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  1. ITV Report

Why we probably won't stop spending pennies any time soon

Chancellor Philip Hammond will decide on the future of one pence and two pence coins in the spring statement this week.

There has been a sharp decline in the use of 1p and 2p coins, a change noted in a government consultation paper released last year as part of the Chancellor's spring statement.

Coppers were even called “obsolete” by the Government as the debate on our small change’s future continues a little while longer.

Businesses in Southport lobbied against the plans and if the Chancellor changes his mind, as reported, they would be more than happy.

Justin Prescott, who works in an arcade in the seaside town, said: “2p for us is the fun side of what coming to the seaside is about.

"You can give a kid a pot full of 2ps and it will last an hour.”

Those on the seafront also make use of coppers, with one woman telling ITV News she saves up her pennies over a year and then gives what she collects to charity – normally around £30.

In 2015/16, 500 million one pence and two pence coins were made, but this nearly halved to just 288 million the following year.

500m
The number of 1p and 2p coins produced in 2015-16.
288m
The number of 1p and 2p coins produced in 2016-17.

Bank of England economists waded into the debate last summer, claiming that scrapping coppers from circulation would not push up inflation.

In a Bank of England blog post, two analysts said their research and the “overwhelming weight of literature and experience” suggests that retiring copper coins would have “no significant impact on prices”.

The authors – Marilena Angeli and Jack Meaning – argue fears over the rounding up of prices are overdone, given that doing away with low denomination coins would only affect cash payments, and even then would likely see prices rounded up at the total bill level, not individual items.

Treasury consultation pointed out that 60% of 1p and 2p coins are used just once before they drop out of circulation – often being thrown into jars or down the back of the sofa – while inflation is also steadily eroding the purchasing power of the penny.

Two pence coins are an important part of seaside towns, says one worker. Credit: ITV News

Among the fears raised over the move was the worry that it would see the cost of living increase due to price rounding.

The economists labelled the argument as "flawed on a number of levels" adding that their findings are backed up by a raft of international research.

They said the growing number of economies that have removed low denomination coins have introduced a system where price rounding is only applied to the final bill.

And the impact is lessened further given that rounding only applies to cash payments – which now make up just three percent of spending in the UK.

The analysts also highlight that price tags ending in 99p now only account for 12% of prices.