- The government is consulting on scrapping the use of 1p and 2p coins.
- This has caused outrage among some of the population, but it makes perfect sense.
- Copper coins are rarely used in transactions, are expensive to manufacture, and have little role in an increasingly cashless society.
LONDON – Philip Hammond’s Spring Statement earlier this week was – as anyone paying attention had expected – an uneventful and quite frankly dull affair.
Hammond, not known for his bombast at the best of times, didn’t announce any new policies, and simply updated the House of Commons on the government’s fiscal progress.
There was however, one talking point – the possible removal of Britain’s one and two pence coins from circulation.
The Treasury published a “call for evidence” on the proposed changes on Tuesday, and began formally consulting the British public about whether to phase out the denominations over the coming years as part of a move towards digital payments.
This wasn’t a formal announcement of the withdrawal of pennies and tuppences, merely the start of a consultation on their future.
The news however, sparked outrage among certain sections of Britain. On Wednesday, the Daily Mail ran a front page story asking “Do you REALLY want to kill off the coppers in our pockets Mr. Hammond?” – while a prominent journalist started a campaign under the hashtag #HandsOffOurCoppers.
One of the most often cited reasons for opposition to removing coppers from circulation is that it would make receiving change in shops difficult, and could lead to price increases. Say for example you buy something for £2.99, paying with a £5 note. Without the penny it would be physically impossible to get the correct change.
However, there is a clear precedent for managing this change. As many as six European countries, including Finland, the Netherlands, and Belgium, have a so-called “rounding” system in place, whereby change is rounded to the nearest five cents when change is given in a cash transaction.
Rather than a simple rounding up or down, the system means prices ending in one, two, six or seven get rounded down, while prices ending three, four, eight or nine are rounded up.
Ireland uses the system, and a survey from the country’s central bank in 2016 when it was introduced showed that 93% of people approved the idea.
Penny acolytes also cite the historical and cultural value of the coins. “Their value is more than just monetary. I still remember the excitement as a child of finding a penny older than I was,” one commentator said in a column earlier in the week.
That sort of thinking is almost sickeningly nostalgic, coming from the same sort of people who want a new royal yacht, and still yearn to buy their groceries in pounds and ounces rather than the far superior grams and kilograms.
In a post-Brexit world, if Britain truly wishes to succeed, such nostalgia needs to be thrown out immediately.
The simple reality of copper coins is that they are, for the vast majority of us, almost entirely pointless.
I cannot honestly remember the last time I actually used a copper coin in a transaction. Instead I endlessly save them up in a jar so that I can eventually take a trip to the bank to get rid of them, and add the princely sum of about £1.12 to my bank account.
“Surveys suggest that six in 10 1p and 2p coins are used in a transaction once before they leave the cash cycle,” the government said, illustrating just how little coppers are actually used. 8% are even thrown away, such is the difficulty in getting rid of them.
Besides the sheer inconvenience and uselessness of them, there are numerous practical reasons for scrapping coppers.
For one thing, they cost almost as much to make as they’re worth, with the Royal Mint having to produce 500 million new 1p and 2p coins each year, despite continually dwindling demand.
“The cost of industry processing and distributing low denomination coins is the same as for high denomination coins, making the cost high relative to face value and utility,” the Treasury said in its consultation announcement.
By contrast, bank notes cost only a fraction of their worth to make, with the newest note, the £10 costing only 1.2 pence per note, according to the Bank of England’s chief cashier Victoria Cleland.
At a time when Britain’s public services are stretched, and debates about extra funding for the NHS and the Armed Forces are at a feverish pitch, why not stop spending money on making new pennies, and push that money into vital services instead.
Society’s dependence on cash is declining
As Britain, and the wider world, becomes ever less reliant on cash, surely it would make sense to experiment with removing the smallest, most pointless coins. Canada, Brazil, Sweden, and Australia – all major economies – have already ditched small denominations and don’t appear to have suffered any harm.
Cashlessness itself is something of a polarising concept. Some believe that within decades cash will cease to be, with MasterCard’s UK and Ireland boss Mark Barnett telling Business Insider in 2016 that in 30 years handling physical money will seem as old fashioned as the horse and cart.
“By the time we get to another generation, 30 years down the track, will there be any cash? I very much doubt it. The idea of carrying coins – 2p, 1p, 50p all cluttering up your pocket – it will be an anachronism. It will seem as antediluvian as carrying a pouch full of gold,” Barnett said.
Others, however, see a continuing role for cash for a long time to come.
Of course, no one is suggesting that taking the one penny coin out of circulation is going to lead to the rapid withdrawal of all physical money in a few years, but it would certainly be a start of a process that takes a very long time.
Recent research from the Guardian newspaper showed that “Britain will move beyond ‘peak cash’ this year,” and that “notes and coins are rapidly being supplanted as the favoured payment method, particularly in cities.”
Removing the penny and the tuppence from circulation would mark a small step in the direction that Britain is clearly already travelling, why stand in the way of progress for the sake of an outmoded and faintly ridiculous idea of tradition.