HL Deb 10 December 1984 vol 458 cc87-112

8.38 p.m.

The Earl of Kinnoull rose to ask Her Majesty's Government whether, in view of the substantial public opposition to the planned withdrawal of the £1 note in December 1985, they will reconsider their decision.

The noble Earl said: My Lords, after listening to the fascinating and illuminating debate on the future of Hong Kong I would ask the House now to consider a subject that is a little closer to home; it is the contentious decision of the Treasury to withdraw the £1 note from our currency next year. This is the second occasion that this debate has been on the Order Paper. We were thwarted on the first occasion by 38 enthusiastic speeches on the subject of televising debates. I am glad that the Hong Kong debate has not attracted quite such numbers and has given us a little time tonight to discuss this subject. I am particularly grateful to all noble Lords who have indicated that they wish to intervene in this debate and have stayed behind, and who indeed will make the debate much more valuable.

I feel I should say at the start that the Treasury's record in this whole affair to kill off the £1 note looks, in my view, at best quite appalling and at worst highly arrogant. To consider that the Treasury had no public duty to hold any proper consultations prior to announcing the removal of the £1 note from our currency is truly amazing. Our currency is part of the root of our national life. It is a major currency of the world, even it if is not always valued in the currency markets with the respect it deserves.

Our notes go back to the mid-1700s. The £1 note goes back to 1797; the £5 note to 1793; the £10 note to 1757; and the £20 note to 1725. Our currency paper makers of those early days—Portals—are still suppliers to the Bank of England, as well as being the world's largest suppliers to over 60 countries. Our security printers—de la Rue and Bradbury Wilkinson—have effectively been in busines for over 200 years and also combine to supply over 160 countries with their currencies.

The origins of the Royal Mint go back much further and it, too, provides coins for many countries. But above all there sits the Bank of England, whose renowned world-wide reputation can perhaps be best illustrated when one recalls the skilful way it handled the compensation of the United States hostages in Tehran, when it was trusted by both sides at a very delicate time.

That is the rich heritage of experience that surrounds our currency. From all this it seems hardly conceivable that a major change can be decided without the normal process of consultation; a change that throws us up a stark imbalance between our coins and our notes—what we have known for all our lives; a change that in future will mean a minimum of nine coins' change for a £5 note for a small purchase in a shop; a change that will surely increase the chance of confusion as to which coins are which in the purses of the old and the blind.

The only mitigating circumstances I can find in favour of the Treasury in these unhappy circumstances is that it has consistently stated that the £1 coin would eventually replace the £1 note. But this threat was seen by most people, until the sudden announcement last month, as a long-term threat, similar to the decision on the third London airport which has now been running for 15 years. Fears of any immediate action were further dispelled, I would suggest, by the Prime Minster's own comments last December, when she not only indicated her preference for the £1 note, but also added that she had reason to believe that the £1 note would be retained. It has never been disclosed how the Treasury won the day against such a formidable ally of the £1 note.

At the time of the announcement last month the Treasury gave three reasons to support its decision. First, it was said that the coin was now widely accepted. This, I suggest, is an amazing claim. If any noble Lords or noble Baronesses ask their banks how they judge the coin, they will find that the banks almost invariably say that they have stacks of unused coins in their vaults and that customers simply do not want to know them. In shops also your Lordships will find the same answer, that there is a strong current of anti-coin feeling among customers. The consumer polls show even more positive reactions. For example, the BBC's breakfast television programme spent a week inviting viewers to write in about their attitudes. Over 10,000 letters were received in support of saving the £1 note, from breakfast time viewing alone. I doubt the claim that the coin has been accepted. In fact on the evidence there is a good case to abolish the coin.

The Treasury's second reason given in support of its decision is that the public now so abuse the pound £1 note that the life of the note in circulation has been reduced to only nine or 10 months. The Treasury might have added that our currency paper is of some of the worst quality in the world, despite the fact that we have home suppliers. I understand that there is available a better quality paper which would give at least twice the life at little extra cost. Why we do not improve the quality of our paper even to Hong Kong standards is something that I hope my noble friend can touch upon later.

The third reason the Treasury gave was that by abolishing the £1 note it would save £3 million in the first year. Whether this figure includes the extra cost to the clearing banks for handling millions of £1 coins or the loss of overnight interest on their balances I doubt very much. Whether the £3 million saving takes into account the loss, or possible loss, of 100 jobs at the printing works at Loughton caused by the death of the £1 note is again perhaps something my noble friend can touch on later.

The decision by the Treasury to kill off the £1 note is supported, I believe, by the weakest of arguments. There is no logic why the £1 note cannot survive alongside the £1 coin for many years to come. This forced decision is, I believe, wholly bad. It demeans our currency, and it is clearly against majority public opinion. I know that the Government are sensitive to public opinion, as indeed are all good Governments. They should accept now that there is an overwhelming voice to retain the £1 note, and it would be a mistake not to consider this.

I believe my noble friend should take away tonight for further consideration what will be said by others far better qualified than myself. It is an overwhelming case to save our £1 note.

8.47 p.m.

Lord Beswick

My Lords, by no means for the first time the noble Earl, Lord Kinnoull, has shown that in matters of public concern his judgment is often sounder than that of this Government. I believe the Government to be wrong in their decision to withdraw the £1 note, and I am sure they are wrong, too, in the way they have reached their decision and in the reasons or excuses which they have given for that decision. In the first place, there should have been consultation. In a matter of this kind, when the day-to-day interests of the general public are involved, surely a serious effort should have been made to have established public wishes in the matter.

I can only say that when the noble Lord, Lord Glenarthur, answered a Question on this point it looked as though he had been searching the scriptures for some guidance on how to reply. His reading appeared to have been selective, because he came up with advice from the good book that a soft answer might turn away wrath. His answer to a Question from the noble Baroness, Lady Burton, about whether there had been any consultation regarding public reaction to the proposed withdrawal of the £1 note may have turned away immediate wrath, but it must have made very sad reading to the noble Lord when he came to look at Hansard the next day.

The Government have no mandate for this action. They did no consult the people concerned about withdrawal of the note, whatever questions they might have asked about the shape or size of the coin which is to replace the note. The arguments about cost are no more convincing. Some day we might have a really fundamental discussion about profit or loss in the issue of currency and credit. But if the Government thought that an economy was called for in the administration of the issue of £1 notes, as the noble Earl asked, what tests were made of better quality paper? What estimates were made about the cost of better paper with a longer life? Can we have an answer to that? Can we be told what was done? Were the clearing banks consulted about the extra costs of transporting coins and modifying all their dispensing machines?

But the most serious point that the noble Lord made in his answer on 22nd November was when he said that those who did not like £1 coins could always use a £5 note. I am bound to recall the noted saying that if they cannot afford bread, they can always eat cake. If the lowest denomination in paper currency is to be a £5 note, then that note will be devalued. The noble Lord will find himself in many situations (as shall we all) when he will be offering a £5 note where once a £1 note or two £1 notes would have been acceptable.

This proposed change will add certainly to inflationary pressure. I remember the days when I spoke for the Treasury from the Box opposite and I had to justify the 100-pence pound against the ten shilling system. I am quite sure now with the benefit of hindsight that the Treasury arguments which I then used were wrong and that the Opposition of the day were right when they said that the proposed change would be inflationary. The Labour Government of the day were asked to think again. They should have done so.

I understand that the present Prime Minister has said that, after giving way on the students' grants, there will be no more concessions. That would be an unfortunate posture to adopt, especially for a Government elected by a minority of the electorate. In this case, the right honourable Lady would he much better advised to think again. I believe that it was the noble Lord, Lord Sherfield, who, when we debated the case of the 100-pence pound, said that to think again might mean that minutes must be torn up and decisions reversed; that there might even be faces to be saved, but that it would be worth it.

There is no party point here, my Lords. Any taunts about U-turns would be uncalled for; but stubbornness, I am sure, would be regretted. This is a case where public opinion, if properly assessed, ought to prevail or certainly should be taken much more seriously into account. Certainly, an adult electorate should be given all the relevant facts. And, even if there are some small apparent savings to be made in the mechanical processes of currency manufacturing, the basic, longer-term economics of the nation could show a different result. I hope that the noble Lord when he comes to reply, speaking for the Government, will be able to tell us that he at any rate will endeavour to ensure that this decision will be looked at again.

8.54 p.m.

Viscount Massereene and Ferrard

My Lords, I should like first to thank my noble friend Lord Kinnoull for bringing up this subject. I may be exaggerating, but I think I was the first person to bring this subject to the attention of the House several months ago in my Question. My interest in this subject has been aroused by the fact that at my place in the country, where I have the grounds and gardens open to the public, we have many tens of thousands of people who come in. Your Lordships would be surprised at the great difficulty that we have in getting the public to accept these £1 coins. I would say that certainly less than 10 per cent. will accept them and even then only after argument.

Of course there are many disadvantages to this coin and we have already heard some of them this afternoon, so I shall not repeat them. One of the serious disadvantages, which I think my noble friend mentioned, was the great difficulty that old people and people with bad eyesight have in handling them, especially in the evening. Of course, it is not everybody who uses taxis, I know, but in using many other forms of transport, they have great difficulty in seeing these coins. I think they are a very badly designed coin and I cannot imagine why, as the noble Lord, Lord Beswick, has said, there has not been more consultation with the public. I could easily be wrong here, but there appears to have been no consultation and the only excuse that I have heard from the Government is, "You must remember that when the golden sovereign was done away with, when the paper currency was brought in, there was a great fuss but it soon died down".

My Lords, that is quite a different matter. After all, the golden sovereign had an intrinsic value. I think that I am right in saying that, certainly for 100 years, it has more than maintained its value. Today, we are asked to choose this extremely small and very inconvenient coin—inconvenient especially if one has a hole in one's pocket, not that I have, but with a lot of coins in one's pocket it becomes a possibility. We are asked to accept these very small, inconvenient coins made of a base metal and which have no intrinsic value.

I think that we really do have too many small coins. Perhaps it is impudent of me to advise the Treasury; but, if they are insistent upon having a £1 metal coin, then I would suggest that they do away with the 50p piece and make that the £1 coin. If they do that—and I do not suppose they will though I hope they will—they must colour it with a far more golden colour than the present coin because it is very difficult to tell the difference between the present coin and the 20p piece. I do hope that the Treasury will withdraw these coins and, if they are insistent upon a coin with a £1 value, that, as I say, they will make it larger and far more easily seen.

I will not speak for too long, but I have to apologise to my noble friend who introduced this debate and to the House. When I rang up the Whips' office—and I do not blame them—I was told that the Hong Kong debate would probably end between 7.30 and 8.00. I have a train to catch and, if I do not catch it, I shall not get home tonight. I hope therefore that your Lordships, and especially my noble friend the Minister, will forgive me if I leave before the debate ends. Of course, that depends upon how quickly the debate goes. but I do not imagine that it will be over in an hour.

My Lords, I should like to plead with the Government to think again on this coin. I have had practical experience of its use—although perhaps I should say, "We have had practical experience" (not using the Royal plural but referring to people on my estate)—of the great difficulty in getting the public, and especially foreigners, to accept this coin. I would again ask the Treasury (who are a very tough nut to crack; and of that I can give many instances, but this is not the time to do so) to think again.

9 p.m.

Lord O'Brien of Lothbury

My Lords, it was not my intention originally to come to the House today, but in view of my past close connection with the subject of this debate I felt I ought not to miss the opportuity to take part in it.

Some of your Lordships may be aware that for seven years between 1955 and 1962 all Bank of England notes bore my signature. During those years my interest in the note circulation was constant and acute, being responsible, as all Chief Cashiers of the Bank of England are, for satisfying in the first instance the Governors and Court of Directors of the Bank of England. and finally the Government of the day, that the banknotes in issue serve the needs of the public. I am, in fact, now the senior living former holder of that office and the last to put his name on the old white Bank of England "fiver"—for my money, the most beautiful banknote ever produced, although unhappily not the most secure against forgery and impractical for use in these post-inflationary days.

My memories of those far-off days are now fading, and I have had no opportunity to refresh them by contact with the Bank of England. Nevertheless, I hope that I may be able to be of some help in this debate, even though I know nothing about consultations or financial savings.

May I start with some even more distant reminiscences? When I first joined the Bank of England in 1927 this country was on the gold standard and the gold sovereign was the principal coin of the realm although not, if I remember rightly, any longer in general circulation. The currency consisted of high sum Bank of England notes down to the smallest denomination of £5, supplemented by Treasury notes for £1 and 10 shillings signed by the Permanent Secretary to the Treasury, first Bradbury and then Fisher.

In 1928 the Treasury notes, which had been issued in a hurry at the beginning of the first world war, no doubt to replace the sovereign, which was withdrawn, were withdrawn and replaced by Bank of England notes of the same denominations. I would remind your Lordships that in those distant days an ounce of fine gold cost 85 shillings.

My princely salary, much envied by my friends, when I entered the Bank was £150 a year; within a few years I was married on rather less than twice that amount; and I lived comfortably enough, with coal, which we all burnt in those days, at half-a-crown a hundredweight. This only illustrates what we all know only too well: the pound in your pocket is now far from being what it was. Is it therefore reasonable to resist the change from note to coin which the Government have now decided to force upon us?

Many other countries use coins for similar or larger amounts in conjunction with banknotes, the smallest denomination of which is at least five times the value of the coin. For example, the French 10-franc piece is nearly equivalent to a pound, and the Swiss have a 5-franc piece worth nearly £2. This is much the same size as our 50p piece. On the other hand, the US one dollar bill, worth (at least for the time being) nearly £1, is still in active circulation and, as far as I know, is likely to remain so. Incidentally, I have always felt that the US dollar bills looked more like real money than most currencies, and at one time, when I was Chief Cashier, I had hoped to imitate them by making all our banknotes the same size; but the opposition of the blind put paid to that idea.

I got much further some 25 years ago with a plan to issue a £2 note. That proposal got as far as the Cabinet, who turned it down because, they decided, it would look inflationary. If we had such a note today the prospective loss of the £1 note might not be causing so much unhappiness, although I must admit that the United States two-dollar bill has never been a great success.

Certainly an essential characteristic of any currency is that it should serve the needs and wishes of the people who use it. I think there can be little doubt that the large majority of users want the £1 note to stay. It is, however, a very uneconomic note to retain in use. Its much reduced value has resulted in its vastly accelerated circulation, so that after only a few months its condition is so poor that it has to be replaced by a new note. The consequent pressure on the Bank of England printing works is unremitting and obviously pointless as against a £1 coin, which will remain in circulation for some 40 years and involve much less expense over such a period.

I would remind your Lordships that for many years past the Bank of England has reluctantly had to reissue used notes, a thing it never did in earlier days, because the printing works is just not capable of coping with the vast demand for notes in the country at present. But, it is said by other noble Lords and will be said by many other people, coins are heavier than notes and in quantity are a nuisance to carry around, whether in a trouser pocket or in a handbag: so why, it is asked, is not user preference being respected, despite the additional cost of doing so?

From time to time suggestions are made that the life of banknotes could be substantially lengthened by coating them with plastic or by some other special treatment. Ideas of this sort have been around for a long time. I remember that 30 years ago the Bank examined a Dutch process called, if I remember rightly, the van Houten process for coating banknotes. We did not find it acceptable. I do not remember the detailed technical reasons for rejecting it, but no doubt the effect of increased thickness on handling notes in bulk was a consideration. I am sure that research has continued since my time, but not much seems to have come of it yet. Certainly the idea that an improved quality of paper might be used is also worthy of examination.

Like most people I shall be sorry to see the £1 note go, but I am sure that the Government's decision to force the issue by withdrawing the note is an acknowledgment of their inability to effect the change by persuasion. I have tried to illustrate both sides of the question, but I feel forced reluctantly to accept that the Government are right. But what they are doing focuses attention on our coinage. As your Lordships all know, the Chancellor of the Exchequer is also Master of the Royal Mint. I do not think he can be proud of the motley collection of coins he issues for our use. They have no rational graduation in size, and are not designed as a set. As individual coins they give little pleasure to the eye, unlike so many beautiful coins of the past.

I would recommend that the money to be saved by replacing the £1 note with the £1 coin be used to help to finance the design and issue of an entirely new coinage. I know that widespread use of coin machines makes this a daunting task, but it should, nevertheless, be undertaken. If it were to be tackled, I strongly recommend that the Swiss coinage—which I have used frequently on my visits to Basle over many years—be taken as a model. The Swiss coins are not unduly large. They are graduated in size strictly according to their value, and with milled edges in the case of higher values. They are extremely well produced, and are the better for all being round and designed in a traditional manner. In short, they look good coins—which, in my opinion, ours do not. With such a coinage, the present discontent which we are debating tonight would, I believe, fade away.

9.8 p.m.

Lord Rodney

My Lords, I must declare an interest in as much as I am a director of one of the companies in the Portals Group which, as I am sure your Lordships all know, manufacture the paper for the Bank of England and, incidentally for the Scottish £1 note and for some 100 other currencies throughout the world. I should also like to start by thanking my noble friend Lord Kinnoull for providing us with the opportunity to discuss this subject this evening.

I, too, believe that it is regrettable that Her Majesty's Government have taken such precipitous action to discontinue the Bank of England £1 note. The warning was in weeks rather than months. It is also to be regretted that this decision was taken without any prior consultation with consumer or other interested bodies. One can argue the pros and cons of the £1 coin itself; but, as we have heard from a number of other speakers this evening, this question remains: what do the public want?

We have been given a totally unsupported figure of a saving of £3 million achievable by replacing the note with the coin. I suspect that any accountant worth his salt could shoot holes in that calculation. There again, there have been criticisms about the durability of the present £1 note. It is probably not generally known that since 1966 the Bank of England has progressively and increasingly recirculated the £1 note. Prior to that—as the noble Lord, Lord O'Brien, has already said—the Bank of England only issued new notes. Evidently, this practice has placed an increasing demand on the quality of the paper used. This challenge was met by Portals Limited, with the development of a much stronger paper; one which can be folded 3,500 times as against 1,500 foldings previously. May I say to the uninitiated that a machine is used to fold the paper for the purposes of such testing. The new paper will stand up to 3,500 foldings. This more than doubles the life-span of a note, with only a marginal increase in the cost of the paper.

Regrettably, the Bank of England has not adopted this higher quality of paper for any of our banknotes, with the exception of the £50 note. Surprisingly enough, our friends north of the border have chosen the paper for their Scottish £1 note. A similar quality of paper is used by the Americans for their one dollar bill. One is tempted to ask whether the Old Lady of Threadneedle Street is not being a little too parsimonious.

I should like to suggest to Her Majesty's Government that they continue the £1 note and the coin in tandem; that the Bank of England adopts the higher quality of paper that I have mentioned; and that consultations take place to obtain the views of the general public as to whether or not they want the £1 note to continue. However, it may be that the Government are determined to have their way and that no amount of argument can persuade them to change their minds. If that is so, I would ask them to give serious consideration to at least introducing a £2 note. This would be quite within the criteria followed by other developed countries (although I believe I stand corrected by the noble Lord, Lord O'Brien), none of which has such a large step between its highest denomination coin and the lowest denomination note. We are contemplating a 5:1 step from a £1 coin to a £5 note. We have already heard about the number of coins which one can end up with after proffering a £5 note; one can get back anything between 9 and 11 coins. Your Lordships will agree that there is a strong argument for a £2 note if the £1 note is withdrawn.

There is another consideration to which I should like to draw your Lordships' attention, and which I believe is relevant when discussing English bank notes. Our friends overseas see our bank notes not only as the currency of this country but also as an example of our ability to produce quality paper and print. I suggest that when consideration is being given to the design and quality of our bank notes, decisions should not be taken solely on economic grounds, but the image they create abroad should also be given weight. Before the introduction of the present smaller notes in 1978, the £1 note was held in high regard as an example of British quality. Sadly, since then it has commanded less and less respect with no improvement in the paper quality and with a cheaper printing process.

Britain has the largest producer of banknote paper in the world and two large commercial banknote printing companies whose total exports of paper and print add up to considerably more than £50 million a year. In fact, we have probably the largest banknote producing industry in the world. I ask: do we not have responsibility to help promote that industry though the excellence of our own notes?

9.14 p.m.

Viscount Hanworth

My Lords, I join this debate rather lightheartedly simply because I want to make the point that some people, like me, ask for pound coins and not notes but it is sometimes quite difficult to get them. Why do I say this? It is because I have a purse which has a pocket which will take only tightly-folded £1 notes and it is always a little on my conscience when folding those notes. It is rather anti-social.

To be rather more serious, I accept that the majority of people are opposed to the change. I agree with the view that probably the Government hope that people will get used to the £1 coin, but, as they are not doing so, they feel they ought to take action now rather than wait. Anyway, what is the point in saying that people were not consulted when we know jolly well that if they were consulted, they would vote against it? Many long-term measures are unpopular. Do we want in future that we all press a button in referendums on every subject of debate, without first having tried to get across the facts? Even then, this Athenian approach does not appeal to most people, except on some selected issues; for example, what about capital punishment?

I acknowledge that the £1 coin can be difficult to distinguish from a 5p coin in some lighting, but it has greater thickness which can be felt. The £1 and the £5 notes have a similar problem in some lighting and only a small size difference is then apparent. I am sure that the Government will say that the £1 coin is, and will in future, be needed more and more for coin boxes. One has only to file down a disused 5p slot and make some alterations for a £1 coin to be acceptable. I am inclined to think that is the reason why the Government made the new coin that size, but I may be wrong. If I am right, no doubt the coin box industry had a strong voice in the decision to produce a coin of this size.

A different size coin, somewhat larger than the 5p, would have helped. Never mind; it is a waste of time to protest as there are now too many protestors on so many issues. I think we must accept this coin. Let me suggest that the personal handbag makers could now reap the benefit and perhaps even bring again into circulation the old gold coin holder, so conveniently put into the waistcoat pocket as an appendage of a watch chain.

In all this we must realise that the coin is worth less than the old 10 shilling note, when we had very large and heavy halfcrowns which, I suppose, if one wishes to go back, roughly equated to the £1 coin of today. So the weight of the new coin is minimal. If gentlemen insist on keeping coins in their trouser pockets, it will mean that their wives will have to mend them more frequently, and there will be an inevitable loss of money for those who are athletically inclined. I strongly suggest to them that they use a purse, which is much more sensible.

On the whole I support the introduction of the £1 coin. Although I know that it is unpopular, I believe that people will become accustomed to it and, with a little more inflation, its benefit for use in slot machines will be apparent.

9.18 p.m.

Earl De La Warr

My Lords, like my noble friend Lord Rodney, I, too have to declare an interest as a director of Portals Holdings. Lest your Lordships should think that Portals is badly in need of succour from this decision. perhaps I should add that that is very far from being the case. The loss of the note will scarcely be noticed, except in slightly different delivery dates. Therefore, I ask your Lordships to accept that I am capable of taking a totally objective view.

I think that all the arguments that it is possible to adduce for keeping the pound note have been adduced, but there is one thing which I must say which has been said once or twice before. It is that the Government have surely behaved in an abrupt and arrogant way in the speed with which they have inflicted this news upon us. It may well be that it was impossible to consult the public, but surely they should have gone to the clearers and discussed it with them. Surely they should not give the Bank of England printery only 10 days' notice and the National Westminster Bank, or whoever else it may be, only a fortnight's notice. That is a very curious style of government. It is something to which I want to draw your Lordships' attention. I see that the noble Lord, Lord Beswick, is smiling.

Let us agree that it was a good idea to mint the pound coin; it was time that we had it, and there are a number of uses for it, such as in vending machines. I am told that London Transport on the buses and more particularly on the Underground has welcomed it. But why, oh, why, that ridiculous little object which just from time to time one finds nestling among a number of 10p coins in one's pocket? It is terribly easy even for the likes of us to get confused about how much money we are carrying, but we should think of the old people who find it immensely difficult. I know of two ladies who have to take the pound coins off their old mothers every week and given them nice, even if occasionally tatty, pound notes instead.

We were immensely interested to hear what the noble Lord, Lord O'Brien, with all his experience, had to say. but I was left in some doubt as to where he really stood on this matter. What we heard him say in—dare I say it?—a rather wistful way perhaps, was that it would he nice to redesign the whole coinage and start from scratch. Maybe it would, but given that that is not likely to happen, I wonder whether really he was saying to us that, with the coinage being as it is, it is right to lose the pound note and substitute the pound coin.

Lord O'Brien of Lothbury

My Lords, may I clear the noble Earl's mind on that subject? I really believe that this has to be done and that the coin must replace the note. It is sad, but I think that that is so.

Earl De La Warr

My Lords, I am most obliged to the noble Lord. I hope that he did not mind my taking him up on the matter.

We have been given a number of reasons as to why the change should be made, but I have to say that none of them is immensely credible. I shall not enlarge on that, because other noble Lords have already done so. Now we come to the real question, which is: Why was it really done, and done so suddenly? We have yet to be given reasons that we can really believe.

I shall be a little bold and hazard a guess. I ask your Lordships to remember that the Royal Mint is owned by the Treasury and has nothing to do with the Bank of England. It is located in Llantrisant, an area of very high unemployment. We all know, I think, that for years the Royal Mint has been exporting coins to other countries, and with the mints that are growing around the world that business is likely to be declining. Indeed. if we take a look at what has happened to the private mint in Birmingham and see what a pickle that is in, credibility is lent to that theory.

I suggest that the fact of the matter is that these manufacturers have done a bad bit of marketing, and they are overstocked with what has turned out, to their horror, to be a slow-selling line. It is just as simple as that. They have found that this line cannot compete with the paper product of the Bank of England. So they have persuaded the Chancellor that to give them a monopoly is the only answer.

What a strange concept, coming from a Tory Government who believe—and I think they are right, too—in the market place as being the most important tool in the running of the economy. You see, my Lords, if you believe in the primacy of the market place, you believe in this right that the public has to make its own choice. The public has made it choice abundantly clear and does not wish to he deprived in this arrogant and callous way.

9.26 p.m.

Lord Monson

My Lords, I should like to join other noble Lords in thanking the noble Earl, Lord Kinnoull, for giving us the opportunity to debate the threat to our £1 note. This is not the relatively trivial matter that the Government evidently suppose. On the contrary, the decision, if implemented, will cause millions of people continuing irritation and inconvenience and will involve them in continuing unnecessary expenditure, albeit to a minor degree. This is leaving aside the wholly valid historical and sentimental considerations to which the noble Earl alluded. For this reason, opposition to the change, if it happens, will not be a nine-days' wonder which will fade away long before the next election—far from it. I think the Government should take note of this.

Let me start by enlarging on an excellent point made by the noble Lord, Lord Kilmarnock, when we touched upon this matter during Starred Questions several days ago. This concerned the question of weight. The subject of weight was treated then in a somewhat flippant fashion, but it is a serious point. Suppose that a man goes into a shop and makes purchases to a value of £ 1.38, for which he tenders, as one might expect, a £5 note. At the moment his change, amounting to £3.62, is likely to consist of three £1 notes, a 50p piece, a 10p and a two pence piece, weighing in total 35 grams. However, one year from now, if the Government cannot be persuaded to change their minds, the weight of that change will rise from 35 to 60 grams, an increase of no less than 71 per cent.

The Chancellor will doubtless argue that this is a necessary burden so as to enable taxpayers to save a collective £3 million per annum. But I would submit that the Chancellor's calculations are mistaken, for this reason. Nearly all heterosexual males, plus a substantial proportion of those who are otherwise inclined, do not carry their coins in purses dangling from their wrists, as the Government seem to imagine. No; they carry them in the pockets of their suits or of their sports coats—pockets which are already sagging dangerously under the weight of what must be the heaviest coinage in world, even without the added £1 coin.

There are 17 million adult males in Britain. If each one of these adult males has to spend an extra £1 a year on having the pockets of his suits and jackets repaired or replaced in consequence of £1 notes being replaced by coins—and this is a conservative estimate—then, far from the taxpayers saving £3 million a year, taxpayers collectively will be a net £14 million per annum out of pocket, possibly in more senses than one.

Moreover, one reads in The Times today that the clearing banks are also opposed to this move in that it will cost them several million pounds a year in added handling charges, although no doubt the clearing banks are more readily able to afford this money than members of the public. This is really the answer to those who tentatively support the Government on the grounds that dirty and crumpled £1 notes are aesthetically displeasing. Yes, indeed, that is so: but, conversely, there are few things more aesthetically pleasing than a crisp new £1 note. There is no reason why we should not have one, whether plastic coated or in its existing form particularly when, as I hope I have demonstrated, they will actually cost the public less.

Other countries have certainly arrived at a similar conclusion. The United States, Canada and Australia have all kept the paper dollar. The average value of the dollars of those three countries, as of last Saturday, was 75⅔p. So the average value of the dollar notes is approximately 15 per cent. (that is to say, less than one-sixth) of the value of the smallest note that the Government now propose to retain; that is, the £5 note. Even if one treats dollars as a special case (although I do not see why on earth one should) the position is not so very different in Europe. The average value of the smallest note in circulation in the six original EEC countries—France, West Germany, Italy, the Netherlands, Belgium and Luxembourg; I have not had time to investigate those that have joined since—as at last Friday's closing prices, is £1.66; that is to say, less than one-third of the value of the smallest note proposed for England and Wales.

There is another group of people extremely anxious and upset about the Government's proposals. It is the group of people who organise charities and who collect for charity. At the moment, many individuals of modest means, very few of whom have bank accounts, have the habit of putting a £1 note in an envelope and sending it off to the charity of their choice, either on a regular basis or when there is an appeal for some emergencey such as the Ethiopian famine disaster. Clearly, no one will put a £1 coin in an envelope. The sort of people about whom I am talking cannot afford to put in a £5 note; and few of them are prepared to stand in a long Post Office queue in order to pay over the odds for a £1 postal order. So the charities are extremely worried that their takings will slump.

Indeed, the noble Baroness, Lady Macleod of Borve, who, unfortunately, is not able to take part in the debate today, told me less than an hour ago that a charity in which she is interested had received £575 this morning alone in separately-posted £1 notes. Naturally, the noble Baroness and her colleagues are very worried that this sort of figure may never be repeated and that their takings will decline quite dramatically if the Government's proposals go through.

At the very least, if the Government are absolutely adamant about abolishing the £1 note, I urge them to introduce a £2 note without delay, as the noble Lord, Lord Rodney. also urged. Not only would this help the charities at least to some degree; it would also help the clearing banks and, above all, make the day-to-day life of millions of our fellow citizens just a little less difficult.

9.34 p.m.

Earl Fortescue

My Lords, I shall be brief, as a number of the points that I had intended to make have already been made—surprisingly, many of them by the noble Lord, Lord O'Brien, whose career has been so very different from, and so much more distinguished than, my own. May I be forgiven if it appears sentimental, but I feel that a matter of national pride is involved here. The £1 note is more than just a piece of paper. As the noble Lord, Lord O'Brien, pointed out, on the note is written, I promise to pay the bearer on demand the sum of one pound". and it is signed by the Chief Cashier on behalf of the Governor and Company of the Bank of England. The £1 note may recently have become less popular because it is so often in such a filthy state. I suggest that the only reason for this is that they are not withdrawn and replaced as often as they should be. Until a few years ago if one cashed a cheque at a bank, one was always given new £1 notes. I urge the Government to retain a reasonable supply of respectable £1 notes, even if they do go in for the £1 coin.

As to the coins, these appear to have been designed by different groups of students and distributed by the Mint on an ad hoc basis, and without much thought. Surely their size, their weight. their colour and their shape should relate to their value in some way which the public can understand. The £1 coin does not meet these criteria. It is just another medium-sized coin.

Trouser pockets are often over-weighted by coins which turn out to be 10p or 2p. Occasionally an honest cashier points out to me my mistake as I am offering 20p instead of the 1p or 5p which I had intended. Many of your Lordships' eyes, like mine, are not as good as they used to be. Just think of the number of elderly people there are in this country who pay out money in poor light and cannot rely on an honest cashier. I believe that we deserve something better than this from the Govenment and the Mint. Let us retain a decent £1 note and try to rationalise the coinage.

9.37 p.m.

Lady Saltoun

My Lords, I too am grateful to the noble Earl, Lord Kinnoull, for raising this matter this evening. But surely this is a very great fuss about a very small matter? A sort of storm in a pocket book. Had it not been for the fact that the 1914 Currency Bill was introduced in both Houses on the third day of the 1914 war, I have no doubt that the issue of £1 notes which it introduced would have given rise to quite as loud lamentations as their prospective demise does today.

One pound coins in various forms have been with us since 1489–505 years—and the £1 note for only 70. When the £1 note was issued in 1914 it was worth approximately I think 16 times as much as it is today so it was worth putting away carefully in a notecase. Today it is not; it has become change. It is only worth—as I think the noble Viscount, Lord Hanworth, said—the equivalent of about half-a-crown in my childhood. People complain of the weight of the £1 coin. Yet it is lighter than a half-crown, and I do not remember anybody complaining about the weight of half-crowns then. We were only too delighted to have any!

One of the troubles is the £1 coin itself. It is too similar in size and colour to the 5p piece and in a bad light they can easily be confused. The noble Lord, Lord O'Brien of Lothbury, touched on this aspect. But before decimalisation in the then two categories of coin the size reflected the value. The so-called silver ranged from the half-crown down to the threepenny bit; and the coppers from the penny to the farthing. Incidentally, I think the noble Earl, Lord Kinnoull, said that when we had the £1 coin we would then have nine coins; in fact, I think that after the demise of the half-pence piece we will end up with seven coins instead of eight, which we had in the days of pre-decimal coinage.

However, we seem to have lost this relationship between size and value which made it easy to distinguish coins one from another, even by feel in the dark, as the noble Earl, Lord Fortescue, has just said. Although I think that we have had enough changes to be going on with for the time being, it is perhaps something to keep in mind for the future, and I wonder whether the noble Lord, Lord Glenarthur, would care to comment on this in his winding-up speech.

I shall not leave your Lordships in any doubt where I stand on this matter. I welcome the £1 coin; I should welcome even a £2 one or a £5 one because I much prefer them to dirty, crumpled notes. I think a lot of women do: perhaps we are more pernickety than men over this. Incidentally, during the Second World War when clean new £1 notes were rare my mother, who could not bear dirty notes, used to launder them, scrubbing them vigorously with a nail brush in the basin and then hanging them out over the hot towel-rail to dry. Most of them survived, such was the quality of the paper, But I wonder whether the plastic-coated note which has been suggested would survive. I am told that it tends to melt under heat.

Various noble Lords—the noble Lord, Lord Monson, in particular—are concerned lest their pockets go into holes under the extra weight of the coins, because modern pockets are very flimsy. I hope the manufacturers of trouser pockets will take note of the fears expressed by your Lordships this evening. I do not advocate handbags for men, although of course Scotsmen wear them as sporrans slung round their waists. But I do not see why men should turn up their noses at purses. In 1815 my predecessor was hit in the thigh by grapeshot at the Siege of Peronne. He had in his trouser pocket a purse full of ducats, which took the force of the shot, and instead of being mortally wounded he was only badly bruised. I therefore recommend to your Lordships the use of purses, filled with £1 coins; they could be life-savers. Meanwhile, I commend the £1 coin and I suggest that the Poet Laureate should write a requiem for the £1 note.

9.43 p.m.

Lord Moyne

My Lords, I rise to say only a very few words, as is appropriate to this hour of the night. They result from a supplementary question I was trying to ask a couple of weeks ago on an occasion when many of us were on our feet at once. Our noble Leader, in his wisdom, suggested we should save up our curiousity for this forthcoming discussion. I was glad that he did so, since I had found myself trying to shout down the noble Baroness, Lady Burton, whose attitude I was endeavouring to support.

My question was to have been, and now is, whether, in view of the announcement that £1 notes are still to be available in Scotland, Her Majesty's Government will not introduce the necessary legislation to give Scottish £1 notes the status of legal tender both in Scotland and in the rest of the United Kingdom. This is evidently possible since it was done for Scotland possibly in the first world war; and I am reliably informed by my Scottish bank manager that it certainly was in the second world war, though rescinded in 1946.

If it could be done then, why not now, and, if for Scotland, why not for England? From the statement made by the Prime Minister in another place I understand that she would have liked to maintain the £1 note but feels it has to go for reasons of economy. My suggestion is a way of maintaining the £1 note without undue expense. The additional notes required for the South would, I imagine, have to be underwritten by the Bank of England, which might indeed reasonably expect to pay something towards the production of the extra notes, though less than if producing them itself.

Scottish notes are, I know, widely accepted in England, hut they are sometimes refused. I heard only recently of a Member of this House whose secretary arrived late for work and in great distress at having been turned off a bus when she only had a Scottish pound note with her. Since the status of legal tender has been given in the past to Scotland, I hope that Her Majesty's Government will try to meet the widespread liking for pound notes which the Prime Minister herself has endorsed, by enabling Scottish pound notes to fill the gap everywhere in Britain. No U-turn would be involved. Where there is a will there is a way.

9.45 p.m.

Lord Barnett

My Lords, this has been quite a remarkable debate, and I should like to begin, as others have done, by congratulating the noble Earl, Lord Kinnoull, on introducing it to your Lordships' House. A number of your Lordships and the noble Lady, Lady Saltoun, have supported the coin, although I must say that I thought the strongest case was made by the noble Lady, Lady Saltoun, who said that you could save a life by maintaining the coin. As I have said, it has been a fascinating debate. About the only case that I can think of for justifying maintaining the £1 coin as opposed to the £1 note, is if I thought that a lot of people were going to be shot in their pockets! This has also been a well-informed debate because among those who have contributed has been the noble Lord, Lord O'Brien, who actually signed the notes for so many years.

I do not for a moment pretend that this is the most important issue that the nation has had to face in recent years or will have to face in the years ahead. But precisely because it is not the most vital issue of the day, because the cost is comparatively small, it is not unreasonable that a Government who care for the consumer should take account of what the consumer thinks on this issue. Let us assume that your Lordships in this debate truly represent the nation, which I am not suggesting for a moment is necessarily true, and that there was a substantial majority in favour of retaining the £1 note. I should have thought that one could go much further, as a number of noble Lords have said as regards what the consumer really wants. However going on that assumption, it seems to me—and the point has been made by a number of noble Lords—that the only real case that the Government have put to the country, to your Lordships' House and to the other place is the saving of £3 million a year. The Government have made no substantial case.

Having spent some time as Chief Secretary to the Treasury, cutting many billions of pounds of public expenditure, I do not sneeze at £3 million; it is not an unimportant sum. On the other hand, I am bound to say to your Lordships that that amount of money could almost be lost in what is called the "roundings". At one time I wondered what that meant. On the very first occasion I entered the Treasury my accountancy eye went up a column of figures which did not add up. I asked my private secretary to take the figures away and find out why they did not add up. He did not know at the time, but he came back a little later and said, "Chief Secretary, it is all because of the roundings. Each line is taken to the nearest million and it would be an enormous coincidence if they added up to the right figure". And of course they did not. Therefore, I suggest that it would not require a great deal of creative accounting—which the Chancellor has pursued in recent years to an even greater extent than I did. If one wanted to persist with the £1 note, as I hope the Government will, and as many of your Lordships have suggested, the cost would be lost in the roundings.

I would not lightly suggest to your Lordships that we should spend even £3 million of public money without giving careful thought to it. I should like to ask the noble Lord, Lord Glenarthur, who is to reply to the debate, whether the true cost to the nation is going to be £3 million of saving or rather substantially more. It has been suggested by the noble Lord, Lord Monson—and I should be interested to hear from the Minister whether he has done a similar calculation—that it might cost £1 a year per male to strengthen trouser pockets at a cost of some £14 million.

I shall put it another way. As has also been referred to in this debate and as was suggested in an article published in The Times today, is it likely that the actual cost to the banks would be rather more than the £3 million saving that the Government give as their major reason—indeed, largely, their only reason—for doing away with the £1 note? I make it clear to your Lordships' House that I do not consider this particular £3 million as being in the same category as, say, saving £3 million of expenditure on the British Council or student grants, or anything of that kind. But I am bound to say that when the vast majority of the public—and I shall return to this point—clearly want to maintain and retain the £1 note, to seek to save £3 million out of a total public expenditure of £132 billion is perhaps a little miserly.

I have indicated, and a number of noble Lords have also made the point, that the public would like to see the £1 note retained. The noble Earl, Lord Kinnoull, and my noble friend Lord Beswick made the point that, to put it mildly, there has been inadequate consultation. In another place, the Economic Secretary to the Treasury on 20th December at col. 406 of Hansard said: In terms of consumer choice, therefore, in a sense the public are being consulted through their daily use of the £1 note. If it is under threat, the threat comes from the way in which it is misused. The result has been a serious deterioration of £1 notes in currency. Tatty and dirty notes remain in circulation far longer than they did previously". Of course, they would do, would they not? If you do not issue new ones, then the old ones will become tattier and tattier. That is one way of ensuring that you can use the argument that, because they are tatty, you should do away with them. I used similar arguments in other ways when I was Chief Secretary to the Treasury, but that is about the weakest argument I have ever heard. I hope that the Government do not believe that what they have done is to consult the public.

In another place at column 408, when talking about consultations, the Minister said: representatives of the bodies that we had consulted confirmed that the £1 coin, because of its relative thickness, was sufficiently identifiable for their purposes". But who did he consult? He consulted representatives of bodies. If he had consulted the bodies, he might have obtained a rather different result because, as all of us know, the plain fact is that the vast majority of ordinary people would like to see the £1 note retained. Indeed, if the Government disagree, let them consult properly, let them consult the public.

For the sake of £3 million per annum it is not unreasonable for a Government that care so much about the consumer and the public to take the view of that public. We are told at column 403 of Hansard of 20th December that on 18th November 1983 the Minister said: It has always been the Government's intention to withdraw the £1 note from circulation in due course once the public have had time to become accustomed to the £1 coin". Is the Minister really going to tell us this evening that the public have become so accustomed to the £1 coin that they prefer it to the note? The Minister is shaking his head; I see that that is not what he will argue. I am glad to hear that that is not what he will argue, because it would be a very difficult case to sustain. There is a case for sustaining both the £1 note and the £1 coin. The noble Lord, Lord Rodney, in a most interesting and well-informed speech made a very strong case for retaining both the note and the coin, though if it so happens that inflation continues at a faster pace than at present, it may be necessary to do away with the £1 note at some time in the future. Certainly no case has been made by the Government, nor, I would submit, by any noble Lord in the debate this evening, for doing away with it now. The case must surely be strongest to retain both the note and the coin.

Those who have argued most strongly for having the coin instead of the note—they are in the minority in this debate tonight—have made the strong point, having done so, that the coin is not a very good one and that we should have a different coin. I do not mind having a different coin—I certainly do not like the present £1 coin—but, whichever we do, I should have thought that if the Government were to consult on a wider basis they would find that there is a powerful case for accepting what the consumer would like; namely, to maintain the £1 note. It would be at a trivial cost. I therefore suggest to your Lordships that we should press the Government most strongly to ensure that the public have what they want at such a comparatively small cost.

9.56 p.m.

The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Glenarthur)

My Lords, we have had a number of Starred Questions in your Lordships' House in the past about the £1 coin. As I have had to answer most of them, I suppose that I have become more aware than most of the mix of feelings in the House about the coin versus the note, let alone people's trouser pockets and indeed their sporrans as described by the noble Lady, Lady Saltoun. It is for that reason that I too welcome the opportunity that my noble friend Lord Kinnoull has given us to debate the subject more fully, and the chance this Question provides for me to expand the Government's case for ending the production of the £1 note and relying eventually on the coin.

Perhaps I ought to correct the feeling that I think the noble Lord, Lord Beswick, imparted when he spoke earlier that when I had answered a Question earlier I indicated that it was all very well for people who had lots of coins to change them for a note. Essentially, yes, the noble Lord, Lord Kilmarnock, referred in that particular Question in a fairly lighthearted way to the difficulties people might face if they had a lot of coins; but the fact is that a lot of coins can be changed. Indeed, more than four coins can be changed for a note. I did not try to indicate when answering that point that there was any particular lack of merit in the coin or indeed in the £1 note as such, but merely that if people carried excessive weight that could be changed up.

My noble friend Lord Kinnoull and the noble Lord, Lord Rodney, chided us with lack of consultation in the whole process of the introduction of the £1 coin. There are two differences here. One is the question of introduction and the other is the question of the withdrawal of the £1 note itself. The Royal Mint was the focal point for the consultations about the introduction of the coin, although the Treasury and the Bank of England were closely associated. The Royal Mint circulated a pamphlet on the United Kingdom coinage to those principally concerned, inviting their comments on the proposals. Discussions were held with them as necessary, and I can let my noble friends have a copy of the document which I have here.

There was wide consultation. It was not as ad hoc as my noble friend Lord Fortescue suggested. The consultative document was also made available to Parliament. Bulk cash handlers heavily involved in the use of coins such as security companies, transport concerns, retailers, the service and vending industries, were consulted; and in recognition of the special problems of disadvantaged members of the population, organisations for the elderly, handicapped, and blind were also consulted. I can only assume—and I am sure that this will be the case—that those bodies consulted their individual members, which I think answers Lord Barnett's point.

Lord Beswick

My Lords, would the noble Lord answer the question whether they were consulted about the coin, or consulted about withdrawing the £1 note?

Lord Glenarthur

My Lords, I shall come to that in a moment. My noble friends also asked about who chose the design for the £1 coin. The Royal Mint Advisory Committee recommended designs to the Master of the Mint, who is my right honourable friend the Chancellor of the Exchequer, who recommended the change to Her Majesty the Queen. The members of the committee were notable, and they were headed by His Royal Highness the Duke of Edinburgh.

The changes were announced in 1981, and it was made clear then that the coin would eventually replace the note but that the note would continue to circulate for some time after the coin was introduced. This was repeated when the coin was launched in 1983. The Autumn Statement in another place on 12th November confirmed all that had been said before, but for the first time put a provisional timetable on the life of the £1 note. But no one need fear that the £1 note will disappear overnight. It will continue to be available for at least another 12 months, perhaps longer, and in that period will continue to circulate alongside the coin, exactly as it does now.

Lord Barnett

My Lords, I noted particularly what the noble Lord said—"perhaps longer than 12 months"—so presumably this matter has been discussed in the Government. Would he care to elaborate on what he meant by that?

Lord Glenarthur

My Lords, no, I cannot elaborate on it any more than I have. I said that the period will be indeterminate, but will possibly be for longer than a year, and the coin will circulate in parallel with the note. I cannot be any more forthcoming than that.

In answer to the question of the noble Lord, Lord Beswick, about consultation before withdrawal, I have to tell the noble Lord, as I did in answer to an earlier question, that it was implicit in the introduction of the coin in the first place that it would in due course replace the note. I can tell him that there was no consultation about withdrawing it. There need not be because the consultation about the coin was the important thing, and that had already taken place.

From their initial consideration of the case for a £1 coin, the Government have of course been aware that any change in currency can be difficult for people to come to terms with. All new coins are unfamiliar, and time is needed to get used to them. There was consternation in 1914, for example, when the first of the modern series of notes was introduced and the Government of the day replaced the sovereign—representing the unit of sterling currency—with mere paper. People did not refer to that coin, gold though it may have been, as "a ridiculous little object" as my noble friend Lord De La Warr refers to the pound coin now.

Similarly, there was an outcry 15 years ago, when the 50p coin was introduced and the 10 shilling note withdrawn. Not so long ago the 20p coin was introduced and again there was some resentment. But over time people have come to recognise the utility of these new coins, and indeed both the 50p and the 20p pieces now enjoy considerable popularity.

To understand why the Government decided to replace the £1 note with a coin, one must essentially look at its real value, as did the noble Lord, Lord O'Brien of Lothbury. It was based on his magical signature at the bottom of the notes when my parents used to impress upon me the then value of £1 notes. The purchasing power, as he described, of the £1 unfortunately fell subtantially in the 1970s. For example, by March 1976 it was already less than the 10 shilling note at the time it was withdrawn in 1970. In short, because of its reduced purchasing power, people started to treat the £1 note as if it were a coin. As the Economic Secretary to the Treasury put it a couple of weeks ago, the purchasing power of the £1 note today is about the same as a half crown 30 years ago. Nobody then was arguing that we should have a paper half crown.

Any Government has a duty to keep the currency up to date in relation to purchasing power. I have seen letters in the press recently which make this very point. How much easier it is to pop £1 coin into a ticket machine at a Tube station and avoid queuing for a ticket.

As a result of this changed attitude towards £1 notes, because of the drop in their value, they get treated differently from higher value notes. While in circulation they have become increasingly tatty: £1 notes circulate between customers and traders alongside coins. They are not returned to the bank for replacement as often as they used to be. As the noble Lady, Lady Saltoun, said, the notes get pushed carelessly into pockets and the purse of the noble Viscount, Lord Hanworth, and the noble Lady's ancestor's sporran, just like a coin and tend to stay in traders' tills rather than being banked. If notes do not get passed back to the banks, it is obviously much more difficult and expensive for the Bank of England to take them out of circulation and replace them. Unlike when its value was respected and it was thought to be perhaps a more precious article, the note now deteriorates quickly and lasts only 10 months in active circulation.

These facts about the way currency is used and the potential utility of a coin are not limited to experience in the United Kingdom. The same effects have been felt in many other industrialised countries. France, Germany, Switzerland and Japan are among those who have replaced their lowest-value notes by coins whose value is broadly comparable with the pound. Others, like Australia and Norway, are in the process of making a similar change. Like us, these countries want to ensure that the taxpayer gets a better deal over time. Even if we spent more on the note, it is unlikely that people would treat it any better; so that it would not lead to the longer-lasting, secure unit consistent with purchasing power which we all wish to see. To those who say, as some have said, that the authorities have deliberately rubbished the notes, I can assure your Lordships that there has been no attempt to restrain the number of new £1 notes being put into circulation over the last 12 months.

Lord Morris

My Lords, may I ask my noble friend this question? If what he says is correct about the coin against the note, why is it that in the United States of America the silver dollar is very much a scarcity rather than being in current circulation?

Lord Glenarthur

My Lords, the fact is that the Americans treat their dollar notes in rather a different way from the way we do. If the noble Lord will bear with me, he will hear a little more from me on that subject in due course. I referred to other countries and to the fact that, like us. these countries want to ensure that the taxpayer gets a better deal over time, and that even if we spent more on the note it is unlikely that people would treat it any better. I went on to say that it would not necessarily lead to the longer-lasting, secure unit consistent with purchasing power that we all wish to see.

Lord Beswick

My Lords, is the noble Lord really saying that the general public are deliberately ill-treating the notes?

Lord Glenarthur

My Lords, what I am saying is that they are not treating the notes in the same way as they did when the £1 was worth rather more than it is now. I can think of many examples of this. The noble Viscount, Lord Hanworth, referred to the way in which he, himself, folds his notes a number of times in order to get them into his purse. There are others who just squash them into their pockets. The fact is that they are not treated in the same careful way as they were when those who handled them put them carefully in their wallets. I suppose it is deliberate, yes. But it is rather more careless, I think, than deliberate.

I referred earlier to the rubbishing of the notes, and I have said that that was not the case. Nevertheless, the deterioration continues. I have no doubt that we are all too aware of examples of pound notes which show just how tatty, torn, dirty and even disgusting in many cases they become in the circulation pattern into which they now fall. The prospect is that the problem will simply worsen unless steps are taken to break out of the vicious circle.

Whatever one's views, the coin has a number of advantages over the note. It has great potential use in vending machines and in meter use, and once the circulation increases this potential can be fully realised. There are millions of gas and electricity meters where a pound coin should be increasingly convenient, and hundreds of thousands of other machines have been converted to take the pound coin. It has been welcomed by organisations who represent the blind. If a pound coins falls it makes a noise, and that evidently helps blind people to find it. A note flutters to the ground silently. The coin's specification, its thickness, the milled edge with the security wording, and so on, make it relatively easy to distinguish from the 5p or 2p coins; and those design features, too, help the partially sighted and the handicapped.

There are those who have criticised the the coin as being difficult to distinguish and there have been those who have done so tonight: and also because it adds weight when carried in pockets or purses, as the noble Lord, Lord Monson, has said. Perhaps I should now explain that long before the pound coin was launched extensive consultations were carried out about what would be the best design. Among those consulted, as I said earlier, were organisations representing the blind, the handicapped, the elderly and the consumer bodies. All their comments were taken into account in reaching final specifications. In answer to the noble Lord, Lord Monson, concern about weight was considered and the Government decided to introduce the relatively new 20 pence coin, which is displacing two of the heavier 10 pence coins. One in four of the ten pence pieces has now been removed from circulation; and the withdrawal of the halfpence coin should also help to make space in pockets, purses and tills, as well as to reduce weight.

Lord Molson

My Lords, may I interrupt my noble friend? Was this argument produced and arranged before the news in the newspapers today that the banks have now changed their view about the desirability of introducing this new coin?

Lord Glenarthur

My Lords, I shall return to that point in a moment and pick it up with some of the points that were made by the noble Lords who actually took part in the debate. That would be very helpful to me; and I have an answer for that particular point later.

Ceasing to issue the £1 note saves money. Whilst the £1 coin admittedly costs a little more to mint than the note to print, it has a much longer life; it is estimated that a coin will last nearly 50 times as long as the note in active circulation—40 years, compared with the 10 months to which I referred earlier. That means that over the lifetime of the coin it is many times cheaper.

Of course there are those who will argue, as did the noble Lord, Lord Barnett, that the saving of £3 million a year which will result from ceasing to print the note is itself not a large sum, and is small measured against the totality of public expenditure. But the Government cannot afford to ignore small public expenditure savings. Many of them taken together add up to a much larger sum which can help the Government in their efforts to restrain public expenditure.

I should like now to refer to a number of points that were raised in debate. My noble friend Lord Kinnoull, the noble Lord, Lord Beswick, and my noble friend Lord Rodney, asked about the use of better quality paper, taking up a suggestion made by the Bank of England's paper suppliers, Portals, to use a more expensive product. Despite the declaimers made by my noble friend Lord De La Warr, I suppose they do have a degree of self-interest. Their argument is perhaps based on the fact that the United States' notes last longer, but the comparison is not straightforward. I think that this answers the point raised by my noble friend Lord Morris. The life of the notes is calculated differently. The United Kingdom note has an actual circulation life of only 10 months. I know that Portals say that it is 18 months for the United States, but currency is used differently. Here it is used more for low and medium value transactions. The proportion of wage earners paid in cash is greater in the United Kingdom. As cash is used more frequently, our notes become tattier. We cannot prove that better paper means a longer life. If notes, for example, did not tear quite so easily, the probability is that they would become even dirtier.

There is a cost to the banks from the switch to coins from notes because currently banks can return surplus bank notes to the Bank of England, whereas there is no such facility for returning coins to the Royal Mint. But coin has always been handled differently and the cost is offset by the benefit to the banks of the business which supplying cash to customers brings to them.

Several of your Lordships made mention of the position of my right honourable friend the Prime Minister. The Government's position has always been that the note might eventually replace the coin. I can quote from a letter from my right honourable friend the Prime Minister to Mr. Norman Atkinson, a Member of another place, in which she said: There is no question of withdrawing the note for the time being. But equally, that may eventually be the right thing to do". It was prudent to provide an alternative because of the rapid deterioration of the note to which I referred earlier. Equally, it was sound to retain the note as long as was reasonable to allow the public at large and retailers to adjust. But last Christmas, when all this cropped up, it would have been too soon to withdraw the note and my right honourable friend the Prime Minister said so. As the matter now in hand does of course touch on public interest, my right honourable friend the Prime Minister was of course consulted about the Chancellor's announcement on the 12th November.

My noble friend Lord Rodney raised the question of the £2 pound note. The possibility has been considered but, apart from the additional cost, a £2 pound note would tend to circulate much like the £1 note and so be open to the same objections of wear and tear with treatment as small change which I described earlier. These are reasons for substituting a coin for a note but not for introducing a new note. To opt for a £2 note would erode the savings gained from ending the £1 note.

My noble friend Lord Kinnoull asked about the loss of overnight interest by clearing banks; I believe that was the theme he was trying to develop. The switch from notes to coins does have a cost to the banks because they can return surplus bank notes to the Bank of England, whereas they is no such facility for returning coin to the Royal Mint. But coins have always been handled differently, as I am sure my noble friend is aware—and, as I indicated earlier, the cost is offset by the benefit to the banks of the business which supplying cash to customers brings to them.

Another point my noble friend raised concerned job losses. A number of jobs at the Bank of England will go, but it expects to contain those numbers by natural wastage or selective voluntary redundancies. There will be compulsory redundancies. In answer to my noble friend Lord Molson and the noble Lord, Lord Beswick, I, too, have read the article in The Times today to which they referred. Publicly and privately, the banks have confirmed that they support the £1 coin and favour its introduction in place of the note. The financial arrangements for handling the coin to which that particular article referred are an entirely separate issue and will no doubt be resolved with the authorities in due course.

The noble Lords, Lord O'Brien and Lord Monson, referred to plastic coatings. The Bank of England has been investigating the use of plastic coating for 20 years or so as the noble Lord, Lord O'Brien, suggested it had. There are various problems. Two of them are the difficulty of interpreting results and the translation of results into comparisons against cost. For example, is extra cost matched by a higher note life? The conclusion is, there is insufficient evidence that plastic coating lengthens note life, when account is taken of cost. Other countries have tried it from time to time; many are believed to have stopped its use since.

My noble friend Lord Massereene and Ferrard, the noble Lord, Lord O'Brien, and the noble Lady, Lady Saltoun, asked in simplified language: why not start again with an orderly coin series? Major upheavals and replacements of the coinage are expensive and they are also disruptive. Our approach has been to adopt evolutionary development, of which the £1 coin is the most significant to date. As was recently announced, the Royal Mint has commissioned some research from Nottingham University into alternative specifications for existing coins; that is to say, the 5 pence, 10 pence and 50 pence coin. The aim would be to improve the size and weight configuration of the coinage, but Ministers have not yet considered any further change.

My noble friend Lord De La Warr referred to the Royal Mint's financial affairs. I can tell him that it has enjoyed excellent financial results, achieving its last financial objective, and is selling well throughout the world.

My noble friend Lord Moyne asked about making Scottish notes legal tender. I can confirm to him that they were legal tender in England during the Second World War. But legal tender status is not the issue. Current legislation for England and Wales, Scotland and Northern Ireland makes it not legal to issue Scottish £1 notes outside Scotland, or in the case of the Northern Ireland note, outside Northern Ireland.

It was because the Government recognised that currency changes can upset people (and they obviously do) that we considered the case very carefully before reaching conclusions. It was in part to help people become accustomed to the new coin that the Government deliberately introduced it alongside the note to allow them to circulate together for some time. The £1 coin has been with us for more than 18 months and the note will stay in circulation for at least another 12 months. I am glad to be able to say that the utility of the coin is being increasingly recognised. Its circulation in the hands of the public, despite being on issue alongside the note, has risen by 25 per cent. over the past 12 months.

The points made in this debate are valuable and I am sure that my right honourable friend the Chancellor of the Exchequer will note the views that have been expressed. I sympathise with much of what has been said but I am sure, as is the noble Lord, Lord O'Brien, that this change is the right thing to do. In a sense, we are reverting to the past. As the noble Lady, Lady Saltoun, said, a coin of £1 value was introduced in 1489 by King Henry VII. Although no longer made of gold, the new £1 coin retains many features of the old sovereign. The Government remain confident that the fears and prejudices about the new coin will diminish and its virtues will become more widely appreciated.

Lord Monson

My Lords, before the noble Lord concludes will he say something about the position of charities, to which I referred, who fear that their incomes will drop dramatically if the £1 note is abolished?

Lord Glenarthur

My Lords, I take the noble Lord's point and I am sure that that is one of the aspects which my right honourable friend will note.

House adjourned at twenty-one minutes past ten o'clock.