This morning Mark Carney, Governor of the Bank of England, faced questions from BBC News School Reporters from across the UK at Whitley Academy in Coventry. In the same week that a new plastic £5 note was launched they asked: “Why do we still have pennies when we can’t buy anything with them?” What a fantastic question.
Here’s Mr Carney’s reply.
“That’s a very good question, but that’s a question for the Royal Mint because we produce the bank notes. I will say that in a number of other countries, because the penny isn’t used very frequently - and to be honest I rarely see them myself – they have done away with the penny, so in Canada, New Zealand and Australia, they’ve done away with the penny, or the equivalent. What they did in each of those cases is they gave people the opportunity to donate the existing pennies to charity as a transition, and it was very successful. But it’s a decision for other people and they’re still very much legal tender and can be used to buy things.”
The school reporters went on to ask Mr Carney “Is getting rid of the penny a good idea?”
He answered: “At some point. I made the point that we keep inflation low, stable, predictable. But actually what that means, what parliament tells us to do, is to make sure it averages 2% a year. The cost of a chocolate bar should go up 2% a year and ideally wages should go up more than that so people are getting ahead. But the point was that over time that means the real value of the penny, and what the penny can buy, goes down, and so at some point it does make sense to get rid of it.”
The questions are yet more evidence that for younger consumers the appeal of cash is losing its shine. Data from Payments UK showed earlier this year that more people rarely use cash (2.7 million than predominantly use it (2.2 million).