Cheaper coins to save government £10m a yearDebased coinage uses less copper, more steel
22 October 2010
A measure in the government's comprehensive spending review calls for £40m worth of savings by the Royal Mint over the next four years. The first coins to be affected are the 5p and 10p piece.
The new coins will go into circulation from April 2011.
The decision to change the composition of new coins has been driven by the rising price of copper. This has gone up sharply since 2009, due to increased demand from developing economies, such as China and India. High copper prices make coins more expensive mint. The UK's current 'silver' coins are cupro-nickel. The Royal Mint plans to replace these with steel coins, with nickel plating. They will look the same but be cheaper to make.
Bringing down the value of metal used in coins has a long history. The Romans did it to the silver dinari, and in sixteenth century England Henry VIII was notorious for debasing the coinage- ultimately unleashing a wave of inflation.
George Osborne's new 5p and 10p coins are not expected to cause inflation, but they will bring problems for vending machine operators and local councils. This is because they will be slightly thicker than the current coinage, at 1.9mm, rather than 1.7mm. The difference is enough to mean that the new coins, due to go into circulation from April 2011 onwards, will not work in slot machines and meters. These will need re-calibrating- an expensive and time-consuming activity.
Alternative ways to pay
Coins are still used extensively for everyday payments, but the latest initiative might accelerate the trend towards alternative methods of payment. The Payments Council reports that over half of transactions currently involve cash, although 80% of these are for under £10. New 'wave and pay' technology, also called contactless payment, presents an increasingly viable alternative for these low-value exchanges. For larger transactions debit cards are already gaining in popularity.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what's going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.