With Covid-19 driving a switch to cashless payments, MPs are calling on the Treasury and Bank of England to ensure access to cash continues, and to investigate £50bn in sterling notes which is ‘missing’
A report by the public accounts committee (PAC) found oversight of the production and distribution of notes and coins is ‘unclear’ and ‘fragmented’ across responsible authorities, who have been ‘behind the curve’.
Responsibilities are spread across the Treasury, the Financial Conduct Authority, the Payment Systems Regulator and the Bank of England but no one body is in overall charge of making sure that people and businesses have access to cash.
As a result, these bodies are failing to understand or act on the clear dangers of hardship if the UK continues what PAC calls its ‘precipitous’ move towards a cashless society.
The committee said the reduction in the number of facilities from which to obtain cash, and in the number of businesses that will accept cash, can have a negative impact on the lives of many people, including those in some rural areas, vulnerable and digitally excluded people.
PAC also points out that the continued reduction in coin use, possibly accelerated by the Covid-19 pandemic, is likely to put further pressure on the Royal Mint’s ability to deliver a profit on their operations.
In sharp contrast, demand for sterling notes has steadily increased, but according to PAC the Bank of England does not ‘appear to have a convincing reason for why the demand for notes keeps increasing’ or any real understanding of where approximately £50bn of issued sterling notes are, or being used for.
The Bank estimates that 20%-24% of issued notes are used or held for cash transactions. This leaves about £50bn worth of issued bank notes that may be being used overseas for transactions or savings, or held in the UK as unreported household savings or for use in the shadow economy.
Meg Hillier, PAC chair, said: ‘Our run up to Christmas and Christmas shopping is obviously very different this year, but it highlights how increasingly difficult it has become to, for example, choose to support a small local business by paying it in cash – generally the cheapest form of payment to accept.
‘In many areas where you can use cash you’d be hard pressed to find it, at least without paying an ATM fee that may be a substantial percentage of a small withdrawal – yet making frequent, small withdrawals can be a key budgeting tool for those on low incomes, and least able to afford those fees.
‘Conversely, £50bn of sterling notes – or about three quarters of this precious and dwindling supply – is stashed somewhere but the Bank of England doesn’t know where, who by or what for – and doesn’t seem very curious.
‘Depending where it is and what it’s being used for, that amount of money could have material implications for public policy and the public purse. The Bank needs to get a better handle on the national currency it controls.’
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