Coin shortage crisis looms after Darling's VAT cut - Roy Mint

[Arizona Coin Collector]

FROM:
http://www.dailymail.co.uk/money/article-1111554/Coin-shortage-crisis-looms-Darlings-VAT-cut.html

Coin shortage crisis looms after Darling's VAT cut

By Dan Atkinson
Last updated at 10:59 PM on 10th January 2009

The Royal Mint is bracing itself for a surge in demand
from shopkeepers for smaller coins as a result of
Alistair Darling's VAT cut.

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A shortage of coins due to hoarding has forced
the Bank of England to put more into circulation.

By reducing the rate from 17.5 per cent to 15 per cent
in his November Pre-Budget Report, the Chancellor made
transactions much more fiddly because price tags have
long had the old VAT rate built in.

A £10 item, for instance, would fall in price to £9.79,
while a £15 item would be reduced to £14.68. A £4.99
item, which would previously have called for just one
penny in change from a £5 note, will now cost £4.88,
increasing the demand for change.

All of this means that much more small change is needed
when customers pay in cash and the Royal Mint is on
alert for an increase in demand.

'We have been looking into this,' said a Royal Mint
spokesman. ' We are monitoring the position closely.
There is no sign as yet, but it may be a bit early for
demand to have fed through the system.'

The first port of call for shopkeepers will be their
banks. Once the branches start to run short, they will
report this fact to their head offices, which, in turn,
will put in bigger coinage orders to the Mint, of which
Darling, as Chancellor, is the Master.

There are coins worth about £3.6 billion in circulation,
of which £2, £1 and 50p pieces account for £2.5 billion,
or 70 per cent.

Smaller silver coins - 20p, 10p and 5p - account for
£815 million, or 23 per cent.

Copper coins - 2p and 1p - account for £241 million, or
seven per cent.

In 2007, the Mint estimated that since Britain switched
to decimal currency in 1971, 6.5 billion penny coins
had been taken out of circulation, either because they
had been lost 'down the sofa' or been collected in jam
jars and never spent - with a total value amounting to
a staggering £65 million.

That figure looks likely to increase given the likelihood
of ever more small change being handed out in response to
the VAT cut.

A spokesman for Coinstar, whose machines - many of which
are in supermarkets - take loose coins in exchange for
vouchers that can be cashed for shopping, said:'There has
been an increase in the amount of coin machines being used.

'There has been an increase in the average transaction
from £25 to £32 in the past year.

'The reason that people use Coinstar is to make the
family budget go further. More people have a coin collection
than a bank account in the UK.'

A pocket guide to loose change

About 28million people keep money in piggy banks and
jam jars

Estimates indicate that £580million in loose change is
sitting idle in UK households

Of the 23billion coins in circulation, 13billion are
sitting in piggy banks and jam jars or are down the backs
of sofas

The first penny was introduced in the year 785, and the
penny we recognise today in 1971 when the British currency
was decimalised

Coinstar machines in the UK have processed more than
£500million in change, in approximately 22million
transactions. More than two billion coins have passed
through the machines

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