Penny Pinching? U.K. Mulls the Future of Its Smallest Coins
(Bloomberg) -- As a Conservative Chancellor of the Exchequer, Philip Hammond would love a reputation for looking after the pennies. Instead, he may be angling to scrap them altogether.
In documents released alongside his Spring Statement Tuesday, the U.K. government called for evidence on the use of cash, with particular focus on the role played by the nation’s smallest and largest denominations -- 1 and 2 pence coins, and 50 pound ($70) notes.
The Bank of England, and the government, have stressed the need to preserve cash, with research suggesting that 2.7 million people are entirely reliant on it. Still, the consultation comes as the use of notes and coins for U.K. payments dwindles.
There’s also evidence the need for smaller coins is diminishing. According to the document, most 1p and 2p coins are used in a transaction once before they leave the cash cycle. That’s left the Royal Mint needing to issue over 500 million of them each year to replace those falling out of circulation.
At the other end of the scale, the document says that 50 pound notes are “rarely used for routine purchases and is instead held as a store of value.” In addition, there is “a perception among some that 50 pound notes are used for money laundering, hidden economy activity, and tax evasion.”
Other high-denomination banknotes, including the European Central Bank’s 500-euro bill and Switzerland’s 1,000-franc, have also come in for criticism in recent years.
The report continues:
“From an economic perspective, having large numbers of denominations that are not in demand, saved by the public, or in long term storage at cash processors rather than used in circulation does not contribute to an efficient or cost effective cash cycle.”
The section concludes by seeking to gather evidence on whether the current selection of coins and notes meets present and future needs, and the circumstances under which 50 pound notes are used in routine transactions. The BOE declined to comment on the consultation.
The government is seeking response from groups including the public, consumer organizations and businesses by June 5.
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