Thanks everyone, I have just about given up, today I've cleaned the pads and rotors with sandpaper and brake cleaner. I've adjusted the pads in and out and even when they are just about touching the rotors there is no way I can lock the back wheel up, in fact down a hill it won't even bring me to a stop without the front brake. The front brake isn't powerful enough to lock the wheel either. I know modulation is supposed to be a benefit of discs but surely if you press the levers sharply in it should lock the wheels up.
I'm going to stop messing now and take it out when it rains to see what it's like in the rain, which is why I got the thing in the first place as a wet weather bike.