Spring Statement 2018: Is the writing on the wall for 1ps, 2ps and £50 notes?

13 March 2018

“The writing looks to be on the wall for 1ps and 2ps”, writes one personal finance analyst, while £50 notes may also be at risk after the government published a call for evidence on the future of cash and digital payments as part of today’s Spring Statement.

Entitled ‘Cash and digital payments in the new economy’, the consultation asks for views on how the transition from cash to digital payments impacts on different sectors, regions and demographics.

It also seeks to explore how the government can “support digital payments”, as well as ensuring that the ability to pay by cash is “available for those who need it” while at the same time cracking down on the “minority” who use cash to evade tax and launder money.

However, the consultation goes on to question whether the current denominational mix of eight coins and four banknotes meets consumers’ and businesses’ current and future needs.

When it comes to 1ps and 2ps, the government points out that surveys suggest that six in 10 1p and 2p coins are used in a transaction once before they leave the cash cycle. They are either saved, or in 8% of cases are thrown away.

But it says the cost of industry processing and distributing low denomination coins to make up for those taken out of circulation is the same as for high denomination coins, making the cost high, relative to face value and utility.

At the other end of the denominational scale, the government says the £50 note is believed to be rarely used for routine purchases and is instead held as a store of value. The report continues that there is also a “perception among some that £50 notes are used for money laundering, hidden economy activity and tax evasion”.

It adds that 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”.

Sarah Coles, personal finance analyst at financial provider Hargreaves Lansdown, comments: “The writing looks to be on the wall for 1ps and 2ps. When it costs more to produce and distribute a coin than the coin itself is worth, governments tend to decide it’s a spent force - and we’re rapidly heading in that direction for coppers.

“The root of the issue is that demand for these coins has dramatically declined. People are increasingly using debit cards and contactless payments for low-value spending. Cash was used for 7.2 billion transactions of under £1 in 2006. By 2016, it had fallen to 4 billion and, by 2026, it is expected to fall to 1.3 billion. Meanwhile, shops are using rounded pricing to save the bother of handling low-value coins, so even those who stick with cash have less use for coppers.

“Many of the costs of manufacturing and distributing them are fixed – and some are actually rising at the moment - so falling volumes means it costs more to handle each coin. When you add in the impact of inflation eroding their real value, it’s clear that the days are numbered for copper coins.”

The consultation is open until 5 June 2018.


In reply to by anonymous_stub (not verified)

This is really all about moving to a cashless society in the longer term.The more you use a credit or debit cards the more information "big brother" collects data wise regarding our spending habits!!In any event until we can get balances on our accounts shown on our receipts after every transaction the use of plastic is a poor substitute for cash. I like to see my wallet emptying!!

In reply to by anonymous_stub (not verified)

The affect of withdrawing the copper coinage will directly drive inflation UP. all the small coins add up to a large amount in the hands of less well off, children and Charity boxes How will fruit & veg which is weighed and fuel ( already very costly) and charged to the millilitre, not increase inflation when the smallest denomination is 5 pence. PS how will children learn that x5 is the lowest the coins the UK has, That is not Decimal !!. We have lost (for the youngers the old coins) farthings, Half pennies, old penny's, three pence pieces and sixpence pieces.If you get rid of 1p & 2ps You raise inflation and those in power Deflate themselves and the country.

In reply to by anonymous_stub (not verified)

The demise of 1ps and 2ps couldn't possibly be related to the fact that there are still a lot of pre-1992 coins (ie before they changed over to making them from coated steel rather than actual copper) that are actually worth more as scrap metal than they are as coinage?I wonder - I understand that it's illegal to melt them down while they are still legal tender, but if these coins cease to be legal tender then does it become legal to melt them down for scrap? I'm genuinely curious.

In reply to by anonymous_stub (not verified)

I'm sure there are many like me who save all the low value coins in a jar and give it away to charity at Christmas.

In reply to by anonymous_stub (not verified)

Although I tend to save copper & 5p coins these days from loose change, I still have an aversion to using Debit cards for ridiculously small amounts (eg. £3.50 or thereabouts). Though, I can see the day when copper coins are removed due to the devaluation of money in real terms.As for the £50 note... hardly any traders or retailers will accept them for fraud security risk, so why can't we have a polymer £50 one / or a new lower denomination £40 version?

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