The Cost of Cash....

Posted on: 28/04/2019

I was very disappointed to see in the recent UK Access to Cash Review the headlined assertion  that “cash is expensive”.

Even if the figure of £5 Billion quoted in the Review as being the annual cost of cash in the UK is accepted - and many believe it should not be - how can it be judged to be “expensive”?

It has to be remembered that Sterling - the £ - is the only UK-owned payment method.

In fact, as recently as 1966 ( you remember, the year England last won the World Cup), cash was effectively the ONLY payment method used by the UK public when doing their daily shopping.

Clearly, payments ( if not English football ) have moved on since those Halcyon days, with plastic card, on-line and, most recently, mobile phone transactions offering new choices to at least some of the population.

However, the one aspect that has NOT changed is that the UK owns the £. Most of the other options on the current Payment Choice menu are owned and/or controlled from outside these shores.

So, having established that the UK owns the £, the cost of that ownership surely has to be considered in the context of the total cost of running the country.

So what is that figure?

Well, in the fiscal year ending in 2019, total UK public spending, including central government and local authorities, was £817.5 billion.

So if cash - our very own payment method - does indeed cost £5 Billion a year to run, the outlay amounts to a mere 0.6% of the total expenditure of the UK government.

You probably judge that as being a rather modest price to pay to keep ownership and control of our £.

And I, of course, would agree with you!

To underline the value for money offered by cash, let me share a little secret with you.

Some years ago, a major international card scheme went to the UK Treasury with the proposal that all government expenditure should in future be made using their plastic.

How much would that have cost the UK?

Well, retailers usually pay between 2% and 5% of the value of the sale when they process a card payment.

Let’s assume, however, that the UK government would be very good at negotiating ( you know, like they have been on Brexit ). Perhaps tough negotiations could have reduced the fee paid to 1% of total government expenditure.

Hold on, though.

That’s still nearly twice the currently quoted cost - 0.6% - of running the £.

And, clearly, the UK could NEVER own any international card scheme - BUT we do own Sterling.

Ultimately - and wisely, as we can see from the economics - the government turned down the costly plastic solution.

Many of us, of course, believe that cash is far more important than any purely economic analysis could ever reveal.

Personally, I believe cash is one of the pillars supporting the freedom and independence of each and every one of us.

What price freedom?



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