I welcome this opportunity to introduce a debate on the currency coins of the United Kingdom. There are several features desirable in a national coinage. They include the following: the coinage should be simple; it should be flexible—and convenient for money transactions of all values; it should be lasting; and the coins should command respect, with a consistent relationship between denominations, size, metal and design. The question is whether our present coinage meets those objectives. There is no truly scientific way of measuring the coinage needs of the public. The choice of denominations rests more on history and on demand stimulated by vending machine operators, as well as on the demand for coins from bank stocks.
In theory, our present currency coins include the following: the crown piece, formerly of a nominal 25-pence value and now denominated as £5, but not in circulation as a currency coin; the £2 coin, issued in 1986 and 1989 for commemorative purposes—but with a currency version which has received limited use; and the seven regular currency coins in the denominational values of £1, 50p, 20p, 10p, 5p, 2p and 1 p.
The antecedents of our coins can be traced back over many centuries. The penny derives its origin indirectly from the Roman denarius coin, first struck about 269 BC. For a period of 500 years, the silver penny was virtually the only coin struck by the Royal Mint. The process of inflation reduced this silver coin to a diminutive size. The first copper penny was issued in 1797, and the penny name was retained when the decimal currency system was introduced in 1971.
The bronze 2p was introduced into the coinage with decimalisation and in the early 1970s was an essential part of the coinage system. The coin weight is 7·128 g and the diameter is 25·91 mm. In March this year it was estimated that 3,500 million were in circulation, but by February this year the excess cost to the Treasury of providing the 1 p and 2p coins in bronze was estimated at between £2 million and £4 million per year, and from next year these coins will be issued in copper-plated steel. The question must be whether the public requires six low-value coins and whether the 2p is wanted at all. Its place in the coinage can be questioned on both philosophical and practical grounds.
The 5p and 10p pieces have long antecedents. The 5p was the shilling in the old pounds, shillings and pence system. As a currency coin, the shilling was introduced at the beginning of the 16th century, during the last years of the reign of Henry VII. The recoinage of 1816 brought into use the size and weight of the shilling, which became the 5p in 1971 and which is being progressively withdrawn, with the introduction this year of the smaller sized 5p piece. For a remarkable 174 years, the public has enjoyed the use of a coin of consistent size and shape. That indeed is the test of a coinage being designed to be of lasting value.
The 10p piece started life as the Victorian florin and was first issued in 1849. As a two-shilling piece, it was one tenth of a pound and was intended to be the forerunner of a decimal coinage system which, in the event, did not happen until 1971. In 1992, the present 10p will be replaced by a smaller version proportionate in size and weight to the new 5p. The new-size 5p and 10p coins are excellent and, I hope, will stand the test of time, but whether they will both be around in 100 years' time will depend on the success of successive Chancellors of the Exchequer in their battle against inflation.
The 20p piece has no long and honourable history—it is the creature of expediency. In 1981, a mere 10 years after decimalisation, the Treasury said that the then current range of coins was inadequate. The heavy 10p coin was in demand to pay for a range of goods sold through vending and ticket machines and in quantity the coins were too heavy. The seven-sided cupro-nickel 20p coin was first issued in 1982. Although about 1,300 million are in circulation, it is not the most popular of coins as it is inconsistent in size and weight with the other low-value coins.
The 50p piece was introduced into the coinage in 1969, when it replaced the old 10-shilling bank note. As a seven-sided coin it weighs 13·500 grams. It is now too heavy and is a very unpopular coin, with a circulation little different from 10 years ago, at an estimated 676 million pieces. The decrease in demand is attributed, anecdotally rather than scientifically, to the alteration of many vending and other slot machines to accept the £1 coin. Common sense suggests that that, in turn, is due to a general debasing of the currency by price inflation. But if that implies a consistently smaller coinage to reflect diminished buying power the argument favours abolishing the current 50p and replacing it with a smaller coin.
The £1 coin was a welcome innovation of 1983, for which I campaigned. It weighs 9 grams and has become an essential feature of our coinage.
The Royal Mint has been considering a revised round cupro-nickel 50p piece. I have seen a photograph of the trial pieces. Such a new coin would be proportionate in size and weight to the new 10p to be issued in 1992. The introduction of the new 10p in 1992 and the withdrawal of the old coin will make the current 10p "slot" available for a circulating £2 coin. The currency version of the coin has been available since 1986.
Coinage should also be convenient to the user. The public, the banks and the vending machine industry all require the certainty of a consistent range of coins of regular shape which are distinguishable by sight and touch. Coins should be small and light. Heavy coins like the 50p piece burn holes in the ordinary user's pocket, are unpopular with those who carry around large quantities of coins, and add extra costs to transport and security. Today, the 50p piece is most unpopular.
There are also other important points to take into account. For the banking industry, the principal costs are handling, transport storage, packing and lost investment opportunity. Several points follow from that. Generally speaking, the fewer the denominations in issue, the lower the costs of handling, storage and interest lost. In relation to their value, the costs of handling the existing low-denomination bronze coins are much higher than for handling the existing 5p and 10p coins. Weight and bulk are critical factors in transport, storage and handling costs.
Unlike the situation in most EC countries, coin not used by bank customers cannot automatically be returned to the issuing authorities for value. Therefore, it can be argued that the coinage is not properly responsive to demand—there is an administrative impediment to the operation of market forces which works to the detriment of the banking industry and its customers, the public. With the prospect of eight currency coins from £2 to 1p, six of these in low-value denominations, has the time not come to drop the 2p and 20p pieces, to redesign the 50p piece, reducing it in weight and size, and to bring the existing £2 coin into regular circulation?
I urge upon my right hon. Friend the Chancellor of the Exchequer, who is also the Master of the Mint, this urgent coinage reform. Coupled with the defeat of inflation, my right hon. Friend could give the people of the United Kingdom a coinage of convenience of which they could be proud.
I am grateful to my hon. Friend the Member for Westminster, North (Sir J. Wheeler) for giving us an opportunity to debate a subject of interest to a great many people, many of whom hold strong views. I thank my hon. Friend, too, for obtaining his Adjournment debate at a relatively civilised hour—Friday afternoons are occasions when we are all happy to conduct Adjournment debates. I understand that the last time my hon. Friend was successful in obtaining an Adjournment debate was in 1986, when he advocated a £2 note and managed to secure a slot at 5 am on a Thursday morning. This occasion is certainly a considerable improvement on that.
I apologise to my hon. Friend. That brings me to my second point. I entered into the response to the debate with some sense of inadequacy because I know that my hon. Friend is knowledgeable on the subject. He is a keen collector and student of British and Commonwealth coins and, with another friend of mine, has written a book on the subject. I thought that I had better get the book out of the Library, but I hope that my hon. Friend will forgive me when I say that I did not get very far with it. The book shows that he and his co-author know a considerable amount about the British coinage.
There are nearly 15 billion coins in circulation. I have found the Royal Mint one of the interesting areas of responsibility that I have acquired with my present job, and although I have had it for only a short time I have quickly discovered the depth of public feeling about the sort of issues covered in this debate—the size, convenience and quality of the currency, and the ease with which it can be recognised.
My right hon. Friend the Prime Minister, when he was Master of the Mint, said at this year's Trial of the Pyx:
It is a brave Minister who interferes with anything so familiar to the public as the coins in their pockets.
However, from time to time we have to do so. In view of that, and of the extensive knowledge of the subject on the part of my hon. Friend the Member for Westminster, North, I was pleased to hear my hon. Friend welcome the new 5p coin and other changes that we have recently announced.
I agree with my hon. Friend about the features that should attach to a coinage system. He listed simplicity, convenience and respect—all important aspects of a good system. It is also important that people should be able readily to distinguish between coins by sight and by touch. The latter point is particularly important to visually handicapped and blind people. I know that the Royal Mint has always taken care to ensure that it consults those who represent the blind, or the blind themselves, before finishing any design. In that way, it can ensure that the new design will be readily recognisable and distinguishable from other coins, so that there is no danger of muddling them.
As the cost of producing coins falls on the taxpayer, it is also important that production and distribution costs be kept under control. However, as my hon. Friend suggested, the key issue is public acceptability. When the current 5p and 10p coins were introduced, they retained the same size and weight as the old shilling and florin to minimise the changes arising from decimalisation. In recent years, however, there has been increasing and understandable criticism of the weight of the average pocketful of change. Perhaps some of our coins are too big and heavy.
As a result, just over three years ago, in 1987, the Mint began consulting the public about replacing some coins with lighter ones. Researchers at the university of Nottingham were enlisted to study how easily various sizes of coin could be distinguished. Among those asked to test the designs were elderly residents in sheltered accommodation and blind people.
To ensure public acceptability of any change in the coinage, the Minister issued a consultative pamphlet in 1987. I am sure that my hon. Friend was one of the many people who responded to it. It set out some options for changing the coinage, one of which was no change at all. The pamphlet showed what the current coinage was and gave four options. This fairly extensive consultation resulted in 3,000 replies to the Mint, which it analysed in some detail. As a result of that, the Government decided to implement the most popular option—option 4, which was to introduce smaller and, more importantly, lighter 5p and 10p coins. Other options involved leaving them the same size or making them much smaller, but option 4 seemed to appeal to most people most.
The new 10p coin will be introduced in September 1992. I have a sample of it with me and I should be happy to show it to my hon. Friend afterwards. I think that he will agree that it is an attractive coin, which I hope will meet the tests to which my hon. Friend believes coins should be subjected. People will certainly find that weight of coins in their pockets significantly reduced.
I should perhaps take this opportunity to remind the House that the old 5p coin will cease to be legal tender after 31 December 1990. That means that it is time for people who, like me, keep their loose change in jam jars or bottles, to empty them out. Some charities, including the BBC's "Children in Need" appeal, collect old coins. Anyone who finds themselves with spare coins might care to donate them to that worthy cause.
As my hon. Friend said the 5p coin has a long and distinguished history. As a unit of value, the shilling can be traced back to Anglo-Saxon times, when it was said to be worth a single sheet. By the time the last shilling was issued in 1966, it would just about buy a bar of chocolate. Although the reduction in the size of the 5p coin represents a break with a tradition dating back to the recoinage following the Battle of Waterloo, it could equally be viewed as the return of the much-loved sixpence. The new 5p coin is almost exactly the same size as the old sixpence, a coin which was used for more than 400 years from its issue in 1551 until it was demonetised in 1980. Over that period, its uses and users were numerous—ranging from the tooth fairy of our childhood to the sixpence found in Christmas puddings.
One of the many benefits which flow from controlling inflation is that it enables coins to continue in circulation for many years. I share my hon. Friend's hope that the new coins will stand the test of time. My hon. Friend mentioned inflation which, unfortunately, has a history at least as long as that of the shilling, although somewhat less distinguished. In 1544 Henry VIII introduced a silver shilling which was only one third silver. As a consequence of that debasing of the coinage, the high points of the obverse—in particular, the King's nose—wore through and the predominant copper colour started to show.
As my hon. Friend observed the rising price of base metals on the world market means that 1p and 2p coins now cost more to produce than their face value. That is clearly unsustainable and illogical, as my hon. Friend agrees, and the Government have therefore decided to introduce coins made of copper-plated steel. I understand from the Mint that modern technology means that the fate of the Tudor nose will not be repeated and that we can guarantee that the coins will retain their copper colour even though there is steel underneath. The coins will look and weigh the same as existing coins but will be slightly thicker. The only people likely to notice the difference are those involved in the vending machine industry. The public will not notice any difference at all.
Would my hon. Friend like to go one step further by following my advice and abolishing the 2p altogether? As I have said, it is not merely the denomination of the coin but the formidable cost of transport and storage that impinge upon the public.
I was about to deal with the 2p coin. I do not think that there is quite the overwhelming case that my hon. Friend makes out for doing away with it altogether. We would simply have to have more 1p coins, but I will deal with that in a moment.
To minimise the disruption faced by people in the vending machine industry, we have decided to introduce the new 1p and 2p coins at the same time as the introduction of the new 10p coin. In addition, the Mint will provide its usual high level of technical assistance and a supply of sample coins to the vending machine industry. My hon. Friend says that the 2p coin is not required, and one of the options put forward in 1987 involved the abolition of that coin. That was option 2 in the pamphlet to which I have referred, but it did not find much favour in public consultation. Perhaps one of the reasons for that is that if there were no 2p coins, which as my hon. Friend said are rather bulky, many more 1p coins would need to be produced and put into circulation.
The Royal Mint has achieved extremely high levels of productivity and output in producing the 1,400 million new 5p coins which will be issued by the end of the year. I congratulate all those who work at the Mint on their performance, not only in producing the new coins and our coinage generally, but on their high level of sales to overseas customers. The Mint managed to produce a profit last year of more than £12 million. That accrues to the Treasury, and I am pleased to be able to report that that excellent performance seems to be continuing in the current year. However, the Royal Mint would find it an enormous task to replace with sufficient pennies the 3·5 billion 2p coins currently in circulation. Abolishing the 2p would result in a substantial cost to the taxpayer. The number of coins in circulation and the 300 million new 2p coins issued annually also show that the coin is perhaps not so unpopular as my hon. Friend suggests. I suspect that most people would prefer not to have to handle even more pennies than they do at present. There is no immediate danger of the penny becoming unpopular or being abolished as there are 5·5 billion in circulation.
My hon. Friend also suggested that the 20p coin should be abolished. Although this coin was initially unpopular, it quickly became widely accepted and, as my hon. Friend said, there are now 1,300 million in circulation compared with 1,500 million 10p coins. I think that many people find it convenient to have a coin which bridges the gap between the 10p and 50p coins. The 20p both reduces the weight of the coinage and serves a useful function in vending machines, while its shape means that it is readily identified by the groups that we have discussed.
My hon. Friend called for the 50p coin to be reduced in size and made round. The 1987 pamphlet included three options with a smaller, round 50p coin, but each of those options involved a smaller 10p coin than will be introduced in 1992 and none received significant public support. The most popular option, which the Government are implementing, involves a 10p coin of 24·5 millimetres—about the same size as the old shilling—and thus limits the extent to which the 50p can be made smaller as coins of different denominations must differ significantly in size to be distinguishable both by people and by machines. As a result, a round 50p coin would need to be nearly as large as the current 10p coin. In addition, a survey commissioned by the Mint in 1987 found that 69 per cent. of those questioned thought that it was a bad idea to reduce the size of this coin. Given the number of changes that either have been introduced or are in the pipeline, I do not believe that the case for a new 50p coin has been made.
My hon. Friend also favoured the introduction of a £2 coin. However, as he recognised, there is a limit to how many different denominations can be in circulation at any one time. Commemorative £2 coins have proved very popular, but people have preferred to keep the coins rather than spend them. This suggests that at present a £2 coin is not required for general circulation, although we shall keep this suggestion and, indeed, all matters relating to the coinage, under review.
It would be wrong for a debate on the United Kingdom coinage system, particularly the new coins, to pass without a reference to the work of the Royal Mint Advisory Committee. This committee, under the chairmanship of the Duke of Edinburgh, considers all new designs for United Kingdom coins. In this way, it plays an important part in maintaining the high standards of numismatic art traditionally associated with Britain's coins and I take this opportunity to thank the members of the committee for their work.
In conclusion, I repeat my thanks to my hon. Friend the Member for Westminster, North on giving us this opportunity to discuss the design of the United Kingdom coinage system. I hope that my hon. Friend will recognise that many people take the view that there is much to be said for limiting the frequency with which new coins are introduced. I believe that the new coins that we have announced represent sufficient change to the coinage system for the present. The coins that will be in circulation from September 1992 will be the result of extensive consultation with both the general public and special interest groups, and I hope and believe that they will provide a satisfactory system for the future.