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Government decides to keep 1p and 2p after one-day consultation

Government decides to keep 1p and 2p after one-day consultation

As part of his spring statement on Tuesday, the Chancellor announced a call for evidence on encouraging cashless and digital payments.

Speaking yesterday, the PM's spokesman said: "The call for evidence is simply meant to enable the Government to better understand the role of cash and digital payments in the new economy".

The Treasury's Cash and Digital Payments in the New Economy consultation questioned whether the current mix of eight coins and four banknotes meets modern needs, and if not "how should it change?"

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".

'Surveys suggest that six in ten 1p and 2p coins are used in a transaction once before they leave the cash cycle.

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.

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. Apparently people really do throw them away, with the the document claiming a twelfth of all copper coins.

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However, the cost of producing low denomination coins is the same as higher denomination coins, the same paper says.

The Treasury document states the UK's highest-value note is "believed to be rarely used for routine purchases".

The document also appeared to pave the way for scrapping £50 notes, noting the "significant" overseas demand the perception that they are used for money laundering, tax evasion and other criminal activities.

The Royal Mint needed to produce more than 500m 1p and 2p coins each year to replace those that fall out of circulation, it said - clearly raising the prospect that they would be phased out. By 2016, it had fallen to 4 billion and, by 2026, it is expected to fall to 1.3 billion.

An increasing number of countries have scrapped their smallest denominations as inflation renders them less useful. Meanwhile, shops are using rounded pricing to save the bother of handling low-value coins, so even those who stick with cash have less use for coppers.

"The Government welcome all contributions to the debate and will respond fully after the call for evidence closes on the 6 June".


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