It doesn’t buy anything anymore. It is not enough to put into a charity box, and it just takes up space in your pocket or a purse. On one level, it will save us all a lot of trouble when one penny and two penny coins finally become extinct. The Treasury has told the Royal Mint not to make any new ones this year; and although there are plenty behind a sofa somewhere, this means they could eventually vanish completely. We will miss them when they are gone.
Rachel Reeves, the new chancellor, is keener on increasing government budgets than reducing them. One cut that may well be made, however, is scrapping the smaller coins. Indeed, over the next few years, we may stop minting new coins completely. There are an estimated 27 billion of them in circulation, so they will still be around for a while. But like clamshell phones or typewriters they will gradually fade away. True, it is always good for the government to save some money. Plus, with inflation, and the rise of contactless payments, we use cash far less than we used to – and we use the virtually worthless penny and two penny coins least of all.
However, there are big problems with getting rid of them completely. First, the poor rely on cash far more than the affluent. Of the three million households that still rely on cash for day-to-day transactions, the vast majority are from lower income-households, according to the Financial Conduct Authority. The less cash there is available, the harder poor families will find it to get by.
Second, dropping cash makes us far too vulnerable to a collapse of computer systems, such as the Microsoft outage last week. If the contactless systems go down, then we may all have to rely on cash again.
Finally, getting rid of small coins will inevitably fuel inflation. For many retailers, 99p, £1.99 and so on were a barrier they were reluctant to cross. If those pennies don’t exist anymore then you might as well round up the price to something far larger. The one penny coin may not seem very useful right now, but we will miss it more than we realise when it is gone.