HC Deb 07 April 1978 vol 947 cc936-46

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thomas Cox.]

4 p.m.

Mr. Greville Janner (Leicester, West)

As the value of our currency declines, so inevitably does the value of the pound note and of each of the coins that represent that value in the hands, in the pockets and in the wallets of the ordinary user. I am happy to have this opportunity to ask the House to consider whether the time has now come for a complete review of our coins and our notes in the light of the decline in the value of money, in the light of inflation, and in the light of the weight of the coins that exist. In particular, I shall suggest that the time has arrived for the introduction of a £1 coin, for the introduction of a crown—that is, a 25p coin—and for a change in the type, size and, in particular, in the weight of the coins that are used at present.

The value of currency has dropped in the last 20 years by four times. That is to say, £1 in 1957 would have bought as much as £4 today, 20 years later. Yet we still do not have a coin to represent the 1978 value of a 1957 pound. Indeed, the speed at which the value of the pound has dropped has increased, as we all know. Since decimalisation, when the last major changes in our currency took place, on 15th February 1971, there has been a drop in value of just under 60 per cent. Yet this drop is in no way reflected in the coins and in the notes that are in current use.

It is clear, therefore, that a review is necessary and that steps ought reasonably to be taken so that people can have coins and notes that are convenient to handle, light in weight, last a reasonable time in the wallet or in the pocket, do not deteriorate so fast, and are easily recognisable by those who use them.

I deal first with the question of the £1 coin. The Financial Times today carries a splendid cartoon suggesting that I should let nature take its course and the pound note will disappear anyway. If we allow it to go on long enough, I dare say that that will be so. In spite of the tremendous reduction in the inflation rate from nearly 30 per cent. about three or four years ago to under 10 per cent. today, the pound still faces a change which is inevitable and which is continuing along with the world financial situation.

What we now need is a coin which is convenient in use and which will last indefinitely. I am informed in answer to a Question that the average life of a £1 note today is 10 months, the life of a £5 note, which is used less, is 18 months, the life of a £10 note is two years and the life of a £20 note—which I do not think that some of us have ever seen—is two and a half years. A coin would be expected to have a life of at least 25 years. Therefore, even if the introduction of a coin were expensive at first, it would certainly be justified and much cheaper in the long run.

Given that it would be possible to produce coins, the question then would be whether this introduction would mean the end of the pound note. Here I draw the attention of the House to the fact that in many other countries both coins and notes exist in the same denominations without causing any difficulty, so that those who prefer to use coins can handle coins and those who prefer to handle notes can handle notes. In France, for example, there are 50 franc and 10 franc notes and coins. As the value of the pound in France is about 9 francs, this means that the French have the equivalent of a £1 and a £5 coin, although the latter is not in common use.

In West Germany they have 10 deutschemark and 5 deutschemark notes and coins. As the pound is equivalent to approximately 3.7 deutschemark, that means that Germany has coins worth about £1.30—an overlap in both places.

In the United States there is a silver dollar and there is a dollar note. Those of us who have had the occasion to visit such centres of civilisation as Las Vegas have seen that the coins have a use in machinery which is never approached by notes. In this country there were some complaints, which perhaps my right hon. Friend will deal with in his reply, when the size of the pound note went down about whether the new pound note would be usable in, for example, the machinery at service stations.

In Australia there is an almost complete coverage of notes and coins from 50 Australian dollars down to one Australian dollar, in both cases with notes and coins.

When the 50p piece was introduced at the time of decimalisation, Lord Fisk said that he recognised that introducing a coin of even 50p—or 10s. as it had been in value—would seem rather strange at first. He pointed out that many countries have coins to the value of the same amount as 50p or more.

There would appear to be no good reason in common sense or in finance or in economics why there should not be a £1 coin. I noted that in the other place earlier this week Baroness Birk indicated that the matter was under review. Perhaps my right hon. Friend will be able to give an answer to a question which people are reasonably asking, which is why there is not to be a £1 coin very swiftly. Perhaps he will explain at the same time who makes the decision about whether there shall be. Is it him? Is it the Government? Is it the Bank of England? Who is it? Who decided that the £1 note should be reduced in size? Did he know about it before that decision was taken? If not, why not? Who is consulted? Was the House consulted? If not, why not? Decisions regarding our currency are of importance to our constituents and we are entitled to know what is to happen, what has happened, and why.

I turn next to the crown coin. There is no coin available and in use between the 10p coin and the 50p coin. This is a gap about which shopkeepers complain. There would appear to be no good reason why this gap should not be plugged so that there can be an easier denomination in the giving of change. There is no need for the size to be too large.

The White Paper issued at the time of decimalisation, specifically stated that the 50p coin should be of such a shape and size that a 20p or 25p could be provided in the same tier later if the need should arise…. The Board and the Royal Mint soon concluded that the 50p would have to be a fairly large coin so that it would be possible later to fit into the same tier a 20p or 25p in weight-value relationship". Clearly, although the Jubilee crown was a splendid souvenir which is treasured by many of us and many of our constituents, it is too bulky for everyday use. It is a souvenir and not a coin for use in the market place and there would appear to be no reason why we should not have a coin which is half the size or half the weight for a crown or, if the Government saw fit and the Bank of England thought it preferable to have a 20p piece, it would be one in the same relationship and one, I hope, which would be hexagonal—it should have many sides—unlike the ordinary round coins to which the 50p piece is the only exception.

I suggest to my right hon. Friend that there is no good reason in logic, economics or finance why there should not be a crown coin and why there should be this continued gap between the 10p and the 50p piece. Certainly the only answer that I have received has been that we do not want more coins because they are heavier. I repeat that if we were to have more coins, the notes could be continued, in so far as they exist, and that if there were coins of a higher denomination, fewer coins of the smaller denominations would need to be used.

I turn to my next suggestion, which I hope has already been considered. It certainly should be if it has not. It is that our coins should be looked at in the light of the coinage of other countries to see whether there is any need for them to remain as bulky, and whether there really is any sensible reason why our coins should continue to drive holes through our pockets when they could be made from lighter and more convenient material, as they are in so many other countries.

I suggest that there is very good reason for changing the shape of the coin. It is not only blind people who are concerned with the shape of the coinage. People who have to handle coins in conditions of poor light are also concerned, and we all like to know, from the feel of a coin in the pocket, what it is.

There is no reason why we should remain, as we have done, so stagnant in our approach to coinage, and so old, fashioned. There is no reason why we should not have a radical change, even if, as was pointed out by Lord Fisk at the time of decimalisation, such a change is unpopular at first. It takes a while for people to get used to changes. I do not believe that this change would be unpopular. I believe that it would be a very popular change to have lighter weight coinage of different shapes, which people could recognise readily and use readily. It would enable them, despite the lowering of the value of money, to have coins which are readily usable and changeable.

It is quite plain that, even if these mild and, I suggest, modest and reasonable suggestions are to be taken into account, someone has to perform a general review. I presume that it would be my right hon. Friend and his colleagues at the Treasury. It may be that this would be together with the Bank of England but, whoever is involved, the review is now needed.

From a reply given to me by my right hon. Friend earlier this year, I understand that there are periodical reviews and a balance between notes and coins, for example, but that no date has been fixed for the next periodic review. Surely it is reasonable to suggest that the time has come when the date ought to be fixed.

Fortunately, the value of the coinage and the value of our notes is going down by "only" something under 10 per cent. per year, but the decrease in the value of the coinage means that there is an increase in their number. There is also an increase in the need for coins of convenient shape and size, an increase in the need for coins which cover the denominations in most common use—that certainly includes 25p—and an increase in the need for a coin which would reach the mighty level of the pound.

I suggest that the time has come for us to have a silver pound, just as there is a silver American dollar. I hope that as the rate of inflation continues to decline the silver pound, which I would be very happy to hear the Minister announce, would retain its value for a very long time to come.

4.15 p.m.

The Minister of State, Treasury (Mr. Denzil Davies)

I thank my hon. and learned Friend the Member for Leicester, West (Mr. Janner) for raising this matter in the House, because it gives me an opportunity of amplifying some of the answers which have been given to several questions raised by him and by other hon. Members about the currency over the last few months.

My hon. and learned Friend asked some specific questions. He asked, for instance, who makes the decision about the coinage. The denomination of the coinage is basically determined by the Treasury. As for the new pound note, the denomination of notes is again determined by the Treasury, but the actual issue of notes is carried out by the Bank of England.

The decisions on the size of the new pound note were taken by the Bank of England in 1967–68 and not by Ministers. This was a matter within the province of the Bank of England. Indeed, as I shall point out in my speech, the Governor explained to the Select Committee on Nationalised Industries the reasons for that decision.

Perhaps the best way I can reply to my hon. Friend is to try to explain why we have the present structure of coinage. The House may recall that, except for the 50p, the specifications of all the denominations of the existing coinage were those recommended by the Halsbury Committee which reported in 1963. The Committee devoted a great deal of its time to this important question and consulted widely among all sections of the community. Nevertheless, it recognised that the system it was recommending was less than ideal, but the cost and inconvenience involved in wiping the slate clean was prohibitive. The Committee concluded—and this is the crux of the debate—that the shilling and florin ought to be preserved both in order to provide a psychological link between the old system and the new and to avoid the substantial cost that would have been incurred in modifying coin-operated machines, especially gas and electricity meters.

I do not doubt that the Government's decision in 1966 to accept this recommendation was correct, but the 5p and the 10p pieces are both bigger than they need be and their retention involved the disadvantages of limiting the sizes available for the bronze coinage and of imposing severe constraints on the choice of specification for any higher denominations. The Halsbury Committee, in fact, recommended a 20p—twice the weight of the 10p and approaching 1½ inches in diameter—but such a coin would have been bigger than anything else in modern use. The Government felt that as there was no generally circulating coin of that value in the £sd coinage it was by no means certain that one would be needed under a decimal system.

So one ought to look at the present situation in the light of the decision to retain the shilling and the florin as part of the new decimal coinage in order partly to familiarise people with their use within the decimalisation process. Once those decisions were taken the size and weight of other coins were reflected by those particular coins.

The introduction of the 50p piece was decided upon after the Halsbury Committee had reported. The grounds were those of cost. Low-value notes tend to have a short life and it was clear by the late 1960s that a coin, although more expensive in the first instance, would be cheaper in the long run because of its much longer life. The specification was devised by the Decimal Currency Board, again following extensive consultation and research. The problem posed by the already large size of the 10p forced consideration of shaped coins and led to the choice of the equilateral curve heptagon.

The introduction of the 50p in turn placed further constraints on the choice of specification for other coins of high denomination. A 20p or 25p coin, for example, would preferably be smaller than the 50p, but that would also make it smaller than the 10p. A £1 coin ought preferably to be, if not larger than the 50p, at least more important-looking in some way. Thus in considering the case for these denominations one's attention is inevitably drawn again to the case for replacing the 5p and 10p coins and thus providing scope for round 50p and £1 coins, and possibly a 20p intermediate in size between the new 10p and 50p.

The choice of specification is of course, not the only problem associated with the introduction of new denominations. In considering the case for a coin intermediate between 10p and 50p it must not be overlooked that the introduction of a new denomination does not by itself alter the amount of coin required in daily use, which is a function rather of the number and magnitude of the transactions that take place.

New denominations can therefore be accepted into circulation only at the expense of others, and it follows that for every new 20p coin issued, four fewer 5p coins or two fewer 10p coins would be required. The consequence would be to aggravate the difficulty that people already encounter from time to time in not having in their pockets or purses the coins they need to use in certain coin-operated machines, particularly telephone call boxes and parking meters. Depending on the habits of a society, there is undoubtedly an optimum number of denominations for a coinage system. If there are too many, some do not circulate effectively and may become more of a nuisance than an asset.

An important question also is whether a particular denomination is found useful by retailers for change-giving. Most coins enter circulation by being drawn by shops from banks for the purpose of giving change. They then generally find their way back to the banks via public transport undertakings and coin-operated machines. This pattern does not vary significantly and cannot be made to do so by Government action. Thus, if for example, because of the design of their tills or a belief that the use of a particular denomination slowed down change-giving or increased the number of mistakes made, retailers did not draw that denomination from the banks, it would not become an effective component of the currency system. These are points to which in relation to a 20p or 25p coin I do not pretend to know the answer, but I believe that there is a sufficient element of doubt to make further consultation and research essential before a decision is taken.

Similar considerations are involved in the case for the introduction of a £1 coin, and there are also major questions of cost and convenience. As was the case with the 10-shilling note in the 60s, it is now probable that a £1 coin would be cheaper in the long run than a £1 note. But a £1 note is a much more important feature of the currency system than the 10-shilling note ever was and the balance between cost and convenience is therefore more difficult to strike. The question of timing is also difficult, and it would be necessary to be certain that in the rapidly changing conditions of today sufficient time would elapse for the new coin to pay its way before a further reform of the coinage became desirable. Naturally a net saving would take longer to achieve if the introduction of the £1 coin were preceded by changes in the 50p, and in the 5p and 10p.

Before concluding I should like to mention two other points which have interested hon. Members in recent months and to speak briefly on note design. First, I should like to repeat that the Government have no intention of withdrawing the ½p coin. This coin is still in strong demand and plays a significant part in the fight against inflation. Some 140 million were issued by the Royal Mint last year in response to demand, and a ½p is featured in about 10 per cent. of prices recommended in a nationally distributed guide to the pricing of groceries and small household items.

Secondly, I announced in 1976 that it was planned to omit the word "New" from the inscription on the coinage. Most people have dropped this prefix in everyday speech and it would be timely to make the modest change in the coin design. At the time of my announcement it was believed that the change could be effected by Royal Proclamation, but it is now clear from advice that an Act will be required and I hope that time may be found for this before long.

I hope that my hon. and learned Friend will agree that what I have said illustrates that changes in the structure of the coinage can take place only as part of a continuing process of evolution and adaptation.

Mr. Greville Janner

When my right hon. Friend says that, is he suggesting that there is any advance in this process of evolution? Are we to see any change, or is he saying that there is no intention to have any change?

Mr. Davies

It is intrinsic in the process of evolution that there should be change. We are saying that this is an evolutionary change. I do not think that it is possible to say that a review will start tomorrow and that we shall decide in that review what we shall do about the coinage. The only way to deal with this problem is continually to look at the use of coins and to decide matters in the light of change. That is what I mean by evolution and adaptation.

I concede that if we were beginning afresh we should not choose precisely the present range of denominations, but two points need emphasising. First, changes involve costs for the private sector and for the Government: banks, shops and the users and makers of coin-operated machines, among others, could all be affected. Secondly, some quite complex behavioural questions are involved and there is a need to avoid confusion. I can assure the House that the Government will continue to keep these matters under review and that, when the time is ripe, will certainly wish to consult representative bodies of everyone likely to be affected.

The actual design of the note is within the responsibility of the Bank of England, but I should say something about note design and in particular the new £1 note. Although it is logical to compare the size of the new note with that of the note it replaced, the new note, which is some 2¾ square inches smaller than its predecessor, forms part of the series of notes first announced by the Bank in 1968. The other notes of the series are the £5—first issued in 1971—the £10—first issued in 1975—and the £20—first issued in 1970. A new series of notes was thought necessary to make possible economies in production and an increase in printing capacity, to make forgeries more difficult, to introduce a new high value note, namely the £20, and to maintain distinctions of size between the denominations for the benefit of the blind.

Apart from the last consideration, the factor which I understand from the Bank determined the size of the notes was that if a range was to be provided from new machinery, certain mathematical progressions based on the circumference of web cylinder were essential. As the Governor of the Bank of England made clear to the Select Committee on Nationalised Industries in giving evidence at the beginning of this year, the dimension which is critical from the point of view of the blind is the height. The difference in height between the earlier £1 note and the £5 note was only some quarter of an inch and this caused problems. The margin in the case of the new note is almost doubled and the Bank are assured by the associations for the blind that this will fully meet their purposes.

Perhaps my hon. and learned Friend will be disappointed with my reaction to his interesting speech. Obviously these matters are considered all the time. If it is necessary to change any aspect of the coinage, the Government will consult all interested parties and bring forward such changes. However, I stress that changes are expensive, and unless they are proved to be absolutely necessary it is better to retain our present system.

Mr. Michael Neubert (Romford)

I am grateful to the Minister for a brief opportunity to intervene. Does the Minister feel that he has taken sufficient account of the decline in purchasing power of our present currency? The purchasing power has halved in the past four years, and even if inflation is kept down to 10 per cent. it will halve again in another seven years or so. I believe that this is one factor that should be taken into account when considering these matters.

Mr. Davies

The decline in the purchasing power of the unit of currency is one reason why we are constantly looking at the kind of coinage that we have. I am sure that the hon. Member for Romford (Mr. Neubert) would not wish to imply that, just because the unit is declining in purchasing power, people's standard of living is declining. Obviously it depends on how many pound notes one has in one's pocket and not the actual value of the particular pound note. Living in inflationary times, as we have been for quite a while, this is a factor that one must take into account in considering the kind of coinage that is suitable for modern needs.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Four o'clock.