The future of the UK penny was thrown into a sea of doubt after the latest Spring Statement, and the £50 notes are perhaps in danger too.
The Treasury questioned the reasons behind producing the penny, the two pence coin and £50 notes – claiming it doesn’t make economic sense to produce coins and notes that are used infrequently.
The UK isn’t alone in their tense relationship with the penny, America has had a similar problem for years.
You might be surprised to hear that in America the penny actually costs more to make than what it’s worth. That’s right, for every penny they make, the country loses money.
In order to abolish the penny though, a law would need to be passed in Congress – something that many aren’t interested in doing.
Why Keep The Penny?
One of the main arguments behind keeping the penny in circulation is the familiarity surrounding it.
People have grown up with the penny, and just a few years ago when George Osborne had it on his radar to remove the penny, the Prime Minister at the time (David Cameron) suggested against the idea – citing the general public’s interest in the coin.
He perhaps had a point. Part of this reasoning comes from this statistic – that an estimated 2.7 million brits rely entirely on cash alone, and more than half of these people live on less than £15,000 per year.
The big argument is this – cash is not obsolete.
Why Get Rid Of The Penny?
Although the data above suggests that cash is not obsolete, other data suggests it’s heading that way – perhaps sooner than we think.
Cash was used for £7.2 billion worth of transactions under £1 in 2006, but 10 years later in 2016 that figure had fallen by nearly half – cash was used in only £4 billion worth of these types of transactions.
Predictions have been made that in 2026, this figure is expected to fall further to £1.3 billion, as contactless payments and mobile phone payments become part and parcel of our lives.
If inflation continues to rise, and drive down the value of the penny, it could spell the end for the coin. It’s value currently sits at less than the halfpenny, which was abolished in 1984.
The Treasury make the point that having large amounts of currency that are not in demand or are being saved by the public, does not contribute to an efficient or cost-effective cash cycle because they are not in circulation.
What Does The Future Hold?
Every Brit knows that the UK have been upgrading their notes and pound coins over the past few years and according to the Bank of England the paper £20 notes will also be phased out by 2020 and replaced by a plastic upgrade.
This would leave the £50 note as the only paper note left – perhaps presenting the opportunity to do away with it entirely, rather than upgrade it along with the rest.
But what do you think about the fate of the penny? Comment below and let us know.