(Bloomberg) -- The Bank of England’s chief cashier defended the 50-pound note, saying that demand for the U.K.’s highest-denominated bill in circulation is likely to increase in coming years.
In a response to a Treasury request for submissions on the banknote’s future, Victoria Cleland -- whose signature appears on British cash -- said that the 50-pound bill ($66) is not only used by criminals, but also tourists and increasingly by the general public. That usage is likely to rise as inflation erodes their value.
“It is important that the public have choice,” said Cleland, in one of her final acts before she starts a new role at the BOE. “The Call for Evidence suggests that some 50-pound banknotes are used for illicit means. It is also really important to bear in mind that many are used for a variety of legitimate means, for example higher value purchases and tourist spending.”
Banknotes also play a role as a contingency payment method and may be especially needed in the event that people are unable to use digital payment methods, she said in comments posted on the BOE website on Thursday.
Inflation is likely to increase the demand for higher denominational banknotes for use in transactions over time, Cleland wrote. When it was introduced in 1981, it had a purchasing power of around 145 pounds at today’s prices, while, assuming that prices rise in line with the BOE’s 2 percent price gains target, by 2030 that will have fallen to 39 pounds.
Some high street banks are already increasing the availability in ATMs, she said. Given the decline in cash transactions in the U.K., that also implies increased use as a store of value. A 2013 survey by the BOE found that the most frequent users were based in London, while almost one-third had never used one.
While Switzerland and the euro region have debated discontinuing their highest-denomination bills amid concerns they facilitate money laundering and other economic crime, Cleland noted that the 50-pound note is of comparatively low value. While the European Central Bank is halting issuance of the 500-euro banknote, it has retained the 200-euro note, which is “still of significantly greater value” than the fifty.
Overall, she said, demand for BOE banknotes has grown materially in recent years, with the value in circulation approximately doubling between 2005 and 2017, largely driven by the two higher value bills. The 50-pound banknote accounts for approximately 24 percent of those in circulation by value and 9 percent by volume.
Cleland has been promoted at the bank and starts her new role as executive director for banking, payments and financial resilience on Friday.
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