UK: Polymer £5 and £50 Banknotes Soon?

[Bimat]

British bank notes set for plastic surgery

By Mark Leftly
Sunday, 4 September 2011

The Bank of England is considering a plastic fiver and a £50 with transparent slots to improve durability and protect against counterfeiting in the next generation of bank notes.

De La Rue, the British notemaker, bought the Bank's printing operations in 2003 and has a contract to produce the UK's notes until 2015. However, it is understood that the contract could allow new suppliers to produce some of these updated notes ahead of that date.

Bank officials are believed to be concerned that the £5 note, which as a low denomination changes hands quickly, is not tough enough. Sterling notes are currently made mainly from cotton, but Australia paved the way with a polymer currency that better withstands everyday use.

A source close to the Bank said: "This is at the evaluation stage. A decision won't be made for the next year or two and production a little while after that, but a plastic £5 note is a possibility even though it won't provide as much security as other options."

A polymer note is considered easier to replicate than those with clear, plastic windows within a traditional cotton fabric. The Bank is considering the latter option for its other notes, favouring a trial with the £50.

A far less used note, the £50 does not require the durability features of a fiver, but is more costly to the economy if counterfeited on a large scale. "The Bank is looking at ways of putting a see-through, transparent window on notes as a primary security feature," said the source.

An industry source added: "There are ongoing conversations about the future features of banknotes, particularly in order to combat counterfeiting, between the Bank and industry suppliers."

The European Central Bank is considering similar anti-counterfeiting measures for its second generation of banknotes. Banknote makers are producing prototypes, several of which are understood to include plastic windows.

These notes have been heavily delayed: the first series is already nine years old and was expected to be replaced this year. However, existing notes would have remained legal tender for at least a few years as it takes time to replace them.

There have been suggestions that the first note to start production will be the €5, commencing next year and appearing in 2013. The €10 would follow in 2014 and the €20 in 2015.

Source: Independent

[<k>]

The Bank of England is considering a plastic fiver

A very welcome idea. Anything that lengthens the lifetime of banknotes will save money. That is needed in today's economic climate.

[FosseWay]

Yes, agreed.

Though what is the point of £50 notes in today's economy? Most people most of the time will use plastic or BACS to pay £50+. On the rare occasions they don't, they can probably cope with carrying three notes rather than one (or even fifty rather than twenty, if they really want to pay £1,000 in cash). And even if use of cash for payments of £30–£100 was much more widespread than it is, making the £50 note superficially more useful, you often can't actually use £50s as retailers won't accept them.

The only time I ever see £50s is in the hands of foreign visitors to the UK, especially from outside the EU, who have bought large quantities of sterling cash in their home country. Such people invariably then get embarrassed or confused when they try to spend what is to them an ordinary banknote and have it refused, even when they're buying something costing ~£50.

So, I'd say that either we need, produce and use the £50 denomination or we don't. If we don't, then stop making it. If we do, traders should be legally bound to accept it, and any other sterling banknotes, in payment. The legal tender rules should be revised so that it is an offence to refuse payment in standard coins and notes of the realm, subject to reasonable limits on how much small change you can dump on someone at a time, and how much change it's reasonable to expect e.g. a market trader or bus driver to give if you tender a large note for a small purchase.

[Figleaf]

If we do, traders should be legally bound to accept it, and any other sterling banknotes, in payment. The legal tender rules should be revised so that it is an offence to refuse payment in standard coins and notes of the realm, subject to reasonable limits on how much small change you can dump on someone at a time, and how much change it's reasonable to expect e.g. a market trader or bus driver to give if you tender a large note for a small purchase.

There is something you can learn from the euro here. There are no rules on acceptance. You can refuse any coin (e.g. 1 and 2 cents) or banknote (e.g. 100, 200 euros) as a private person. I will admit I had misgivings about that when the euro was introduced, but it turned out that the absence of rules created welcome flexibility. In countries with relatively high prices (Finland), small coins were not accepted. In countries with a relatively underdeveloped electronic payment system (Greece), high value banknotes flourished. In other words, there's no need for strict rules. People will use what they need and reject what they don't need.

Apply this to Britain. Take the London/South East as the richest and most developed area, Scotland and Wales as the least developed and the rest in-between. I would expect that London/SE could do without the 1, 2 and maybe 5 p as well as the £50 banknotes and higher. I could well imagine demand for £50 notes and small coins in Scotland and Wales. The rest might be able to do without the large banknotes, but I think there will be enough areas where there is demand for 1 and 2p coins and they would insist on the 5p.

Petre

[FosseWay]

There are two separate issues here.

One is the convenience (or lack of it) of having to accept a huge pocketful of shrapnel for a relatively large payment, or have to make change for a large note tendered for a small purchase. I see no reason why retailers or private individuals should have to do either. The British legal tender laws (which actually only cover a very specific kind of transaction) explicitly place a limit on the former though not AFAIK the latter. I would have no problem with a revision that deals with the latter as well.

The other is accepting obvious denominations for payment of the sum in question. If the cost of the goods you are buying is £60.47, it is entirely reasonable to tender a £50 note and a 2p coin, among other denominations. It isn't reasonable to refuse either of these denominations. I don't think the difference in the cost of living is 10 times, or even 5 times, between (say) rural Wales and central London. Therefore if the 1p and 2p are useless in London, they're essentially useless in Wales, too. That is an argument for abolishing the denominations, not continuing to make them but creating semi-official uncertainty over whether they'll be accepted. On the £50 (and £100) note issue, retailers should be told that refusing them because they 'might' be fake, or in the case of Scottish notes because they don't know how to tell a fake from a real one, is unacceptable. If they have reasonable grounds for suspecting a particular note is fake, then fine -- that's just the same as for any other denomination. And it's not the customer's problem if the retailer can't be bothered to familiarise himself with the currently issued legal tender money of his own country.

[Figleaf]

The Wales argument in favour of the penny is not only the cost of goods, but also the value of money. A penny is worth more as you are poorer (see the discussion on the use of mills in the US during the great depression.) I could have put that more clearly in my previous post.

Peter

[FosseWay]

In that case, the decision to continue or abandon the denomination should be taken on the basis of net national gain. In other words, if the penny's usefulness in value in Wales outweighs its annoyance factor in London, it should stay; while if it's regarded as useful only among a very small section of society, it should probably be binned. But either way, the decision should be across the board. I don't think it's reasonable to have the uncertainty about whether a given coin will be accepted, or whether you'll get arithmetic change or something rounded to the nearest 5p or 10p. I guess to take the analogy of the US tax tokens, we could abolish 1p and 2p coins nationally and let the Welsh Assembly Government, or lower-tier local government, issue its own tokens, with very specific local validity.

[<k>]

Get rid of the 1p and 2p coins but adopt Swedish rounding, as in New Zealand and Australia. That way, the people who still care about the pennies would be catered for, while cost savings on ousting the 1p and 2p coins would still be achieved.

[FosseWay]

That's not my understanding of Swedish rounding. AFAIK Swedish rounding is to get rid of unwanted small physical coins but to retain the accounting unit (in Sweden's case, the öre). This means you pay to the nearest penny (or whatever) electronically but to the nearest available coin (e.g. 5p) if paying by cash. That doesn't cater for the people who still want pennies, unless they are able/willing to carry out every transaction electronically, and I suspect that the people whose income and lifestyle make them more likely to worry about single pennies are also those who are less likely to use electronic media for payment.

The other two rounding options are:

(a) Stop making 1p/2p coins but for them still to be theoretically usable -- this leads to the uncertainty I mentioned earlier, where you can't predict in advance whether your penny will be accepted or whether you'll get a penny in change. This appears to be the situation in much of the eurozone, and was certainly how it worked in pre-euro Italy; I was given 10-lire coins by the bank when I was paid my wages but could never spend them.

(b) Make a law that all transactions must be stated to a given degree of accuracy (e.g. 5p), so that issuing a bill or advertising an item for sale at a price ending in other than 0 or 5p would be illegal. This was done in Iceland, where aurar are officially and legally no longer used, even in electronic transactions. TBH I think this is the best way forward, as it removes all possibility of confusion and it doesn't discriminate between cash payers and electronic payers.

[<k>]

(a) Stop making 1p/2p coins but for them still to be theoretically usable -- this leads to the uncertainty I mentioned earlier, where you can't predict in advance whether your penny will be accepted or whether you'll get a penny in change. This appears to be the situation in much of the eurozone, and was certainly how it worked in pre-euro Italy; I was given 10-lire coins by the bank when I was paid my wages but could never spend them.

I'd agree with a], but the UK is not Italy! By retaining prices ending in 1p and then rounding, you still keep the overall cost down, and the law of averages says that your bill will be rounded down as often as up, so you don't ultimately lose out. However, if you really do need to count the pennies (and apparently the Harry Potter author really did before she got rich), then you can do your calculations BEFORE you buy and ensure you NEVER get rounded up. So Swedish rounding is all positive, in my view.

[FosseWay]

So Swedish rounding is all positive, in my view.

Swedish rounding as practised in Sweden is actually very extreme, because prices can be given to the nearest single öre, yet the final price at the till is rounded to the nearest krona.

For those who are really counting the pennies, this becomes an issue because of the use of price points by retailers. If the allocation of a digit to that portion of a price that is not directly able to be paid in coinage were random, you could reasonably either (a) take the view that it'll all come out in the wash as on average you'll be rounded down as often as up, or (b) you could as you say pick your purchases to ensure that you're not rounded up. However, with the exception of goods sold by weight, pricing is not random, even (or especially) in the case of the final 'worthless' one or two digits. If the smallest coin you can pay with is 1 krona, you have to buy 50 items priced at x.99 kronor for the total to be rounded down. In the eurozone, and hypothetically in the UK and US, this isn't quite so extreme, as you'd only have to buy three items in order for your total to be rounded down to x.95.

This raises another issue with respect to absurdly small currency divisions that are used in accounting but not cash transactions. If Sweden rounded all electronic transactions to the nearest 10 öre rather than 1 öre, but retained 1 krona as the minimum cash payable, the number of items costing x.90 you'd have to buy to get a rounding down of the total would be dramatically reduced from 50 to 5. (This was the case in Italy when I lived there, where AFAIK the smallest accounting sum was 10 lire, not 1 lira, never mind centesimi.) This is another reason why I support Icelandic rounding over Swedish.

[<k>]

This is another reason why I support Icelandic rounding over Swedish.

This is all getting rather Monty Python. 

Let's just say I'd support "British rounding" - everything priced to the penny but the total rounded up or down to the nearest 5p at the till, after demonetisation of the 1p and 2p coins.

[Bimat]

Plastic banknotes ready for 2016, says Bank of England

10 September 2013 Last updated at 13:00 GMT

Smaller, wipe-clean plastic banknotes could be introduced by the Bank of England from 2016, matching currency across the world.

The new polymer notes stay cleaner, are more secure and should even survive a spell in the washing machine, the Bank says.

It has spent three years studying the impacts of a change from cotton paper.

The switch could start with the new £5 note, featuring Sir Winston Churchill, with the £10 note to follow.

The Bank has organised a roadshow to gauge public opinion across the UK over the next two months before coming to a final decision in December.

Recycling

The current Bank of England banknotes are made from cotton fibre and linen rag, with the average fiver only lasting for a year. Unfit notes are shredded and can end up in industrial compost.

The proposed new polymer banknotes would be made from a thin, transparent and flexible film made of polypropylene.

This is coated with an ink layer that enables it to carry the printed design features of a banknote. This allows the inclusion of windows or clear portions in the design, used to enhance protection against counterfeits.

The Bank believes the new notes would be:

• Cleaner, as they resist dirt and moisture. For example, red wine can be wiped off but would stain the current paper notes;


• More durable, as they last for 2.5 times longer than paper banknotes. However, they would still shrink under extreme heat - such as being put under an iron;


• Secure, because they could include more sophisticated anti-counterfeiting techniques. New Zealand reported a big fall in reported counterfeits after introducing polymer notes.

It added that the longer life-cycle meant that they were more environmentally friendly. In Australia, where polymer notes are used, unfit notes are recycled and used for other plastic items, such as plant pots.

They would be still be thin and flexible enough to fit into purses and wallets, the Bank argues. If they are adopted, then the new notes would be slightly smaller than the existing collection of banknotes and easier to fit in pockets and purses.

Public approval

The prospect of plastic banknotes has been on the agenda for some time. Bank researchers have been engaged in a project for three years to look at the options.

Much of this has focussed on the experience of 20 other countries that have adopted the polymer notes. Of these, only seven have all denominations in plastic.

Adopters of the notes include Canada, whose last central bank governor - Mark Carney - is now the governor of the Bank of England.

Earlier this year, the Bank of Canada was forced to deny that the notes had any scent added, after authorities were inundated with queries from consumers about why they detected a "hint of maple" when smelling them.

Source: BBC

Image Caption: The Bank of England has created some specimen notes for the consultation

[kena]

Adopters of the notes include Canada, whose last central bank governor - Mark Carney - is now the governor of the Bank of England.

This part makes me think that the UK will switch over to polymer bank notes.

Ken

[kena]

http://www.bankofengland.co.uk/banknotes/polymer/Pages/default.aspx

Saw Mark Carney made the announcement today.

So Sir Winston Churchill £5 note in 2016 will be polymer.

Ken