The 18bn British copper coins in circulation weigh the same as 213 fully loaded jumbo jets. Many of them – along with a further 6.5bn pennies the Royal Mint believes are “missing” – line the bottom of sock drawers and fill fridge-top jars. This mass of idle shrapnel indicates that many Britons stopped bothering with the stuff long ago. So it is surprising that the UK – along with Group of Eight peers US and Japan – still continues to circulate its most basic unit of coinage, while countries such as Australia, the Netherlands, Brazil and Israel have all phased out their low-value change in the past 20 years.
The benefits of killing the pocket-fillers go beyond mere convenience. Almost two-thirds of all British coins in circulation are copper, which makes potential savings from cash handling, customer service and transportation significant. Greg Mankiw of Harvard University reckons that if the US ditched its penny, about $1bn of resources could be freed up each year. And that is before considering that the cost to produce it is a third higher than its face value.
Fears of inflation are fantasy. Businesses can continue to advertise their usual prices and then merely round any cash transaction to the nearest 5p, while keeping the effects on the wider economy negligible. In Australia, which phased out its coppers in the 1990s, the University of Melbourne estimated the gain or loss experienced by 19 out of 20 shopkeepers would be less than 88 cents per 1,000 transactions. A Bank of Canada report in 2007 also concluded that inflation was unlikely.
Withdrawing the coins can also reap unexpected benefits. The bronze medals for the 2000 Sydney Olympics were struck from old melted-down coinage. As the market price of copper surges back towards its 2008 peak, the organisers of the London games will be jealous they cannot do the same.
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