Britain ponders dropping its small denominations
- Published: Mar 19, 2018, 4 AM
In the United Kingdom, that old phrase about being “penny wise and pound foolish” might need an edit.
Changes to the payment structure could render 1- and 2-penny coins obsolete, and perhaps even eliminate the £50 note to thwart illegal activity.
The chancellor of the exchequer, the cabinet position over the Treasury, released an annual statement on March 13 about a broad range of financial topics.
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In the report, the chancellor pointed to research that indicates a dwindling need for the two smallest denominations in the United Kingdom.
“Surveys suggest that six in ten 1p and 2p coins are used in a transaction once before they leave the cash cycle,” the report said. “They are either saved, or in 8 percent of cases are thrown away. To meet demand created by such losses from circulation, in previous years the government and the Royal Mint have needed to produce and issue over 500 million 1p and 2p coins each year to replace those falling out of circulation.”
That demand is not expected to last, thanks to increasing use of digital payments, especially for £5 or less, and so the Treasury is spelling out a future that many other countries have adopted.
Australia, Canada, New Zealand and other nations have already eliminated the 1-cent coin, and in some cases the 2-cent and 5-cent coin.
The U.K.’s penny and 2-penny coins are worth roughly 1.4 and 2.8 cents U.S., respectively.
If the move is implemented, withdrawing the two denominations would be the second major decision involving U.K. circulating coinage in the past year. The adoption of a new and reportedly more secure pound coin in 2017 led to old “round pounds” being redeemed to banks, but also swept in with that tide were the other denominations, especially the smallest ones, according to the Treasury.
This surplus of coinage, coupled with growing use of digital payments, means that the Royal Mint won’t need to make as many of those coins.
For now, the U.K.’s Treasury department is merely soliciting “A call for evidence on the role of cash and digital payments in the new economy.”
In real language, that means that residents can submit comments about how they want to maintain or modify the cash system in place now that uses eight denominations of coins and four denominations of paper money.
“Should the UK follow a similar pathway as other countries in modernising the currency?” the Treasury asks.
U.K. residents can respond with comments through June 5, 2018.
Two different reverse designs for both of the penny and 2-penny coins co-circulate currently.
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