the mix of sales particularly where there have been substantial quantities of blanks, with relatively little added value, must also have had an effect. It is also a fact that many other mints, both private and National are quoting keener prices.

  Staff levels are now at the highest level, and the costs increased from the year 1998-99 by almost 15 per cent. A reduction in the level of absenteeism was also reported but there was a fall in the level of production.

  On a personal business level, my need is to supply collector coins at competitive prices to trade customers in various markets, including the United Kingdom. Prices quoted by the Royal Mint for contract minting are now far too high and I am able to source coins of an acceptable quality for the marketplace at prices that are markedly lower than those quoted by the Royal Mint. In addition, there is also a very major difference in the costs for the master tools. The lead times are also much shorter.

  It is a matter of some regret that, from the middle of last year, I have placed manufacturing orders overseas rather than with the Royal Mint.

  The key question, or problem, for the Mint is the need to change its work practices and improve its productivity, leading to better prices and margins, quality, and delivery.

24 January 2001

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