United Kingdom government considers phasing out 1p and 2p coins and £50 notes


In documents released alongside Philip Hammond's update on the United Kingdom economy, it was revealed the Government wants to know whether the "current denominational mix meets the needs of cash users".

There has been a sharp decline in the use of 1p and 2p coins, a change noted in a government's consultation paper released as part of the Chancellor's spring statement.

"One thing the Treasury were seeking views on is whether the current denominational mix of coins meets the public's needs".

Having excess numbers of both types of cash "does not contribute to an efficient or cost effective cash cycle", the paper adds, also pointing to the need to keep "confidence in the currency".

The document also revealed six out of ten 1p and 2p coins were used in only one transaction before leaving the cash cycle. Apparently people really do throw them away, with the the document claiming a twelfth of all copper coins.

"This has been a significant period of change for cash-handling industries and the public", according to the document, issued Tuesday.

As such, the government said it needs to balance the ability to pay by cash while cracking down on the minority who use cash to evade tax and launder money.

But the cost of processing and distributing these low denomination coins is the same as higher denomination coins.

The £50 is under scrutiny due to how small it is in comparison to other countries' largest bills, nd the fact they're most held oversees "as a store of value".

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Officials also suggest there is a "perception among some that £50 notes are used for money laundering, hidden economy activity, and tax evasion".

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: "The writing looks to be on the wall for 1ps and 2ps".

A year ago a bill was introduced in the US Congress which would have abolished the one cent coin.

But No.10 indicated that 1p and 2p pieces were here to stay.

"Technology has revolutionized the way people shop, sell, and save, and people are increasingly moving away from using cash".

But a Treasury spokeswoman said it was a "commercially sensitive" subject and she could not give details on how much it cost to manufacture the 1p or 2p coin.

The Royal Mint has to produce millions each year to replace them - at huge cost.

It is the second time that an attempt to kill off 1p and 2p coins has been abandoned, after David Cameron blocked an earlier suggestion by George Osborne - fearing public opposition.