Recommendations & Conclusions
25 items
2
Recommendation
Thirtieth Report - The production and d…
Deferred
We are not convinced that the public bodies understand how declining access and acceptance of cash can adversely affect many people’s lives. Some consumers prefer to use or rely on cash—particularly the elderly and lower income groups; those in rural areas, where poor broadband and mobile coverage limits the viability …
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We are not convinced that the public bodies understand how declining access and acceptance of cash can adversely affect many people’s lives. Some consumers prefer to use or rely on cash—particularly the elderly and lower income groups; those in rural areas, where poor broadband and mobile coverage limits the viability of digital payments; and some community organisations, for example charities and churches. The public authorities do not seem to have a clear understanding of how difficulties in accessing cash or being able to use cash to pay for items affect people. For example, in some areas people in low income groups, who often prefer to use cash because it helps them with budgeting, may have little choice but to access cash through pay-to-use ATMs. These groups of people may well be left behind if the UK moves to a cashless society without intervention by public authorities. ATMs can be ‘protected’ in some areas, if there are no other ATMs or post offices within 1 kilometre, but this may not be a solution for all communities. The public authorities indicated to us that people could rely on post offices to access cash, but post offices will not always be open at times when people want to access cash, and we are aware of instances where local post offices have closed or are under threat of closure. 6 The production and distribution of cash Addressing the needs of people in different circumstances and geographic areas requires a well-informed and flexible approach. Recommendation: In undertaking their plan to secure continued access to cash, the government should set out how they propose to incorporate the concerns and requirements of different communities and groups to ensure that solutions actually meet local needs. The plan should set out what consumers, particularly those in vulnerable groups, can expect in terms of accessing and using cash in their locality.
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Government response AI summary
The government agrees with the recommendation to set out how it will incorporate community needs into its plan for cash access, but defers specific action. It states it is considering responses to a Call for Evidence and will outline next steps in due course.
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HM Treasury
3
Recommendation
Thirtieth Report - The production and d…
Deferred
No one is in overall charge of making sure that people and businesses have access to cash. The responsibilities and accountabilities of the different bodies for the functioning of the cash system are not clear. Five public authorities have responsibilities relating to different aspects of how cash is produced and …
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No one is in overall charge of making sure that people and businesses have access to cash. The responsibilities and accountabilities of the different bodies for the functioning of the cash system are not clear. Five public authorities have responsibilities relating to different aspects of how cash is produced and delivered to consumers and businesses. But it appears no one organisation is in charge of making the cash system work effectively. The Joint Authorities Cash Strategy Group co-ordinates activities between four of the public authorities but it is not a decision- making body. There are aspects of the cash system where no-one appears to be responsible, such as monitoring how well the cash system performs, or the extent to which businesses are continuing to accept cash. It is also unclear who is responsible for ensuring the financial and operational resilience of the cash system as a whole. In its call for views published just before our October 2020 evidence session, HM Treasury proposed that the FCA should take on overall responsibility for setting requirements to ensure that the retail distribution of cash meets the needs of consumers and businesses. Recommendation: HM Treasury needs to give overall responsibility for the cash system to a single body, with the other bodies having clearly defined roles to support this. It should address potential gaps in current oversight, for example in overseeing the end-to-end resilience of the cash system.
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Government response AI summary
The government agrees with the recommendation to assign overall responsibility for the cash system to a single body, noting the FCA may be well-positioned. However, it is currently considering responses to its Call for Evidence and will set out next steps in due course, deferring …
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HM Treasury
4
Recommendation
Thirtieth Report - The production and d…
Accepted
The Bank of England seems to lack curiosity about the huge volume of notes not used or held for day-to-day transactions. The Bank estimates that 20%-24% of issued notes are used or held for cash transactions. This leaves about £50 billion worth of issued bank notes whose whereabouts or use …
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The Bank of England seems to lack curiosity about the huge volume of notes not used or held for day-to-day transactions. The Bank estimates that 20%-24% of issued notes are used or held for cash transactions. This leaves about £50 billion worth of issued bank notes whose whereabouts or use is unknown. These notes 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. The Bank does not have any real understanding of what these notes are being used for though says that it is a trend being seen with other major currencies. During the Covid-19 pandemic there was a significant increase in the value of notes in circulation, which the Bank thinks is probably explained by people being more inclined to hoard cash in case they need it. There are implications for public policy and the public purse if a material proportion of the large volume of banknotes whose whereabouts or use are unknown are being used for illegal purposes. Recommendation: The Bank, working with other public authorities such as HMRC, should take action to improve its understanding of the factors that are driving the increase in demand for notes, and also who is holding the approximately £50 billion worth of notes. The production and distribution of cash 7
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Government response AI summary
The Bank of England accepts the recommendation and commits to conducting surveys over the next year to understand household and small business use of banknotes as a store of value. It will also engage with HMRC and the National Crime Agency for additional information.
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HM Treasury
5
Recommendation
Thirtieth Report - The production and d…
Accepted
The Bank of England’s stock of notes seems high and it is not clear to us how the Bank decides upon what is an appropriate stock level. The Bank holds stocks of notes well above its own policies for minimum levels of stocks. For example, at the end of July …
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The Bank of England’s stock of notes seems high and it is not clear to us how the Bank decides upon what is an appropriate stock level. The Bank holds stocks of notes well above its own policies for minimum levels of stocks. For example, at the end of July 2020, it held contingency stocks with a value of £30.4 billion, against its minimum guidance levels of £15.6 billion. We recognise that the Bank would not wish to risk running out of notes. However, we do not understand the Bank’s rationale for holding such high levels of stocks. The Bank does accept that it needs to improve the transparency with which it takes decisions on printing notes. Recommendation: The Bank should ensure that it properly records and evidences the judgements it makes about printing notes and its stock levels so that it can be properly held to account for the decisions it makes.
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Government response AI summary
The Bank of England accepts the recommendation, committing to review its documentation around stock decisions and contingency requirements to ensure it clearly records the main factors contributing to final decisions on print volumes and stocks by December 2021.
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HM Treasury
6
Recommendation
Thirtieth Report - The production and d…
Not Addressed
The continued reduction of coin use, possibly accelerated by Covid, is likely to put further pressure on the Royal Mint’s ability to deliver a profit on its UK coin manufacturing operations. Coin use has declined over recent years, and the Mint’s UK coin production has fallen by around 65% in …
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The continued reduction of coin use, possibly accelerated by Covid, is likely to put further pressure on the Royal Mint’s ability to deliver a profit on its UK coin manufacturing operations. Coin use has declined over recent years, and the Mint’s UK coin production has fallen by around 65% in the last 10 years. For the last three years, the Mint has made losses in its coin-making, including a loss of £3.9 million in 2019–20. In March 2020, the Mint had no plans to manufacture any 2p or £2 coins. Although there has been a recent increase in the demand for coins during the Covid pandemic, this is expected to be temporary and the Mint thinks that the long-term impact of the pandemic will be to exacerbate the decline in coin use. Recommendation: In the Treasury Minute response to this report, HM Treasury and the Royal Mint should set out how they are ensuring that the plans for manufacturing UK coins are sustainable and cost effective. 8 The production and distribution of cash 1 Access to cash
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Government response AI summary
The government's response is a boilerplate text about the Bounce Back Loan Scheme and does not address the recommendation for HM Treasury and the Royal Mint to outline plans for sustainable and cost-effective coin manufacturing.
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HM Treasury
1
Conclusion
Thirtieth Report - The production and d…
Not Addressed
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury, the Bank of England, the Financial Conduct Authority, the Payment Systems Regulator and the Royal Mint, about the production and distribution of cash.1
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On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury, the Bank of England, the Financial Conduct Authority, the Payment Systems Regulator and the Royal Mint, about the production and distribution of cash.1
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Government response AI summary
The government's response does not address the Committee's introductory statement about taking evidence, instead focusing on different policy matters like cash access legislation and cashback.
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HM Treasury
7
Conclusion
Thirtieth Report - The production and d…
Acknowledged
When asked who would pay for the increasing cost of maintaining the cash system the FCA acknowledged that the economics of the cash system is changing. It suggested that further thought will need to be given to how to support those consumers who might otherwise be digitally excluded.17 It believed …
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When asked who would pay for the increasing cost of maintaining the cash system the FCA acknowledged that the economics of the cash system is changing. It suggested that further thought will need to be given to how to support those consumers who might otherwise be digitally excluded.17 It believed that the issue of costs and how these are allocated would ultimately be a political question for government and Parliament. The FCA stressed that whatever objectives are set for the cash system they need to be flexible to enable the system to adapt in future.18 Meeting the cash needs of local communities
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Government response AI summary
The government agrees with the Committee's observation regarding the changing economics of the cash system and the political nature of cost allocation, but provides no specific commitments.
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HM Treasury
8
Conclusion
Thirtieth Report - The production and d…
Acknowledged
The Treasury informed us that a lot of work had been commissioned, from both government and outside government, to understand how rapid changes in the cash system were impacting on those still reliant on cash. This work indicated that 2 million people are mostly using cash for their payment needs …
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The Treasury informed us that a lot of work had been commissioned, from both government and outside government, to understand how rapid changes in the cash system were impacting on those still reliant on cash. This work indicated that 2 million people are mostly using cash for their payment needs and that it is the elderly and disadvantaged who tend to be disproportionately reliant on cash.19 Research commissioned by the PSR suggested that around 30% of people have quite a strong preference to use cash, with 5 10 Q 65; C&AG’s Report, para 17 and Figure 4 11 Q 49; C&AG’s Report, para 15 12 Qq 48, 70; C&AG’s Report, Figure 4 13 Q 58 14 Financial Conduct Authority, Finalised Guidance: Branch and ATM closures or conversions, FG 20/3, September 2020 15 Qq 72 16 Qq 72,111; HM Treasury, Access to Cash: Call for Evidence, October 2020, para 5.3 17 Q 80 18 Q109 19 Qq 38–39 10 The production and distribution of cash to 10% at risk of being significantly disadvantaged if cash were to disappear.20 The FCA, however, has only recently commissioned research into the ability of SMEs to access bank deposit services, and SMEs’ acceptance of cash. The FCA told us that this work is not expected to be completed until early 2021.21
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Government response AI summary
The government agrees with the Committee's observation regarding ongoing research into cash reliance and SME access to services, but offers no specific commitments or new actions.
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HM Treasury
9
Conclusion
Thirtieth Report - The production and d…
Acknowledged
The FCA and PSR are working with the University of Bristol to provide a map of access to cash across the country and the different ways in which cash can be accessed, including bank branches, post offices, cash machines and cash back from shops.22 This is being used during the …
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The FCA and PSR are working with the University of Bristol to provide a map of access to cash across the country and the different ways in which cash can be accessed, including bank branches, post offices, cash machines and cash back from shops.22 This is being used during the Covid-19 pandemic to identify areas where access to cash might be threatened, for example by the temporary closure of shops. The PSR told us this is teaching them the value of such data with the possibility, in the future, of linking it to measures of vulnerability, social deprivation and other factors.23 But this work cannot happen fast enough; the week before we took evidence the TSB announced large scale closures in its bank branch network, some in deprived urban areas.24
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Government response AI summary
The government agrees with the Committee's observation regarding the ongoing work by FCA and PSR to map access to cash but provides no specific actions or commitments to accelerate the work.
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HM Treasury
10
Conclusion
Thirtieth Report - The production and d…
Accepted
We asked the witnesses what they are doing to meet differing needs for cash within rural areas, for example where people might want privacy when withdrawing money and where others, on a budget, might not wish to be tempted to make a purchase if having to visit a shop for …
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We asked the witnesses what they are doing to meet differing needs for cash within rural areas, for example where people might want privacy when withdrawing money and where others, on a budget, might not wish to be tempted to make a purchase if having to visit a shop for cash.25 The PSR told us that its policy is to protect the coverage of free- to-use cash machines. Ultimately, we were told that communities, if they have a good case, are able to ask for help from Link, the cash machine network, if local needs are not being met.26 The recent government consultation on cash access has raised the possibility of changing the current regulations, set by the EU, to allow cashback in shops without making a purchase.27 The PSR also pointed to the importance of the post office network in maintaining access to cash and suggested that it was likely to play an even larger role.28 However, post offices will not always be open at times when people want to access cash, and we are aware of examples of local post offices being under threat of closure.29 We also asked about the impact of declining cash use on fundraising by community organisations, for example charities and churches, but were told by the witnesses that they are not looking at this as responsibility lies elsewhere in government.30
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Government response AI summary
The government agrees with the Committee's observations and commits to protecting access to cash, with a target implementation date of Spring 2021. It highlights ongoing efforts and is considering responses to its Call for Evidence, with next steps to be set out in due course.
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HM Treasury
11
Conclusion
Thirtieth Report - The production and d…
Acknowledged
The FCA and PSR acknowledged that there is not likely to be one solution to meeting the cash access needs of local communities. Both organisations recognised that creative solutions will be needed that are community-based, reflecting the make-up of the local area.31 Responsibility for the cash system
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The FCA and PSR acknowledged that there is not likely to be one solution to meeting the cash access needs of local communities. Both organisations recognised that creative solutions will be needed that are community-based, reflecting the make-up of the local area.31 Responsibility for the cash system
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Government response AI summary
The government acknowledges the committee's observation regarding the need for flexible, community-based solutions for cash access. It reiterates its commitment to protecting cash access and will outline its next steps after considering responses to a Call for Evidence.
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HM Treasury
12
Conclusion
Thirtieth Report - The production and d…
Deferred
We challenged the Treasury on who is responsible for the performance of the cash system. It accepted that it was ultimately responsible for proposing legislation to 20 Qq 39–40 21 Q 40 22 Q 41 23 Q 43 24 Q 57 25 Q 64 26 Qq 63–64 27 HM Treasury, …
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We challenged the Treasury on who is responsible for the performance of the cash system. It accepted that it was ultimately responsible for proposing legislation to 20 Qq 39–40 21 Q 40 22 Q 41 23 Q 43 24 Q 57 25 Q 64 26 Qq 63–64 27 HM Treasury, Access to Cash: Call for Evidence, October 2020, para 3.33 28 Q 48 29 Qq 48–49, 60 30 Q 50 31 Q 59 The production and distribution of cash 11 Parliament and therefore identifying gaps in legislation. It chairs the Joint Authorities Cash Strategy Group which helps coordinate the work of the FCA, PSR, Bank of England and the Treasury though the Group is not a decision-making body.32 Each body has its own governance and decision-making structures. The Treasury thinks it is inevitable that responsibilities will be divided across a number of public bodies. In its view, the priority is to ensure that the work of the various public bodies is coordinated and that information is shared.33 In its call for views published just before our October 2020 session, the Treasury proposed that the FCA should take on overall responsibility for setting requirements to ensure that the retail distribution of cash meets the needs of consumers and businesses.34
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Government response AI summary
The government agrees with the implied recommendation (based on its own proposal) to clarify responsibility for the cash system. It states it is considering responses to its Call for Evidence regarding giving a single authority, such as the FCA, overall responsibility and will set out …
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HM Treasury
13
Conclusion
Thirtieth Report - The production and d…
Deferred
There are gaps in the current distribution of powers and responsibilities. We asked, for example, who is responsible for monitoring the resilience of the cash machine network and for taking action should part of it fail. The PSR told us that it is responsible for the oversight of the LINK …
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There are gaps in the current distribution of powers and responsibilities. We asked, for example, who is responsible for monitoring the resilience of the cash machine network and for taking action should part of it fail. The PSR told us that it is responsible for the oversight of the LINK network, which accounts for the free-to-use network of cash machines. The Bank of England is responsible for ensuring the systemically important pieces of the infrastructure are both financially and technically resilient though this might not include every element of the network.35 The PSR told us that it and the Bank are comfortable with the current position of the network. The PSR told us, however, that a further move to a low cash use economy might raise questions about sustainability and that additional legislation and requirements might be needed.36 Similarly, when we asked the FCA what it is doing to monitor trends in the acceptance of cash it pointed out that the cash as used by supermarkets, retailers and so on went beyond its normal remit of financial services companies.37 For the cash system as a whole we could find no single organisation currently responsible for monitoring and reporting how well the system is continuing to meet the needs of consumers and businesses.38 32 Q 69; C&AG’s Report, para 7 & 10 33 Q 69 34 HM Treasury, Access to Cash: Call for Evidence, October 2020, paras 6.8, 6.9 35 Q 60 36 Q 61 37 Q 42 38 Q 76; C&AG’s Report, para 13 12 The production and distribution of cash 2 Cash production
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Government response AI summary
The government agrees with the implicit recommendation to address the lack of a single organisation responsible for monitoring the cash system. It reiterates its proposal from the Call for Evidence to give a single authority, potentially the FCA, overall responsibility, but defers action to set …
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HM Treasury
14
Conclusion
Thirtieth Report - The production and d…
Coins are produced for the whole of the UK by The Royal Mint (the Mint) under a contract with the Treasury, which also acts as the Mint’s sole shareholder. The Bank of England (the Bank) is responsible for producing notes for use throughout the UK, and it sub-contracts the printing …
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Coins are produced for the whole of the UK by The Royal Mint (the Mint) under a contract with the Treasury, which also acts as the Mint’s sole shareholder. The Bank of England (the Bank) is responsible for producing notes for use throughout the UK, and it sub-contracts the printing of notes to De La Rue plc. The Treasury, the Mint and the Bank work to ensure that there is a sufficient quantity of cash to meet the needs of the economy, and to maintain the public’s confidence in its use. In 2019–20, the Treasury incurred UK coin production expenses of £23.6 million, and the Bank incurred note production and distribution expenses of £119 million.39 Demand for notes
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HM Treasury
15
Conclusion
Thirtieth Report - The production and d…
Accepted
The demand for notes has increased in each of the past 25 years. According to Bank figures, in July 2020 the number of notes in circulation reached a record high of 4.4 billion, with a monetary value of £76.5 billion.40 Notes are increasingly being used as a store of value …
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The demand for notes has increased in each of the past 25 years. According to Bank figures, in July 2020 the number of notes in circulation reached a record high of 4.4 billion, with a monetary value of £76.5 billion.40 Notes are increasingly being used as a store of value and therefore the demand for notes has been less affected by the wider decline in the use of cash for transactions. This trend has been seen among other major currencies around the world. The Bank told us that an important reason for this could be the lowering of inflation and interest rates from the mid 1990’s, reducing the opportunity cost of holding cash as a store of wealth.41
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Government response AI summary
The Bank of England agrees with the Committee's observation and commits to conducting surveys over the next year on households' and small businesses' use of banknotes as a store of value, and to engage with HMRC and the National Crime Agency for additional information.
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HM Treasury
16
Conclusion
Thirtieth Report - The production and d…
Accepted
During the Covid-19 pandemic, between March and July 2020, there was a significant increase in the value of notes in circulation.42 The Bank told us this is probably explained by people hoarding cash, and because less cash than usual was being deposited at banks for example by sole traders, window …
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During the Covid-19 pandemic, between March and July 2020, there was a significant increase in the value of notes in circulation.42 The Bank told us this is probably explained by people hoarding cash, and because less cash than usual was being deposited at banks for example by sole traders, window cleaners and gardeners.43
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Government response AI summary
The Bank of England agrees with the Committee's observation and commits to conducting surveys over the next year on households' and small businesses' use of banknotes as a store of value, and to engage with HMRC and the National Crime Agency for additional information, which …
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HM Treasury
17
Conclusion
Thirtieth Report - The production and d…
Accepted
The Bank estimates that 20%-24% of notes in circulation are used or held for day-to- day transactions. In 2018 it estimated that up to a further 5%, or between £1 billion and £3.5 billion, was held by UK households as savings. This leaves about £50 billion worth of issued bank …
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The Bank estimates that 20%-24% of notes in circulation are used or held for day-to- day transactions. In 2018 it estimated that up to a further 5%, or between £1 billion and £3.5 billion, was held by UK households as savings. This leaves about £50 billion worth of issued bank notes whose whereabouts or use is unknown. These notes 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. The Bank does not have enough data even to make broad estimates of how much should be apportioned to each category.44 Stocks of notes
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Government response AI summary
The Bank of England, treating the conclusion as a recommendation, commits to conducting surveys over the next year to understand how households and small businesses use banknotes as a store of value. It will also engage with HMRC and the National Crime Agency for additional …
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HM Treasury
18
Conclusion
Thirtieth Report - The production and d…
Not Addressed
Once printed, the Bank holds contingency stocks of all notes at its premises to avoid shortages. The Bank sets its minimum contingency stock level by considering potential supply and demand shocks, and benchmarks itself against the practice of other major central banks.45 During 2020 the Bank’s stocks of notes have …
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Once printed, the Bank holds contingency stocks of all notes at its premises to avoid shortages. The Bank sets its minimum contingency stock level by considering potential supply and demand shocks, and benchmarks itself against the practice of other major central banks.45 During 2020 the Bank’s stocks of notes have been nearly double its minimum contingency levels. At the end of March, it held contingency stocks with a value of £39 billion, against its minimum guidance levels of £20.5 billion, and at the end of July, 39 C&AG’s Report, para 4 40 C&AG’s Report, para 3.19 and Figure 12 41 Qq 52, 53; C&AG’s Report, para 3.21 42 Q 51; C&AG’s Report, Figure 12 43 Q 51 44 Qq 52, 53; C&AG’s Report, para 3.20 45 C&AG’s Report, para 3.29 The production and distribution of cash 13 contingency stocks were at £30.4 billion, against minimum levels of £15.6 billion. The cost of producing the stocks held at March 2020 above the minimum contingency levels was around £35 million, before taking account of any fixed costs, such as depreciation of machinery.46
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Government response AI summary
The Bank of England's response does not directly address this conclusion, which details the Bank's high contingency stock levels and associated costs. Instead, it commits to reviewing documentation around stock decisions and ensuring factors are clearly recorded, which relates to a different recommendation.
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HM Treasury
19
Conclusion
Thirtieth Report - The production and d…
Not Addressed
According to the Bank, it is not unusual for it to maintain high stocks. It told us that it is more efficient to have long print runs of each note denomination—often lasting up to a year—as short print runs require machine down time, and costly changeovers of printing plates and …
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According to the Bank, it is not unusual for it to maintain high stocks. It told us that it is more efficient to have long print runs of each note denomination—often lasting up to a year—as short print runs require machine down time, and costly changeovers of printing plates and inks. It can therefore be a long time between print runs of the same note denomination, and in order to maintain sufficient contingencies, large stocks of each note denomination need to be maintained.47
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Government response AI summary
The Bank of England's response, despite stating agreement, does not directly address the content of this conclusion which explains the Bank's current practice and rationale for maintaining high stocks. Instead, it commits to reviewing documentation around stock decisions, which relates to a different recommendation.
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HM Treasury
20
Recommendation
Thirtieth Report - The production and d…
Accepted
The NAO found, however, that it was not clear from the documentation shown to them what process the Bank operated to decide upon adequate stock levels, and how the cost implications of doing so were taken into account when building up stocks.48 When pressed by us, the Bank accepted that …
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The NAO found, however, that it was not clear from the documentation shown to them what process the Bank operated to decide upon adequate stock levels, and how the cost implications of doing so were taken into account when building up stocks.48 When pressed by us, the Bank accepted that it needs to improve the transparency with which it takes note printing decisions.49 The Mint’s UK coin production
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Government response AI summary
The Bank of England accepts the recommendation, committing to review its documentation regarding stock decisions and contingency requirements. This review will ensure clear recording of the main factors influencing final decisions on print volumes and stock levels by December 2021.
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HM Treasury
21
Conclusion
Thirtieth Report - The production and d…
Accepted
The Mint’s UK coin production has reduced by 65% over the last ten years, from about 1.1 billion coins made in 2010–11 to 383 million in 2019–20. This reflects the overall fall in production demand over the period, although production volumes increased in some years, for example between 2012 and …
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The Mint’s UK coin production has reduced by 65% over the last ten years, from about 1.1 billion coins made in 2010–11 to 383 million in 2019–20. This reflects the overall fall in production demand over the period, although production volumes increased in some years, for example between 2012 and 2016 with the issue of new 5p, 10p and £1 coins replacing stock already in circulation.50
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Government response AI summary
The government agrees with the Committee's observations on reduced coin production and outlines how HM Treasury and The Royal Mint are improving business efficiencies, reducing manufacturing costs, and enhancing forecasting accuracy to manage the impact of declining coin use.
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HM Treasury
22
Conclusion
Thirtieth Report - The production and d…
Accepted
The decline in demand has been particularly rapid in recent years. This has been in part due to the emergence of contactless payment methods affecting small cash transactions in particular.51 But also, in 2017–18, a Mint-run exercise to recall the old £1 coin, as an increasing counterfeit risk, led to …
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The decline in demand has been particularly rapid in recent years. This has been in part due to the emergence of contactless payment methods affecting small cash transactions in particular.51 But also, in 2017–18, a Mint-run exercise to recall the old £1 coin, as an increasing counterfeit risk, led to an unexpectedly huge return of coins of all denominations as households and businesses emptied their stocks of coins. This led to a large increase in coin stocks and a consequent reduction in the number of coins that needed to be produced.52
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Government response AI summary
The government agrees with the Committee's observations on declining coin demand and outlines how HM Treasury and The Royal Mint are improving business efficiencies, reducing manufacturing costs, and enhancing forecasting accuracy to manage the impact of reduced transactional cash use.
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HM Treasury
23
Conclusion
Thirtieth Report - The production and d…
Accepted
Since 2017 coin stocks have continued to rise. At the end of March 2020, they significantly exceeded the target buffer stocks, which the Treasury set for the Mint to avoid shortages and be prepared for any uncertainties, in all denominations. Holdings of £2 coins were 26 times the target, and …
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Since 2017 coin stocks have continued to rise. At the end of March 2020, they significantly exceeded the target buffer stocks, which the Treasury set for the Mint to avoid shortages and be prepared for any uncertainties, in all denominations. Holdings of £2 coins were 26 times the target, and 1p and 2p were six and eight times above target respectively. At the end of March 2020, the Mint believed that the reduced level of UK coin manufacture that it experienced in 2019–20 would remain for the foreseeable future, and it had no plans to produce 2ps or £2 coins for at least ten years.53
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Government response AI summary
The government agrees with the Committee's observations on rising coin stocks and outlines how HM Treasury and The Royal Mint are improving business efficiencies, reducing manufacturing costs, and enhancing forecasting accuracy to manage the impact of reduced transactional cash use and stock levels.
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HM Treasury
24
Conclusion
Thirtieth Report - The production and d…
Accepted
Since March, the disruption caused by Covid-19 has, we were told, led to increases in demand, as many businesses and consumers hoarded coins in the early months of the 46 Qq 84, 85; C&AG’s Report, para 3.30 47 Q 88–90 48 C&AG’s Report, para 3.30 49 Qq 91, 99 50 …
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Since March, the disruption caused by Covid-19 has, we were told, led to increases in demand, as many businesses and consumers hoarded coins in the early months of the 46 Qq 84, 85; C&AG’s Report, para 3.30 47 Q 88–90 48 C&AG’s Report, para 3.30 49 Qq 91, 99 50 C&AG’s Report, paras 3.3, 3.4 51 C&AG’s Report, para 3.3 52 Q 92; C&AG’s Report, paras 3.6, 3.9, 3.10, Figure 11 53 Q.92; C&AG’s Report, paras 3.4, 3.9, 3.10 14 The production and distribution of cash pandemic in the same way they hoarded notes. To meet this increased demand, from April the Mint pulled forward its manufacturing schedule for the 2020–21 financial year.54 It now expects the Treasury to ask it to manufacture new 2p coins in the next 6 months and more £2 coins within the next 3 years.55 Nevertheless, the Mint expects the increase in demand to be temporary, and that the long-term impact of the pandemic will be to exacerbate the decline in coin use.56
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Government response AI summary
The government agrees with the Committee's observations on coin demand fluctuations due to Covid-19 and details how HM Treasury and The Royal Mint are improving forecasting and operational measures to ensure appropriate coin availability despite declining long-term use.
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HM Treasury
25
Conclusion
Thirtieth Report - The production and d…
Accepted
This could bring further financial pressure to bear on the Mint’s UK coin operations. The Mint has worked hard in recent years to make coin-making more profitable. It has undertaken a series of actions to reduce costs and increase efficiency, including, for example, mothballing two of its six coin-making lines …
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This could bring further financial pressure to bear on the Mint’s UK coin operations. The Mint has worked hard in recent years to make coin-making more profitable. It has undertaken a series of actions to reduce costs and increase efficiency, including, for example, mothballing two of its six coin-making lines of machinery, and reducing the number of full-time equivalent staff it employs for coin-making from 452 in May 2018 to 351in March 2020. Despite its actions, it has made losses in coin-making in each of the last three years, including a loss of £3.9 million in 2019–20.57 54 Q 92; C&AG’s Report, para 3.10 55 Qq 92, 93 56 Q 95 57 C&AG’s Report, paras 3.12, 3.13 The production and distribution of cash 15
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Government response AI summary
The government acknowledges the financial pressures on the Royal Mint and describes ongoing efforts to improve business efficiencies, reduce costs, and accurately forecast coin demand. The response details existing measures rather than new commitments.
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HM Treasury