UK markets closed
  • NIKKEI 225

    23,639.46
    +72.42 (+0.31%)
     
  • HANG SENG

    24,754.42
    +184.88 (+0.75%)
     
  • CRUDE OIL

    40.02
    -1.68 (-4.03%)
     
  • GOLD FUTURES

    1,926.80
    +11.40 (+0.60%)
     
  • DOW

    28,263.97
    -44.82 (-0.16%)
     
  • BTC-GBP

    9,652.87
    +1,118.53 (+13.11%)
     
  • CMC Crypto 200

    254.47
    +9.58 (+3.91%)
     
  • ^IXIC

    11,508.37
    -8.12 (-0.07%)
     
  • ^FTAS

    3,261.01
    -54.72 (-1.65%)
     

Mystery over whereabouts of £50 billion of banknotes in circulation in UK

Imogen Braddick
·4-min read
PA
PA

Mystery surrounds the exact whereabouts of £50 billion-worth of banknotes in circulation, according to a public spending watchdog.

The National Audit Office (NAO) said little is known about around £50-billion worth of notes which are not being used for transactions or identified as savings held by UK households.

Possible explanations include holdings overseas, unreported domestic savings, or cash held for use in the "shadow economy".

There is little reliable information to quantify how much is likely to be held where, the NAO said.

The NAO warned that a “fragmented” approach is being taken by the bodies involved in the UK’s cash system.

Five public bodies – the Treasury, the Bank of England, the Royal Mint, the Financial Conduct Authority and the Payments Systems Regulator – play a role in administering or overseeing it.

The Treasury is reportedly considering tax hikes to deal with the mounting cost of the Covid-19 crisis (REUTERS)
The Treasury is reportedly considering tax hikes to deal with the mounting cost of the Covid-19 crisis (REUTERS)

But these bodies lack a shared view of what a good outcome for the consumer looks like and how the costs of achieving this are to be taken into account, the NAO’s report said.

There is no single body with responsibility for overseeing how well the cash system is performing.

The NAO, which said cash production capacity should be aligned closely to future needs, also said it could take at least a decade for current stocks of 2p and £2 coins to run out.

When fieldwork was carried out, the Mint had no plans to produce new 2p or £2 coins for at least 10 years.

The Mint’s "buffer" stocks in March 2020 exceeded targets in all denominations, the NAO said, with holdings of 1ps and 2ps six and eight times above target respectively, and £2 coins 26 times over target.

While the storage cost of the excess stocks is relatively small, the Mint’s production of UK coins will be reduced over the next decade, as it balances maintaining production capability with steady stock reduction, the NAO said.

Coin production shrank by 65 per cent in the last decade to 383 million UK coins a year in 2019-20, from around 1.1 billion in 2010-11.

Covid-19 has potentially accelerated the decline in the use of cash (PA)
Covid-19 has potentially accelerated the decline in the use of cash (PA)

To drive efficiency, the Mint and the Bank should maximise opportunities to learn from each other’s experiences of cash production and align production capacity closely to future needs, the NAO added.

Last year, the Bank incurred note production and distribution expenses of £119 million and the Treasury, which pays the Mint to produce coins, incurred expenses of £23.6 million.

Gareth Davies, the head of the NAO, said: "As society progresses towards the wide use of digital payments, the use of cash in transactions is dwindling. It may become harder for people to access cash when they need it and those without the means to pay digitally will struggle if cash is not accepted.

"HM Treasury now works more closely with the public bodies in the cash system to achieve the Government’s goal of safeguarding access to cash. However, the approach is fragmented, and it is not clear that the action being taken will keep up with the pace of change."

Ten years ago, cash was used in six in 10 transactions, but by 2019 it was used in fewer than three in 10. Forecasts suggest it might be one in 10 by 2028.

Covid-19 has potentially accelerated the decline. Industry data suggests market demand for notes and coins from cash centres plunged by 71 per cent between early March and mid-April.

The NAO said older people and low incomes are particularly likely to rely on cash.

In March 2020, the Government unveiled legislation to protect access to cash and address the sustainability of the cash infrastructure.

The Treasury should set out more clearly the specific outcomes it wants the cash system to deliver for consumers and small businesses, and how these should be balanced against costs, the NAO said.

Meg Hillier, chair of the Committee of Public Accounts said: "Cash use might be declining overall but it remains a vital part of millions of people’s lives – particularly for some of the most vulnerable in society.

"The Government took its eye off the ball and too many people already have to go out of their way to get their hands on cash.

"It and the regulators will have to hurry to catch up with fast-moving technology, or even more people could be left behind."

Read more

Cash payments may be scrapped across entire Tube network

CEOs make Brexit deal plea after Covid cash squeeze curbs stockpiling

'Splash cash and get back to work', minister urges Londoners

Dominic Raab slashes foreign aid to China after £71m in one year

Top 10 commuter towns for Londoners cashing in on stamp duty holiday

Rishi Sunak ‘will have to drop Santa act to get back cash’