Britain Drops Plan to Scrap the Penny, for Now
Posted March 15, 2018 3:32 p.m. EDT
LONDON — There’s a saying in Britain: “Look after the pennies and the pounds will look after themselves.”
But the penny appeared to be in danger this week when the government’s senior financial minister, Philip Hammond, announced Tuesday that the smallest denomination of the country’s currency might be facing the furnace.
One day later, after an outcry from charities that feared losing a source of revenue and from the news media — one tabloid ran the headline “Save Our Coppers” — a spokesman for Prime Minister Theresa May backtracked.
Britain wouldn’t scrap the penny, after all. At least, not yet.
It was during his spring financial statement that Hammond, the Chancellor of the Exchequer, floated the idea of taking two copper-plated coins — the penny and the 2 pence — out of circulation, along with the red-tinted 50 pound note. The Treasury argued that production of the low-denomination coins no longer made financial sense.
Sixty percent of penny and 2 pence coins are used only once, and in 8 percent of cases, pennies are simply thrown away. In addition, more than 500 million penny and 2 pence coins have been produced every year to make up for the shortfall of pennies taken out of circulation when they are, for example, lost to piggy banks or down the backs of couches.
At the other end of the scale, the 50 pound note is rarely used for routine purchases. While there is significant overseas demand for the notes, the perception in Britain is that the 50 pound is used mostly for money laundering, tax evasion and in illicit transactions. Some shops, fearing a costly mistake with a counterfeit, refuse to accept them.
The contretemps occurred as Britain is increasingly moving away from cash and becoming reliant on credit and debit cards and digital payments. Card transactions accounted for more than half of retail purchases for the first time in 2016, according to the British Retail Consortium, and the Treasury predicted cash would be used for only 21 percent of payments by 2026.
Advocates for keeping the 50 pound were few and far between, but champions of the copper-colored coins were fiercely vocal as soon as the idea of abandoning them was announced. Charities raised concerns about losing pennies, which are almost exactly the size of the American cent, because they rely on them for donations, often collected at shops or on the street.
“Certainly cash is still a very significant form of fundraising for charities. It is still where we receive the majority of our donations,” said Andrew O’Brien, director of policy and engagement at the Charity Finance Group.
The British news media discussed whether the idea was a “PR disaster in the making.” Some responses on social media were even more outspoken, with one user claiming that to abolish the 1 pence coin would be “to give into inflation and to trash 1,000 years of history.”
In fact, the current penny was introduced in 1971, when Britain began using the decimal system. But the blowback was such that the prime minister’s spokesman hastily responded in a statement, saying there were no firm plans to scrap the penny or 2 pence coins. He added that the idea was to enable the government to better understand the role of cash and digital payments in the new economy, and how the mix of coins met the public’s needs.
But while the idea of removing the penny has proved controversial in the United Kingdom and in the United States, it’s a risk that other nations have been willing to take. New Zealand scrapped its 1 cent and 2 cent coins in 1990, Australia followed suit in 1992, and Canada lost its penny in 2012.
The last time Britain got rid of a coin without replacing it was in 1984, when the halfpenny was removed from circulation; inflation had devalued it to the point that it cost more to produce than it was worth.
As for the fate of the 1 and 2 pence coins, the government’s call for public input on the future of cash will close on June 5, when it will finally decide whether to call heads or tails on the penny.