When was the last time you spent a penny? That’s not as impertinent a question as it sounds. I meant it literally and I suspect I know the answer: you can’t remember. If so, you’re in good company. For the vast majority of us the idea of counting out a few pennies when we’re paying for whatever it is we have just bought is simply more trouble than it’s worth. That’s why the humble penny seems doomed to go the same way as the halfpenny forty years ago.
Will you mourn the death of our last copper currency or welcome it? And would you go further? Are you one of the many who no longer routinely pay for anything with hard cash? Would you welcome a cashless society?
It was the late former chancellor Lord Lawson who wielded the axe on the halfpenny back in the days when Margaret Thatcher was in Number Ten. Most people, he announced, would be glad to be rid of what he called the “tiddler”. Now, it seems, the penny is facing the same fate. The Isle of Man, which mints its own currency, has already pronounced the death penalty. It has announced it will not be making any more 1p or 2p coins.
Alex Allinson, the island’s treasury minister, said part of the calculation was that the economics just don’t add up. To make a 1p coin now costs more than a 1p coin is worth. The same is true, he said of even the 5p pieces: ‘We calculate now that each one costs about 20p. It is getting more and more expensive to produce currency. We’ve also got significant quantities in storage in various banks, which has an extra cost.”
The august Economist magazine has pronounced that we, too, should kill off the copper. Its purchasing power, it points out, is ‘so negligible that we cannot even be bothered to pick pennies up off the pavement.’ It is now worth less than a tenth of its original value when it was introduced at decimalisation in 1971.
The Times concedes that the arguments in favour of dumping it are superficially convincing. What use, it wonders, is a coin whose value has dwindled since decimalisation to roughly that of the old farthing? In Britain, fewer are minted than ever: only 30 million in 2022. But it’s not entirely persuaded that we should dump it.
‘For more than a million Britons,’ it argues, ‘those with no bank accounts who really do count the pennies, these humble vehicles of exchange remain useful. They also provide a modicum of protection against rising prices: those £1.99s would be rounded up, not down, if the copper was done away with. Inflation rose by 0.5 per cent after the tiddler’s abolition. And they flow easily into charity boxes at checkouts, painless donations that add up, allowing the pounds to look after themselves.’
But this debate is about much more than the future of the humble penny. It is about the future of a cashless society, which takes me back to my rather silly opening question. What if I had asked when was the last time you used cash for anything? As someone who buys most of his fruit and vegetables from a market stall I still dig out notes and coins regularly but the statistics show I am in a shrinking minority. Real cash was used for only about one in every five transactions last year. The Economist argues (with its tongue not quite firmly in its cheek) that ‘whatever their remaining uses - such as coin machines in seaside amusement arcades, hem weights for curtains, cures for wobbly tables and teaching aides for children - actual spending is not one.’
Numismatists who subscribe to the Change Checker website take a less light-hearted view. One posted: ‘If they are phasing out the little coins, how long before the 5p disappears too?” Another was worried about the potential psychological impact. He wrote: ‘The penny and the pound are the definitive units of currency in the UK and it is important that we retain even a token issue of 1p coins or the concept of a baseline unit of currency becomes abstract.’
But Kate Morgan, who runs the community blog at Change Checker, conceded: “You can’t deny that cash usage has significantly decreased in the last 10 years, with some establishments even refusing cash payments, so there is generally less need for cash and small change.’
And that is undeniably true. At the start of the 1990s cash was used in more than 80 per cent of all transactions. By 2019 that figure had crashed to 15 per cent. Even the Covid epidemic played its part. The World Health Organisation warned us off handling money because of the risk of infection. More than 7,000 cashpoints (ATMs) were shut down across the country in the first two years of Covid. But the principle culprits are obvious. I doubt there is a single reader of this column who does not use some form of debit or credit card rather than cash - or even the ubiquitous mobile phone.
The banks themselves have played probably the biggest part in the transformation to a cashless society for the very simple reason that there is far more profit to be made from cards than cash. Not to mention online transactions which are, of course, handled by computers. And remember, we are only at the start of the AI age. Human beings being employed to stand behind counters in banks and High Street buildings come at a high price. Since the start of 2020 2,411 bank branches have closed their doors.
And yet, despite all this, at the end of last year there were still more than £81 billion worth of banknotes in circulation, according to the Bank of England. That’s up from £70 billion at the end of 2019. As the Sunday Times points out this isn’t digital money stored in savers’ or companies’ bank accounts. This is actual cash: fivers, tenners, twenties and fifties — the equivalent of £2,882 for every household in the UK. And it poses an intriguing question. Where is it all? In our wallets? Under the mattresses? Where is it all? If cash is meant to be dying out what’s going on?’
Just before Christmas the British Retail Consortium (BRC) released figures provided part of the answer. They showed the proportion of transactions using cash had jumped from 15 per cent in 2020 to 18.8 per cent in 2022 — the first increase in at least a decade. This might not be surprising if we were using cash just to pay for little things but we’re not. According to data from UK Finance, the trade body for banks, the vast majority of household bills are covered by direct debit, but in 2022 there was still £3.6 billion of rent paid in cash, £694 million of council tax and £35 billion for gas and electricity bills. The Bank of England estimates that at least £10 billion is squirrelled away in homes for a rainy day. It says it remains ‘committed’ to cash.
And here’s something else the Sunday Time has uncovered that might surprise those of us who assume that young people lead their entire lives on their phones. Those aged 18-24 visit ATMs more often than the 35-54 age group. One of the main reasons, it seems, is budgeting. It reported: ‘The old-fashioned idea of putting aside some notes in an envelope to pay for specific bills has been reinvented and rebranded for Gen Z thanks to TikTok, where #CashStuffing videos have racked up 1.7 billion views.’
There’s something else too. We don’t trust the banks as much as we once did. The financial crash of 2007-08 seems partly to blame for that. And then there are conspiracy theories about banks and the government colluding in secret to secretly kill off cash in order to maintain their control over us citizens.
The Facebook group, ‘Take Action Against Cashless Society’, is urging its followers to boycott companies that will accept only cards. One post says: ‘Retailers need to know we will not be complicit in a totalitarian cashless society.’ The right-wing television channel GB News is running a campaign called Don’t Kill Cash, which says there are ‘strong vested interests’ pushing for its demise.
Hannah Regan, head of payments at the British Retail Consortium, says the conspiracy theories are baseless but agrees that cash has the advantage of being untraceable. “All digital payments are tracked — it does mean that everyone has your data.” The renewed interest in the Post Office Horizon scandal has also been a reminder for many that digital systems can be very fallible. Nearly one in five people believe it’s important to have cash in case IT systems go down.
So what about you? Do you instinctively reach for your phone or card to pay even the smallest bills or do you carry a few quid with you just in case you might need it? Are you, like the Bank of England, still ‘committed’ to cash?’
Do let us know.