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Why cash is a critical piece of our infrastructure

As the pandemic rapidly accelerates the decline in cash use and acceptance, our guest, Paul Maynard MP, sets out why he thinks access to cash should be seen as a right.

This is a guest post by Paul Maynard MP. All views expressed are Paul’s own and not necessarily shared by Which?. 

It’s clear that coronavirus has changed the way we live our lives in so many ways. More cycling, fewer foreign holidays, more home working, fewer office blocks.  

Some existing trends have been accelerated and may become irreversible. One of these is our use of cash.

How often have you seen signs now saying ‘card only’ or ‘card preferred’? You might think nothing of it, flash your contactless card, and maybe reflect on how long your freshly minted plastic £20 notes are staying in your wallet or purse unused. 

But the ‘dash from cash’ does have risks. Not everyone is either willing or has the confidence to abandon cash.

Many who have debt problems, for example, manage them through a ‘jam jar’ technique which seems them apportioning cash to differing priorities – very hard to do when all you have is a card.

Turning cashless without noticing  

We know from industry statistics that the amount of cash being taken out from cash machines has fallen off a cliff since the start of lockdown – we are turning cashless without having either noticed or really discussed it. And it does raise issues. 

So far the debate around cash has mostly been around protecting ATM access, and filling in the gaps in the ‘free to use’ network. But what is the point of preserving access to cash if there is nowhere to spend it?

The government has set up various institutional bodies to try to reduce the costs of the hidden cash infrastructure that distributes notes and coins.

This may encourage some businesses to keep taking cash. But as cash use diminishes, the costs of maintaining the hidden wiring of cash will keep on going up, so it isn’t a long term solution. 

I suspect we have to accept that the days of cash are greatly numbered. We won’t be having anguished debates about who appears on a bank note, but rather whether we even have bank notes.

But we can try to slow the process down in order to give us time to prepare and cater for the vulnerable.

Slowing the process

This involves making clear the cash is no more risky in terms of passing on the virus as a method of payment. Over-cautiousness in this regard is one of the main drivers of retailer reluctance to accept cash.

The second key requirement is to set up a body a bit like Digital UK which managed the transition from analogue to digital TV.

It is perfectly possible to manage this transition – but it needs a guiding hand that can knit all the different interest groups together, and work with both providers of the cash infrastructure, but also those charities who work on debt advice or support the elderly.

There are many questions we have yet to grapple with. Should paying with cash up to £100 become an enforceable legal right – as happens in Denmark?

Will we also need a short term requirement for shops to continue to accept cash as the primary way to protect acceptance of cash whilst we manage the transition?   

We need to see access as a right, and regard cash as a critical piece of our infrastructure, no different from broadband or railways. Few have talked in the public sphere so far about the future of money – but we need to start right now.  

This was a guest post by Paul Maynard MP. All views expressed were Paul’s own and not necessarily shared by Which?. 

The coronavirus pandemic has rapidly accelerated the decline in cash use, putting immense pressure on the UK’s cash infrastructure and pushing the system close to collapse.

What’s more, an increasing number of businesses are refusing or discouraging the use of cash in favour of contactless payment methods.

While Which? welcomed the Chancellor’s commitment to introduce legislation protecting access to cash in the March 2020 Budget, the pandemic has dramatically shortened the time frame for intervention. Unless legislation is introduced urgently, the ability to access and spend cash could be permanently lost for many consumers.

Visit our Freedom to Pay campaign page to find out more about our efforts to protect cash, and to download our recent consumer handbook on ‘Banking in the New Normal’, which provides information on how banks are continuing to help customers access cash, banking services and online support during the crisis.

Comments

Many views on the use of cash, and access to it, have already been expressed in other Convos.

COVID is a special situation. Many prefer not to handle cash that may carry the virus. Many have avoided visits to physical shops and been trading online; clearly that impacts on the amount of cash used. I have hardly used any cash since March; normally around 5% of my spending would be in cash.

We still have cheques; sufficient numbers of people find them useful. We will still use cash and its use will gradually increase again as we, hopefully, approach a more normal life. When I resume bowling for example, hopefully very soon, I. like the others, will chip in £2 for a session in cash.

What we need to recognise is that the cost of distributing cash through ATMs is significant, unless sufficient people use them. Therefore ATMs are bound to gradually reduce in number. What we need to do is devise an even better system for distributing cash conveniently to far more people than ATMs, banks and post offices ever could. I believe that is through the extensive network, UK wide, of businesses that already handle some cash; give them the means to dispense it. If they take it in from customers they can also give it back, against a debit card.

Welcome Paul. As you may know, Which? has been running a campaign to help the citizens of this country retain access to cash. Prior to lockdown, the government committed to protecting access to cash, but so far I have not seen any information about how this will be achieved. https://www.which.co.uk/news/2020/03/budget-2020-chancellor-poised-to-protect-access-to-cash/

It’s rather sad when a virus is used as a means of depriving the now minority of their cash, although the use of cards was the preferred choice amongst many businesses who could afford to refuse cash during the pandemic. Many smaller businesses were not in a position to do this as a means of payment if it prevented them from closing down during lockdown.

Cash is still very much a part of many peoples lives however. It is very useful in an emergency to buy the odd drink or snack from a small market stall or roadside trader. It is also the preferred choice for tipping a taxi driver, paying the gardener, the cleaner or popping inside a birthday card or for buying a surprise birthday gift for joint account debit card holders and it also protects your privacy from data disclosed on your bank statement.

I predict It will be difficult to hold back the evolutionary digital progress of the monetary system that will no doubt affect social interaction and amicable exchanges between friends, family and local traders who will often find time to chat to customers during cash exchanges.

COVID-19 has changed the way we live. It has also forced many people to examine the way they spend their money and to come to terms with the realty that when we eventually come to rely upon cards alone to purchase anything, it will be the banks who will prosper when more people go overdrawn, unable to account for the amount of money they so easily parted with by the quick tap or click of a small card.

I stopped using cash more than five years ago. Cash was far less convenient than paying by card. It’s nice never to have annoying change in one’s pocket and to have to remember to move the change between different clothing.

I disagree that “cash is no more risky in terms of passing on the virus as a method of payment“. Although banknotes are low risk, coins are high risk because lots of people often handle the same coins within a 72-hour period. It is extremely rare that a purchase comes to a round amount for which one has the correct banknotes, and therefore coins need either to be given by the payer to the payee or given by the payee in change to the payer.

The lowest risk method of payment is tokenised contactless payments (e.g. Apple Pay and Google Pay), which have no transaction limit and avoid any need to touch a grubby PIN pad. Physical contactless cards are higher risk because they require chip & PIN above £45 and every few transactions for security reasons.

I would like to see legislation requiring retail businesses to accept tokenised contactless payments without any detriment compared to chip & PIN. Apple Pay was launched for card issuers in the UK more than five years ago. It remains a disgrace that more than five years later mostly because of obsolete software:

– Several large UK merchants such as the Post Office and Tesco still unnecessarily limit tokenised contactless to the physical contactless limit (£30 or £45);
– Several large UK merchants such as the Co-op still limit tokenised contactless with American Express to the physical contactless limit (£30 or £45) without imposing the same restriction on tokenised contactless with Visa and MasterCard;
– A tiny number of large UK merchants such as Asda still can’t process tokenised contactless with American Express at all despite accepting Amex and accepting tokenised contactless with Visa and MasterCard; and
– UK petrol stations have still not implemented tokenised contactless payments at their pumps, and continue to accept only chip & PIN.

Five years is more than enough time for these merchants to get their act together, yet they failed to do so. They need to understand that a digital contactless card does not indicate the existence of a physical card, so it’s no good for their card terminals to display “insert card” when presented with a digital contactless card. Given that these merchants have failed, we need legislation in order to protect public health. In most cases, these lazy merchants can just update their card terminals’ software in order to comply.

You say that bank notes are low risk and coins are high risk for passing on coronavirus, NFH. I have not seen any evidence that suggests that handling these items has been responsible for coronavirus infections in the UK. Is there any evidence to support this?

My understanding is that the virus is spread by inhalation of virus particles in aerosols produced by infected people coughing, sneezing and breathing.

I agree with you. I’ve hardly used cash for the past 20 years.
I find it a nuisance when shops can’t accept card payments and I have to go searching for an ATM to get some cash.
The biggest problem I’ve had is when my internet connection went down for a month and I couldn’t do on-line banking and had no idea how to pay bills without it.

dougd3 says:
8 September 2020

…..and that is exactly why I want to continue to have the choice of using cash. IT/Online banking is not 100% reliable whereas cash in your wallet is there until used! What is more the chance of a fake note nowadays has been greatly reduced with the new notes. When your internet was down were you able to pay your bills by cheque? Oh yes the other thing they want to get rid of!

The NO cash scenario, is far deeper and complex that the simplicity of paying something. It means every penny we earn and spend will be scrutinised by big brother. It is all about control, HMRC will be clapping their hands with glee. No giving/leaving a few hundred or such like for family, Or giving a few quid to someone to do a little job for you. NO, NO, NO, Big Brother will control EVERYTHING.

https://www.bbc.com/future/article/20200317-covid-19-how-long-does-the-coronavirus-last-on-surfaces

This suggests plastic (e.g. notes) and metal (e.g. coins) can harbour the virus for several days although copper seems to destroy it in just a few hours. So handling money seems hazardous, particularly perhaps when stored in the pocket with a handkerchief.
I’d be cautious and avoid cash or use gloves.

DerekP says:
12 September 2020

And don’t get mugged or otherwise loose your wallet 🙁

Is it illegal for muggers not to wear gloves and mask?

Well at least not wearing them would avoid confusion with the Lone Ranger who always wore gloves and a mask.

I would like to see it becoming a legal requirement for all shops to accept cash in payment for amounts up to £100.00.

A friend who is a gardener used to take cash but now only accepts payment by bank transfer. Most of her clients are elderly – and, admittedly, affluent – and have willingly accepted the change, especially since they have not been going out and able to get cash. I suspect this change of habit, alongside many others, will survive long after the epidemic has passed. The entire consumer landscape is changing.

It will become obvious that any small traders doing work at people’s homes who refuse to accept payment by bank transfer in future and insist on cash-in-hand are interested in concealing some of their income. When I pay people for doing jobs I put the transfer through towards the end of the job and give them a copy of the payment transfer document for their records. They then know the money is in their bank.

John, I agree with you that small traders who insist on cash-in-hand are interested in concealing some of their income. An increasing number have card machines, although I had one recently who, despite Visa and MasterCard logos on his web site and invoices, refused to accept card payments, claiming that he had terminated his card machine. His charge was £99, so I paid him by bank transfer, but if it had been more than £100, then I would have insisted on paying by credit card in order to receive Section 75 protection. He would then have had to sort out a card machine or he would have received no payment, not least as his Visa and MasterCard logos formed a binding contractual term under Section 50 of the Consumer Rights Act 2015.

I am quite happy to give cash for a few jobs around the home, small traders concealing a few quid here and there, is not greed it is often their bread and butter. We pay tax through the nose for every darn thing, it is the BIG organisations, that need to be watched. You mention your friends clients are admittedly, affluent and can just proceed with a card payment willy nilly. Well lucky them!

Barrie – My reference to affluent customers was because you have to be fairly well off in order to employ a gardener at roughly £20 an hour. You don’t have to be wealthy to use on-line banking.

I wouldn’t say payment by bank transfer is willy-nilly. It is quite a complex and deliberate action even when the payee is a pre-set-up person or organisation. You have to check everything twice and you can print off a confirmation of payment advice. Its virtue is that it is rapid, direct, and safe and doesn’t involve pieces of paper [cheques or notes] or coins which many prefer not to handle these days.

If people prefer cash I will pay in cash; I don’t concern myself with how they deal with it – that is for their conscience, not mine.

Cash payments for small traders has long been a thorn in the flesh of the HMRC who would welcome the end of all cash transactions and dealings. If £45 is now the new acceptable contactless card limit, I don’t see why a similar amount can’t be imposed on all cash exchanges in the interim period, to tide people over until inflation gradually decreases the value of the pound and instigates the inevitable demise of the ATM and all future cash dealings.

Back to the question asked above “Should paying with cash up to £100 become an enforceable legal right – as happens in Denmark?“, then there is already the concept of legal tender. Cash can always be used in settlement of a debt. For example, if you eat a meal in a restaurant or fill up your car with petrol, then it’s a legal right to use cash, for any amount, to settle that debt. If no goods or services have been irrevocably consumed, then I see no need to change the law. Forcing small shops to accept cash where they have no means of banking the cash, for example if they use a branchless bank, would be unfair on those businesses.

I thought the term ‘Legal Tender’ was more about the form the payment takes rather than the right to pay entirely in cash – e.g. the restriction on the use of low value coins [max 20p in 1p & 2p coins].

I am not sure if this clarifies the situation, but this is what it says on the Bank of England website –

A shop owner can choose what payment they accept. If you want to pay for a pack of gum with a £50 note, it’s perfectly legal to turn you down. Likewise for all other banknotes, it’s a matter of discretion. If your local corner shop decided to only accept payments in Pokémon cards that would be within their right too. But they’d probably lose customers.

“Legal tender has a narrow technical meaning which has no use in everyday life. It means that if you offer to fully pay off a debt to someone in legal tender, they can’t sue you for failing to repay“.

The BoE goes on to say –

Many common and safe payment methods such as cheques, debit cards and contactless aren’t legal tender. But again, it makes no difference in everyday life“.

Well it does now.

John, I think you’re confusing the obligation to enter into a contract with the right to use legal tender to satisfy a debt.

Offering legal tender (i.e. cash) doesn’t oblige a shop to enter into a contract with you to sell you goods. But if you incur a debt to a business, for example after consuming a meal or putting fuel in your car, without any prior contractual agreement to use another form of payment, then the business must accept your cash as legal tender.

Thanks, NFH. It is certainly confusing . . . all the more reason to have a simple piece of legislation that is clear and unambiguous so that disallows the refusal of a cash payment for any purchase up to £100.00.

One of the things that the government suggested it would do under its policy to protect the availability of cash was to work out ways in which businesses could interchange coin and bank note surpluses and shortages. I appreciate that you would prefer to do away with cash but this is now government policy.

Businesses can currently decide which consumers they enter into a contract with, as long as they don’t discriminate on a protected characteristic listed in Section 4 of the Equality Act 2010. I think it would be very dangerous to compel businesses to enter into a contract with a consumer by virtue of the consumer offering cash.

Businesses cannot refuse legal tender (i.e. cash) from a debtor unless prior contactual terms state otherwise.

The status quo seems fine to me.

Jeannie says:
7 September 2020

Covid has nothing whatsoever to do with the Government trying to get us to become cashless. We said in March this would be part of their plan to control us. Shocking, so so wrong. We will become a nation like Mad Max if we are going to be controlled like this.

Jenny Gilchrist says:
7 September 2020

I use cash … and am desperate that we don’t become a cashless society ….. I find it so much easier to manage with real money in my hand….. real money also helps children understand the value of money so much better …. rather than card, no wonder we as a nation have so many debt problems.

Here’s a thought – Sovereignty? As a nation we fought long and hard to retain our good old British Pound rather then be subsumed into the Euro as a form of currency. With no cash about and no Sovereign being depicted on our forms of payment then it wouldn’t matter what our currency was called as long as the relevance of value was maintained………..answers on a postcard to Mornington Crescent.

Steve Rickaby says:
8 September 2020

Think about how commerce could continue when a malign foreign power renders the internet non-functional. More to the point, a vast number of small and rural (and both) businesses could not function at all without cash.

Mmmm – unlike malign foreign powers who would never dream of forging British bank notes.

Germany did so during WW2, to the extent that the Bank of England felt it necessary to produce an emergency £1 note, and stop issuing higher denominations. Almost 9 million forged notes with a face value of £134 million were produced, a figure which represented more than 10% of the total notes then in circulation in the UK. (Source: Bank of England)

It is technically very difficult to render the entire Internet non-functional. The origins of the internet protocols were partially funded by US military, interested in developing communication and control systems that would be resilient to widespead outages resulting from nuclear attack – presumably by those same malign foreign powers.

I wonder if Donald has an internet button as well as one for nuclear action? One of those options particularly bothers me.

Graham Sturdy says:
9 September 2020

As someone who has no real difficulty in making non-cash payments, I am amazed that so many contributors do not seem to spare a thought for those, who for a variety of reasons which may be perfectly valid, don’t have online bank accounts or credit cards. What are they supposed to do in your brave new world or doesn’t it matter?
And by the way what on earth is tokenised payment and how does it differ in principle from cash?

Now that aren’t many banks left in small towns and villages, many of those who prefer to use cash obtain it from cashpoints. Obviously they need a debit or credit card if they are going to do that.

Last week, at Tesco, I was sat eating lunch next to their cashpoints, both of which were out of service. This was clearly upsetting to those who wanted to get cash and then use it in store.

Many of them did not seem to know that nearest alternative cashpoint was at a bank branch, a very short walk or drive away, on the same retail park.

Perhaps the bank branch ATM had run out of cash. But people shouldn’t be paying with cash if they have a credit or debit card, according to the current guidance [and they must have a card if they wanted to get some cash from the ATM].

Supermarkets do not normally provide cashback at the checkout if there is an ATM at the store, but does that still apply if the ATM is out of service?

Christopher Peel says:
11 September 2020

What Paul says all makes sense and it is vital that cash remains as a universal option until as he puts it we have alternative arrangements.

The problem is that the pace of change is is being fuelled by the pandemic which for the most part is essentially ‘knee jerk’.

The facts underlying the transition are that banks don’t want the costs of cash handling and the charges levied on businesses using it are designed to speed the transition away from cash. Governments don’t like cash because it can be a way to evade taxation. Misinformation about relative risks of cash as vector of transmission are cited by businesses as a justification for accelerating events in their own (as distinct from consumers) interests.

One feature of the digital revolution is that there is assumption that everyone wants and can access this method. It is seen across society from new benefit claims to routine consultation with GPs. Choice is good and increases accessibility and convenience, but the key here is choice, not to use the new alternative as a justification to close down other avenues.

We have all witnessed the debacle over public examinations and numerous other recent examples where we put faith in algorithms to deal with issues. By surrendering to technology without viable alternatives we risk sleep walking into an abyss. Digital financial fraud is the largest growth of area of crime in the UK; we would do well to remember this in our everyday lives.

Christopher – I agree with many of the points you make. It is true that events are driving the loss of access to cash so fast now that government can no longer keep up despite it pledge to maintain access to cash and to find more ways of improving the availability of cash and reduce the cost of moving it around to where it is needed [e.g. through recirculating it within local users/receiver groups and by reciprocal exchange processes].

I also concur in your comment on the ‘digital revolution’. It concerns me that there is a prevalent assumption that the non-computer-literate generation will die out and the entire adult population will be able to do everything on-line. I do not think that is going to be the case and existing practical methods of communicating, ordering, applying, registering and transacting must be preserved in a non-discriminatory manner, and government and its agencies should lead the way in that. Commerce will do anything to reduce its operating costs and will progressively remove access to services and functions if it can drive enough business on-line to offset any loss of profit through closing physical access through personal contact, in writing, or by telephone. I do not intend to be shackled to a computer, be it desktop or hand-held, for the rest of my life; to start with such an option might not be affordable, and furthermore I might become physically or mentally incapable of doing so and I don’t want to become totally dependent on somebody else to do simple administration for me that should remain possible outside the digital sphere. I suspect I am far from alone in that desire. There will come a point when failed or obsolete personal technology cannot and will not be replaced.

Unfortunately the current public health crisis has accelerated the flight away from using cash and from going shopping and that will be used as an excuse to remove cash-based facilities. Because ATM’s can hold tens of thousands of pounds’ worth of banknotes there must be a temptation to recover this value where ATM use has fallen below a certain level as it must have done at the moment in many locations. I hope the existing protocols of the LINK system with regard to network proximity will continue to apply indefinitely and not be swept away prematurely because of the temporary restrictions on public activity.

Christopher and John, you both make a lot of sense here. I would add, that not only is the method of transaction important, as you both have explained, but the internet is currently flawed. While insecurities and loopholes exist, on line fraud increases and it is seen as an uncatchable crime for the perpetrators, this should not be the only method of paying and spending. I also resent being classed as financially illiterate because I prefer cash and writing cheques rather than making electronic payments.

I entirely agree, Vynor.

I wish to continue to use a variety of channels for making payments according to the circumstances in each case and to suit the needs of the payee where appropriate.

There is no doubt those responsible for tackling crime wish to see the end of cash because it is the basic currency of the drugs trade. They think the end of cash will bring about the collapse of such criminal activity but it will not. Addictions are so powerful that other mechanisms, including physical violence and weapons, will be employed to ensure continued demand and supply.

If we are going to pursue the loss of tax argument I’d like to see corporate and the wealthy individuals tax evasion and tax avoidance dealt with first, if only to show we are all in the same boat.
I wonder why, for example, all capital gains are not charged as if they are normal income at the marginal rate after taper relief. And not offset against losses.

I agree with you in respect of closing loopholes on corporate tax avoidance and stopping personal tax evasion but, although it is complicated, overall I feel Capital Gains Tax is a reasonable tax structure being both progressive and targeting the right areas. It is not payable on gains on personal possessions worth less than £6,000 or on cars, and there are several other exemptions for gains on certain savings, investments and gifts. Taper relief only applies to Inheritance Tax nowadays.

For a basic rate taxpayer, if capital gains [i.e. profits on disposal of assets] after deduction of the annual tax free capital gains tax allowance [the annual exempt amount] of £12,300 for 2020-21, added to the total of other taxable income after allowances, is within £37,500 [the basic tax rate band] then CGT is payable at 10% [excluding gains on residential property which are taxed at 18%], and any gains that take the total above the basic tax band are taxed at 20% or 28% respectively.

Losses from previous years can be offset against capital gains which does not seem unreasonable to me; it probably discourages people from coming up with dubious avoidance devices.

The sort of small traders I pay in cash probably don’t have any taxable income at all after allowances and reliefs.