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2p and £2 coin production suspended for ten years

According to the NAO, the rapid decline in cash usage, accelerated by the coronavirus pandemic, has left the Royal Mint sitting on a mass surplus of 2p and £2 coins – enough to last the UK for the next ten years.

23rd Sep 2020
Staff Writer AccountingWEB
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Close up of cope two pence coins
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On Friday (18 September), the National Audit Office (NAO) announced that the Royal Mint’s stocks had exceeded targets in all denominations and has “no plans to produce new 2p or £2 coins for at least ten years”.

Following a decline in cash usage since 2010, the Royal Mint has reported stocks of 26 times more £2 coins, six times more one pence coins and eight times more two pence coins than required. Total excess coins are worth around £89m, and 2p and £2 coin stocks could last for the next ten years.

According to NAO, the Royal Mint’s prediction of coins fell by 65% between 2011 and 2020. However, it has emphasised that cash demand has been improving since the lifting of lockdown restrictions but believes the pandemic could have an indelible impact on access to cash and cash usage.

Cash ceased being the predominant payment method in 2017 for the first time ever, despite more than £100bn in cash and change still being spent in retail every year.

Then in 2017 and 2018, when the Royal Mint introduced the new £1 pieces and withdrew the now out-of-date coins, an unexpected amount of all denominations were instead returned by businesses and households.

“Cash use might be declining overall but it remains a vital part of millions of people's lives – particularly for some of the most vulnerable in society,” commented Public Accounts Committee chair Meg Hiller.

“The government took its eye off the ball and too many people already have to go out of their way to get their hands on cash.”

Cash usage demographic

As of 2010, cash was used six times in every ten transactions, which then fell to three in every ten transactions by 2019. The outbreak of coronavirus leading to a nationwide lockdown then accelerated the decline in cash usage, causing a decline in market demand for physical money by 71% during lockdown. 

“The decline in the use of cash in transactions is putting pressure on the cash system,” said the NAO, which lead to an announcement in March that the government “would be bringing forward legislation to protect access to cash and address the sustainability of the cash infrastructure”.

In 2018, LINK commissioned and funded an independent Access to Cash Review which found that older age and lower income were two key factors in determining cash use.

“As society progresses towards the wide use of digital payments, the use of cash in transactions is dwindling,” said head of NAO Gareth Davies. “It may become harder for people to access cash when they need it and those without the means to pay digitally will struggle if cash is not accepted.”

“HM Treasury now works more closely with the public bodies in the cash system to achieve the government's goal of safeguarding access to cash. However, the approach is fragmented, and it is not clear that the action being taken will keep up with the pace of change,” he added.

Starling Bank shows digital customers influenced further by Covid

Digital bank Starling’s ATM figures show that the percentage of Starling customers using ATMs fell by half between April 2019 (43%) and August 2020 (22%). 

“The impact of the coronavirus pandemic has accelerated the move to digital payments and a decline in cash,” commented Starling CEO and founder Anne Boden. “There are huge benefits to digital technology, but we need to make sure that these are felt more widely across society to create a fairer and better banking system for everyone. Education on digital banking is essential to ensure no one gets left behind.”

“As the crisis has sped up the shift to digital and the decline in cash, there’s huge scope to do more to share the benefits of digital technology more widely across society,” said Boden.

The government “and the regulators will have to hurry to catch up with fast-moving technology, or even more people could be left behind,” added Meg Hiller.

Where are all the notes?

According to the NAO report, The Bank of England has estimated that 20-24% of UK notes in circulation are in use or being held for cash transactions, with a further 5% (£1-3.5bn) held by households in savings.

“Little is known about the remainder (approximately £50 billion worth of notes)” said the report. Potential explanations include overseas holdings for transactions or savings and UK holdings of unreported domestic savings or for use in the shadow economy. 

“The Bank and other government bodies hold too little reliable data between them, however, to be able to make even a broad estimate of how much should be apportioned to each category,” added the report.

The Royal Mint

The Royal Mint, which has been producing coins since 886 AD, is owned by HMR Treasury which sets out the parameters of the Mint’s operations and manages the rolling UK coin contract. 

The production of coins and notes by the Royal Mint and the Bank of England cost the public sector £143m in producing and issuing notes and coins in 2019-20.

Replies (10)

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By Justin Bryant
23rd Sep 2020 11:54

I guess I should not add my usual tuppence worth.

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Replying to Justin Bryant:
Image PN
By Mr Hankey
23rd Sep 2020 16:36

Oh go on, penny for your thoughts.

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Replying to Mr Hankey:
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By Justin Bryant
24th Sep 2020 09:00

No, as you'll just be wanting your one or two pounds of flesh next, to coin a phrase.

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Ivor Windybottom
By Ivor Windybottom
24th Sep 2020 09:28

On a more serious note... removing cash from the economy would do a lot to help prevent fraud and tax evasion. It is only a matter of "when" not "if" cash disappears.

Mobile phone payments need to be improve if this is to become a reality, as that would allow the smaller traders (e.g. window cleaner, charity beggars, market traders, etc.) to collect payment.

The health risks in handling cash have been long known and so it should be removed from society on these grounds alone.

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Replying to Ivor Windybottom:
Nefertiti
By Nefertiti
24th Sep 2020 11:20

Never ceases to amaze me how many ordinary citizens are "do gooders" trying to help the government or feel they need to police our tax systems when we have paid tax inspectors to do that. Instead of worrying about tax evasion from people paying in cash, maybe you should focus on how many millions have been "lost" in ordering PPE through dodgy companies that are linked to the conservatives. In the end they had to send an RAF fighter jet to pick up supplies from Turkey and they all turned out to be useless and were binned.

https://news.sky.com/story/coronavirus-ppe-shipment-flown-in-from-turkey...

Maybe you want to focus on the £100 billion that is going to be wasted on Operation Moonshot?

https://www.bmj.com/content/370/bmj.m3558

How about the billions spent on the Track and Trace system and housing illegal immigrants in 4 and 5 star hotels thanks to Serco who keep on getting lucrative government contracts because of their connections?

https://www.theguardian.com/business/2020/aug/11/uk-government-serco-con...

Forget about that old saying: "If you focus on the pennies, the pounds will look after themselves". Focus on the pounds instead and you can save the taxpayers billions in a couple of hits. Let the tax inspectors worry about cash transactions. I have absolutely no problems with anyone getting away with tax evasion bearing in mind how much our government pillages our tax coffers daily on useless ventures.

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Replying to Nefertiti:
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By North East Accountant
24th Sep 2020 12:27

You are quite right that government waste should be keep to a minimum and you highlight some shocking examples.

But condoning tax fraud.

2 wrongs do not make a right.

And every person committing a criminal offence by fiddling is taking money out of the pocket of honest citizens who have to pay more in to make up for it.

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By meadowsaw227
24th Sep 2020 10:36

I try and pay cash for most of the things I need/buy, I`ve never wanted the government or any other official body to know what I eat, drink, give away, have done at home etc .
Looks like the barter system may have to be re instated .

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Replying to meadowsaw227:
By Charlie Carne
24th Sep 2020 11:10

Why do people care about this? Do they really think that the government have teams of people spending all day looking at what we buy? They only do that if they think us guilty of a crime and, in that case, they have so many more tools to track us, such as ubiquitous CCTV and ANPR (Automatic Number Plate Recognition) cameras, amongst others. I haven't spent any cash whatsoever since March and would happily never use cash again. I pay for all retail items from my watch. It's so much simpler and it enables me to track my own spending automatically.

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Replying to meadowsaw227:
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By AWeb72
26th Sep 2020 00:22

I would buy a tin foil hat too if I was you.....

Haven't used cash for over a year now.

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Hallerud at Easter
By DJKL
29th Sep 2020 12:18

Well, I came away from the office in March with £20 in my wallet, I got posted to me over the last six months 3 £20 notes as my boss and I do the Euromillions (I do online he sends me his £20 share every couple of months or so). The window cleaner gets £10 a month, I paid a couple of carpet fitters £60 plus a £10 tip and right now there is £130 in my wallet- looks like I am £20 down somehow, I likely need a kilt.

"Every nicht I used to hang ma troosers up at the back of the bedroom door.
I rue the day; Ah must ha been a jay.
I'll never hang them up any more,
Because ma wife she used to ramble through ma butchers
When I was fast asleep beneath the clothes,
And in the mornin' when I woke, I was always stony broke,
And that's the reason noo I wear the kilt."

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