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Alex Deane and Jason Groves: It's time to eliminate the penny coin

Panel_wide_Penny_coin_webIt’s time to eliminate the one penny piece and two penny piece from circulation. In fact, it’s well past time.

Good old British inertia and vague nostalgia has meant that nothing’s been done about the obvious fact that we have coins of little and diminishing value in circulation which ought logically to be withdrawn. While you may experience understandable irritation from the collections of coppers we all accumulate, think for a moment about the wider costs to the taxpayer from continuing with these little beggars.

There’s the cost to the state of purchasing the materials which go into the coins, which is not insignificant; famously, in the USA the materials used to make a penny cost more than a penny, and the same problem has led to Canada eliminating the penny this month.

There’s not only the cost of purchasing the materials and then preparing and minting the coins; there's also the costs of transporting and introducing them into circulation, and withdrawing them when they’re worn.

Just as they clutter up tills, the coppers also weigh down security vans and the banking system; they add disproportionately to the burden of every stage of the circulation process. Some of this is naturally offset by the decision taken by many machine vendors, such as Transport for London, to disallow the use of coppers in their machines. But then, what does that tell you about their (lack of) usefulness?

Before the typically British kneejerk rejection of a new idea forms in your mind, think for a moment: what do you actually use coppers for? Whilst plenty of creative answers can be suggested, “buying things” is unlikely to be one of them.

Odds are, like most people, your answer is filling receptacles in your house. They accumulate in jars and drawers all over the country. They wear out your pockets, or underpin wonky tables. There is one noted central London church where ancient candlesticks would be teetering precariously were its misshapen legs not propped up by a few coppers from the collection. But they can be used to purchase of fewer and fewer things. You’re irritated when you get anything more than one or two in your change. Many shops price to the nearest 5p anyway. And – put yourself in the position of a cashier for a moment – can you imagine how irritating it is when someone walks into a shop with handfuls of coppers “to get rid of them”? Even if you can’t imagine, or don’t care about, the cashier’s travails, surely you can appreciate the tedium for other shoppers as the person in front loses count at 39p… again.

Inevitably, some retailers will complain that this would mean spending money on new cash register technology. When they realise that the change means dealing with a far smaller of quantity of coins, they will soon came on board. Arguments about the inability of shops to undercut one another by a penny or two are facile – about as convincing as the confusion allegedly caused to cows by moving the clocks. Because eliminating the coin doesn't eliminate the concept of the number 1 or 2.

Shops can still price in denominations of 1 or 2. Petrol can still move by a penny (or by fractions of pennies) a litre. When the government of Australia moved abolish 1 cent and 2 cent coins in 1992, a massive outcry went up that retail discounting would come to a halt, leading to rampant inflation, as stores moved to up prices. To stem this criticism, the government decided that the 99c discount prices would not, after all, be abolished. Instead, the total bill would be rounded to the nearest 5 cents at the till. So, now if you find yourself at Australian checkout and the total comes to $12.67, you pay $12.65. If the total bill came to $12.68, you pay $12.70. Easy.

Indeed, many countries that have eliminated the smaller denominations in their respective currencies still see prices for goods in denominations below the lowest available physical coin. Why? Because a single purchase can be rounded; because most goods purchases are for multiples of said goods, especially when those goods are priced to small denominations; and because cash is playing a diminishing role in transactions. With mobile phone companies implementing technology to allow small value transactions to be completed with a swipe, this proportion is set to dwindle yet further.

It will be a long time before cash disappears as a means of exchange, but in the last 20 years it has certainly diminished in importance. The change contemplated here was successfully accomplished in Australia at a time when a far greater proportion of retail transactions were completed in cash. As most of us now reach for the plastic in supermarkets, even for the most trivial of sums, surely such a change in the UK would be met with an even bigger yawn.

Similarly, the suggestion that charitable donations would go down would seem to be misguided. There’s no reason to suppose that the charitable instincts of people with 5ps and above in their pockets will disappear whilst 1p and 2p carriers are rabid donors. Moreover – and not to upset those doing their good deed by dumping coppers in collection pots – but just how useful is it to receive masses of low-denomination coins? In addition to my membership of the Royal British Legion, like many people I used to accumulate coppers year-round and then shove them in collecting pots for poppies in October and November. But whilst it might make you feel good, the burden on your charity of choice of processing a tenner’s worth of coppers (which have completely filled up a pot or two) is plainly a great deal more significant than if you’d put a tenner in.

Even if these answers don’t convince you, the obvious and compelling precedent for this proposal should. When we went decimal in 1971, a ½p piece was introduced. Inflation over the ensuing 13 years led to the coin being withdrawn from circulation in December 1984. Do you really miss it? Would anyone really claim that its absence means less money for charities or that its absence has had harmful deflationary effects on our shopping or at the petrol pumps? Of course

not. For those who like their big jars of coppers, fear not – keep them! Indeed, the benefit to the state of you not trading in your little coins when shops will no longer accept them will be a nice windfall of you having “bought” the coins but not asked the state to redeem their value.

Reactionaries in this country will wail that we would be somehow diminishing our heritage, yet despite similar noises, when change came to Australia in 1992 scarcely anyone noticed. In the history of this country there has frequently been coins in circulation with diminishing real terms value such as the penny - and we've withdrawn them from circulation. Unlike those coins of old, the penny would live on in electronic pricing.

At a time when the government is looking for quick wins to cut costs, here is one that will not lengthen any waiting lists, enlarge class sizes or squeeze the middle. Individuals, business and government would all save a collective fortune – and hassle – by cutting copper from the currency.


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