The Bank of England has suggested that scrapping 1p and 2p coins would have minimal impact on the UK’s economy.
Fears of getting rid of the coins are, it seems, mainly founded in the difference it would make to prices – meaning items could be rounded up in cost, not only affecting individuals but inflation as a whole.
However, research suggests that, even if retailers rounded up all prices to the nearest 5p, inflation would only be pushed up by 0.07 per cent.
In a recent blog post, two researchers said:
Our analysis, and the overwhelming weight of literature and experience, suggests it would have no significant impact on prices because price rounding would be applied at the total bill level, not on individual items and it would only affect cash transactions, which make up a low proportion of spending by value. Even if individual prices were rounded on all payments, analysis of UK price data suggests no economically significant impact on inflation.
According to the report, production of 1p and 2p coins was roughly halved in 2016-17 compared to the previous year.
They also revealed that six out of every 10 coppers are used just once before dropping out of circulation – dropped into jars, down the back of sofas, lost in general or even thrown in the bin.
The authors of the report, Marilena Angeli and Jack Meaning, also said:
As inflation slowly erodes the purchasing power of the penny, the balance between its usefulness and its cost begins to shift.
The analysis states that, for most economies, payments by card or similar electronic means far outweigh those made with cash. In the UK, for example, just 3 per cent of all payments are now made with cash. Even low value payments are now being overtaken thanks to contactless technologies.
And while we’re all very used to seeing the price of items ending in .99, the number of these items is falling. They now only account for 12 per cent of prices.
The decline in these items adds to the suggestion that there would not be a big impact on prices if 1p and 2p coins were abolished.
In the chancellor’s Spring Statement, it was suggested that 1p and 2p coins could no longer be needed after a Treasury consultation about the mix of coins in circulation, BBC reports.
However, a spokesperson for the Prime Minister said there was no current plan to scrap the coins.
The consultation’s call for evidence was simply intended to help the government better understand the role of cash and digital payments.
One of the elements was whether the denominational mix of coins meets the public need. From the early reaction it looks as if it does.
Many countries, including Australia, Brazil, Canada and Sweden have already got rid of their low denomination coins, with studies showing it had little impact on prices.
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Charlie Cocksedge is a journalist at UNILAD. He graduated from the University of Manchester with an MA in Creative Writing, where he learnt how to write in the third person, before getting his NCTJ. His work has also appeared in such places as The Guardian, PN Review and the bin.