Future of 1p and 2p coins questioned by Treasury

George Osbourne

George Osbourne

Meanwhile, the £50 note is rarely used for "routine purchases", the Treasury said.

While stressing that there are no immediate plans to scrap any denominations, the Treasury is calling for feedback on the issue as part of an investigation of cash and digital payments, outlined during the Spring Statement. The report continues that there is also a "perception among some that £50 notes are used for money laundering, hidden economy activity and tax evasion".

But it says the cost of industry processing and distributing low denomination coins to make up for those taken out of circulation is the same as for high denomination coins, making the cost high, relative to face value and utility.

Sarah Coles, personal finance analyst at financial provider Hargreaves Lansdown, comments: "The writing looks to be on the wall for 1ps and 2ps".

Could we soon be saying goodbye to 1p and 2p coins? Debit card payments are forecast to overtake cash as the most frequently used payment method this year. By 2016, it had fallen to 4 billion and, by 2026, it is expected to fall to 1.3 billion.

As a result of the rise of contactless and other digital payments, the document says there has been a "much more significant decline in the use of cash for transactions that are less than £5 compared to higher-value transactions".

However, the Treasury said in its consultation that cash was not obsolete, an estimated 2.7 million people in the United Kingdom entirely reliant on it.

"It continues to play an important part in the lives of many people and businesses in the United Kingdom, whether as a budgeting tool or as a cheap and convenient method of payment", the Treasury said.

He said: "This is a call for evidence meant to enable the Government to better understand the role of cash and digital payments in the new economy. If not, how should it change?"