Bank of England says scrapping 1p and 2p coins won’t cause inflation

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Economists at the Bank of England have said scrapping 1p and 2p coins would not push up prices, reigniting the debate over the future of the copper coin.

In a blog post, analysts at England’s central bank said that removing the coins from circulation would not cause inflation, as is often claimed, and the coins’ purchasing power is so small, it is considered to be practically meaningless anyway.

In March, the Chancellor Philip Hammond revealed that the government was looking into the future of cash and digital payments, including the question of whether to retain 1p and 2p coins as well as the £50 note.

The suggestion was met with immediate backlash from some who claimed scrapping coppers would mean that shops would automatically round prices up, increasing the cost of living for consumers.

But according to analysts Marilena Angeli and Jack Meaning, removing 1p and 2p coins would have “no significant impact on prices” because the popularity of pricing items ending in 99p has fallen in recent years, now only accounting for 12 per cent of prices.

They also argue that the increasing number of digital payments – just 3 per cent of purchases are made using cash in the UK – would also reduce the effect on prices.

The blog post suggests the government may be reopening the debate over whether to remove the coins, however Downing Street swiftly issued a response saying that “there are no proposals to scrap 1p or 2p coins”.

Lead image: Oliver Quinlan, licensed under Creative Commons.