HC Deb 12 December 1984 vol 69 cc1185-90

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

12.50 am
Mr. Geoffrey Dickens (Littleborough and Saddleworth)

This debate, coming as it does before the end of 1984, ensures that the pound note will not be reduced to small change without at least a voice being raised in the House of Commons on behalf of the millions of people who, like me, believe that the pound note has become part of our heritage and must be saved. Having studied the speeches of Lord Glenarthur in another place this week, and recalling the words of the Chancellor of the Exchequer in his autumn Budget statement, may I say that the drastic decision to abolish our pound note is a financial decision that does not measure up to strict examination.

We are advised that an annual saving of £3 million will result. That is nonsense. It is within my knowledge that the sheer weight of the £500 bags of £1 coins will dramatically increase the transportation costs of foreign exchange, and inter-bank branch circulation will be more expensive. Banks supplying currency to industry and commerce to meet wage bills will have to pay more for security. It may take security officers two or three journeys from bank to vehicle against one at present, thus adding to their time and risk at each end of the contract. Storage of £1 coins is also a headache for the banks.

We hear today that job losses may occur in the paper producers and printers of banknotes. I ask the Government to reflect on the queues that will result at cash desks when the staff and customers have to deal with 10 or more coins in change for a £5 note. It is widely believed that to abolish the £1 note will cost £14 million a year rather than save £3 million. Against that background, the House is entitled to demand a financial inquiry before the pound note is withdrawn from circulation.

It cannot be argued that people will get used to the new pound coin in time. We have had it for months and it is unwelcome. The small pound coin hides itself away in the middle of our coin range. It is almost identical in diameter to the 5p and 20p coins, and is slightly larger—but not by very much—than the 1p coin. Our coinage is in a mess, derived from a mixture of inflation and decimalisation. The 50p and 10p coins are both larger than the £1 coin. Switzerland has a complete coin range, with the major coin—the five franc coin—as the largest, then down to two francs, one franc and half a franc. Even in France, the 10 franc coin is large and substantial. The United States coinage is sound. Charities, which rely on impulse donations of £1, £2 or £3 slipped into an envelope, claim that they will suffer. Many people cannot afford to give £5. This also applies to pensioners who like to slip £1 or £2 into birthday cards or letters to their grandchildren. London taxi drivers find the £1 coin confusing and they handle money all day long. For the elderly, we are creating a financial horror.

Bank headquarters are asking their branches to push the new £1 coins, but many people refuse to accept them. We are flying in the face of public opinion, and have produced a psychological devaluation of our respective currencies. Lloyd George introduced the £1 note when he was Chancellor of the Exchequer back in 1914. It was a state financial provision because of the war in Europe. The House may be surprised to learn that that happened during an Adjournment debate. Therefore, it is fitting that today I use the same parliamentary procedure in my endeavours to save the £1 note.

In the name of the people of this nation, I beg the Government to pause and reflect on public opinion, which is calling out to save the £1 note. Let the Government hold a financial inquiry, and if any doubts remain, let us have a referendum so that the House may have the benefit of the advice of the millions of our citizens who hold such affection for the £1 note.

12.56 am
The Economic Secretary to the Treasury (Mr. Ian Stewart)

After the excitement that we have had today, I wish to deal seriously with the points made by my hon. Friend the Member for Littleborough and Saddleworth (Mr. Dickens) about a matter so important to all of us as our national currency. I begin by congratulating him on having obtained this debate at such an appropriate time, so that we can deal with the issues that he has put before the House.

My hon. Friend has made a number of important and telling points about the change from the pound in note form to the pound in coin form, and in particular he commented on public opinion. No Minister offers a referendum from the Dispatch Box because, as my hon. Friend knows, in our political system a referendum has been used only for the most major constitutional questions. In recent times, it was used on the question of membership of the European Community and it was proposed in the case of the Scottish and Welsh Assemblies, all of which were constitutional matters. We do not deal with our affairs by referendum. However, it is not on those grounds that I must resist the beguiling plea to consult the public in that way. I do so because of the nature of the problem of changing currencies.

I entirely accept my hon. Friend's comments that there is an untidiness about the structure of our coinage. Unfortunately, after the period of rapid inflation that we suffered in the 1970s, the existing structure of the coinage was no longer convenient because some of the coins were the wrong size in relation to their purchasing power. My hon. Friend pointed to Switzerland, which has a more self-evident graduated currency. That is enviable, but it is no accident that it has happened in a country such as Switzerland, which has not suffered the ravages of inflation and has been able to maintain such a pattern. I have no immediate further proposals about alterations in the currency, but I assure my hon. Friend that I shall take serious note of what he says about the structure of the currency. It may be that, in the years ahead, we shall consider that further changes are needed.

We have responded to a number of the difficulties caused by the size of the coins already. The introduction of the 20p coin was a good example of this. When the lop coin was doing service on a much larger scale, unless a 50p coin was offered in change for a pound for a very small purchase, one was apt to get nine lop coins that formed an extremely inconvenient cylinder in one's pocket. Therefore we introduced a 20p coin to reduce some of the weight. But the 20p coin was not popular when we introduced it, and had we at the time had a referendum or a public opinion poll, or whatever might do service for that, it is very likely that the verdict would have gone against the coin. It certainly would have gone against the 50p coin 15 years ago, when that was introduced. But after a short while the 50p coin was found to be a very useful part of the currency.

If we go back a bit further to the introduction of the Treasury note in 1914, to which my hon. Friend alluded, we know that there would have been an absolute outcry if it had not been the beginning of the war. The note was introduced then because of the emergencies involved in the war breaking out. But people at that time felt that to have the pound in the form of a piece of paper was a great insult to the currency.

I am sure that my hon. Friend will remember that a few years ago the size of the pound note shrunk. There were all sorts of disparaging references to pieces of paper like soap coupons, and so on. But concern is now expressed about that same shrunken pound. Although cost is a significant factor in the decision, it is not the reason that triggered it. With the persistent inflation of the 1970s, the purchasing power of our units of currency fell to a point at which their usage changed. By 1976, the pound's purchasing power was less than that of the 10 shilling note when it was withdrawn from circulation. Of course, it is considerably less than that again today. Indeed, the purchasing power of the pound today is about equivalent to that of the half-crown when I was at school. In those days people were not saying that they must have a half-crown note. We managed pretty well without such a note. Of course, in those days the 10 shilling note was worth much more than the pound note is today.

Because of the change in the purchasing power of the pound note, its usage has also altered, particularly in recent years. No hon. Member could say that pound notes are not now in a much dirtier state, and are more often torn and damaged than they were a few years ago. That is because people no longer keep pound notes carefully in a separate segment of a wallet or in a hip pocket as they used to, separate from their coins. They tend to keep them in their pockets or purses, alongside coins, and so the notes suffer. If one looks at the issue in that way, paper is not a very satisfactory material for something that is being used as a coin.

Various comments have been made about the possibility of doing more to maintain the quality of notes in circulation. We have obviously looked at many of the options. A year ago my hon. Friend the Member for Shipley (Mr. Fox) suggested plastic notes. But of course forgery is an absolute bar to that solution. We have looked at other means of dealing with the problem, because the servicing of the note issue has become increasingly expensive as notes have been used in that way. But we have not found a satisfactory solution. It is because of the way in which pound notes are now used that we were led to this decision. They now circulate much more between individuals and retailers without going back through the banking system where they could be replaced by new notes.

It is not just a question of the cost of replacing the notes through printing new ones, but also of the notes staying longer in circulation than before, without coming back centrally for renewal. That situation has been deteriorating over the past few years. It was in response to that change that the Government decided that they should introduce the pound coin. It is not some extraordinary decision by the Government alone. It has happened in other countries. In France a 10 franc piece was introduced in 1974, and no notes of that value are now issued. The Germans have a five deutschmark piece, worth about £1.40, which was introduced in 1974 and there are now no notes of that value in Germany. The Japanese introduced a 500 yen coin, worth about £1.70 in 1982, and the note has long ceased. The Swiss five francs is worth about the same, and that has been around for many years. It is not an isolated decision. Other countries are also making the same decision. For example, Australia and Norway are introducing new, higher value coins in 1984.

My hon. Friend made a fair comment about the difficulties faced by people using the pound coin. It is sometimes criticised as being too heavy. It is not as heavy as the 10p piece, which is worth only a fraction of its purchasing power. Its thickness and edge, apart from its different colouration, are deliberately designed to make it easily distinguishable by touch from other coins. As they come into use more generally, they will be easy to distinguish—especially by the blind, whose interests we consulted before taking a decision. They thought it a great improvement on the note.

My hon. Friend mentioned that people liked to put a pound note in an envelope at Christmas or send it to a charity. I assure him that it will not disappear overnight. It will be around this Christmas and next Christmas. The Chancellor of the Exchequer said that it would continue for at least a year. I cannot say more than that as we shall have to see how things progress. It will be around at this time next year, so it is not a sudden change. In fact, by this time next year it will be two and a half years since the pound coin was circulated, which is a long transitional period.

Mr. Dickens

Is my hon. Friend saying that we shall print more pound notes during 1985?

Mr. Stewart

No, that is not what I said. The issue of new pound notes will cease at the end of 1984. However, there are more than 500 million notes in circulation, and they will, no doubt, continue to be in circulation for some considerable time. There will not be a sudden change on 1 January from all notes to all coins. The pound note will remain in circulation for at least a further year.

The pound coin is already increasing rapidly in circulation and it is only when it comes into common usage that it will be more readily distinguished by the public and its advantages will be fully realised. Quite apart from the convenience to the blind, there are specific applications for a coin of that value that have not been fully taken into account for the very good reason that not sufficient of them have been in circulation to encourage those who have meters and vending machines to convert them. For the sake of those who have gas and electricity meters, it will be convenient to have a £1 coin, which is not too large, and which will save the collection of a large number of smaller value coins.

Many businesses held back converting machines until the pound coin was in wider use. The Royal Mint has issued more than 200 million pound coins, and more coins are being produced. I believe that, in a few years' time when people have become used to the pound coin, they will like it as they have learnt to like many other coins which were initially unpopular. At the time the 50p and 20p coins were issued, there was substantial resistance to them, but I do not receive any letters of complaint about them now. It is always difficult to make a transition of this kind, because the public are naturally conservative about currency. They are always reluctant to have any currency changes. If we had had to conduct a referendum or public opinion poll on currency changes, we would still be using groats and nobles, or the Scots among us would be using placks, bawbees and unicorns. There has always been an inherent conservatism about the currency.

The Government have a duty to ensure that the currency is maintained not only in good condition but in accordance with the current needs of individuals, shopkeepers, the financial system, and so on. I assure my hon. Friend that all those factors have been considered. The decision might well have been taken several years ago, but we felt that it was right to wait until there was a clear-cut case. We have allowed an unusually long transitional period for circulation of the coin and note together. The decision was right. The factors that led us to make the decision were justified and they have not changed.

I understand the point that was so well put by my hon. Friend. The public are instinctively suspicious and, therefore, hesitant about using new coins until they have been in circulation long enough and in sufficient quantities to be widely familiar. I accept that, until recently, that has not been the case with the pound coin. With increased usage, the pound coin will be a much more useful and respectable part of the currency than initial reactions suggested. I take on board my hon. Friend's point about the relative size and weight of coins. Those factors must be considered. As I said, already we have introduced a much lighter 20p coin to reduce the great weight of 10p coins. We shall continue to examine all the options. It is helpful for the House to have an opportunity to discuss the questions raised by this change.

I genuinely thank my hon. Friend for giving us an opportunity to consider these matters. I frequently discuss the future of the coinage with my right hon. Friend the Chancellor of the Exchequer, because he is the Master of the Mint and has overall responsibility for the nation's coinage and currency. My responsibilities are more to do with day-to-day matters of the Royal Mint. We take account of the public impact of changes we make and carefully research coin specifications before introducing a coin into the currency. At that time it was necessary to make the change.

Some of the reactions have been exaggerated. I am not accusing my hon. Friend of that. It is frequently said that people will not take the pound coin and that most people regard it as highly unsatisfactory. There have been one or two tests. One major store found that less than 3 per cent. of its customers actively disliked the coin. The Post Office test showed that that applied to an even smaller proportion of people. It is an instinctive reaction to a new coin and not one that attaches to the pound coin as distinct from other new coins.

I hope that my hon. Friend will accept that the factors that he mentioned have been and always are taken into account when any decisions are made affecting our currency. There are sound reasons for our decision in this case.

Question put and agreed to.

Adjourned accordingly at fifteen minutes past One o'clock.