Why does Philip Hammond want to ditch copper coins?

George Osbourne

The government has hinted that it may ditch the £50 note and 1p and 2p coins as part of a move to make cash fit for goal.

He said: "We will call for evidence... on how to encourage cashless and digital payments, while ensuring cash remains available to those who need it".

In documents released alongside Philip Hammond's update on the United Kingdom economy, it was revealed the Government wants to know whether the "current denominational mix meets the needs of cash users".

The UK Treasury has questioned the future of the lowest-denomination UK coins in circulation, valued at 1p (GBP0.01) and 2p (GBP0.02), as part of a consultation document on the growing move away from cash towards digital payments.

The document points to surveys that suggest six in 10 of United Kingdom 1p and 2p coins are only used once before being saved in a jar or discarded.

And the Treasury now say shops have already started to "round" the price of products to avoid giving change in anything below 5p coins.

More than 500 million 1p and 2p coins have to be produced every year as so many are lost down sofas or put in saving jars.

The call for evidence is simply meant to enable the government to better understand the role of cash and digital payments in the new economy.

But it says the cost of industry processing and distributing low denomination coins to make up for those taken out of circulation is the same as for high denomination coins, making the cost high, relative to face value and utility.

The UK Government is also considering dropping the £50 note, which it says is rarely used in everyday transactions.

However, there is significant demand from overseas for these notes, where they are saved alongside dollars and euros.

"There is also a perception among some that £50 notes are used for money laundering, hidden economy activity, and tax evasion", the report says.

"The Government welcome all contributions to the debate and will respond fully after the call for evidence closes on the 6 June".

Conservative former chancellor George Osborne was reported to have been weeks from scrapping pennies in 2015, but was stopped by then prime minister David Cameron.

Sara Coles, personal finance expert at investment firm Hargreaves Lansdown, warned that savers could be hit.

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