BRITAIN'S CURRENCY CHANGE BELATED REPRIEVE SOUGHT FOR PRESENT SIXPENCE COIN

Press, Volume CIX, Issue 32235, 2 March 1970, Page 12

BRITAIN'S CURRENCY CHANGE BELATED REPRIEVE SOUGHT FOR PRESENT SIXPENCE COIN

'Reprinted from the “Economist" by arrangement>

Britain’s Decimal Currency Board lias approximately six weeks to decide whether it likes the 6d enough to advise the Government to retain it in perpetuity as the equivalent of a 21 new pence coin. The signs are that the board likes the 6d a lot and is sufficiently impressed by the supjxii t it has got—not necessarily from the traditionalists but from thoroughly sensible people including large numbers of retailers and the Government’s own Consumer Council—to Say at the end of its deliberations that the coin ought to have been kept. But if the arguments for keeping the 6d are so impressive, why this conversion only at the eleventh hour?

Decimal critics have missed the boat by several years. The Halsbury Committee reported in favour of the £-new penny-halfpenny system as far back as 1963, under a Tory government; by end--1966 a Labour government had got round to accepting, the system in preference to. one based on the more prac-[ tical 10s unit. There were free votes in both 1967 and 1969 when dissenters could have had their say. But there is obvious political capital to be made from the inevitable short-term disruption and price increases D-day will bring, and the Tories would be foolish to miss it. Particularly when there is always the likelihood that the introduction of decimal coins could coincide with a spring election next year.

The Government has strenuously denied any suggestion) that D-day might be postponed to avoid this. There ;is no reason to disbelieve it. Any change of date would [need new legislation. And In a purely practical context, the i preparations have probably gone much too far. Business |and industry will be spending in the region of £lOO million I (with a wide margin of error either side) on getting ready for D-day. People Conservative But anxieties over how the [public will take to decimalisation are justified. People are highly conservative about their money, as the storm over the seven-sided 50 penny-lOs bit demonstrated only a few months ago. The change does not just involve the simultaneous introduction of three new coins (the decimal bronze ones which have no exact £.s.d. equivalents), but a new unit (new pence) which is difficult to convert mentally into an old one, this could cause widespread suspicion and confusion. And it is no good pointing to Australia, New Zealand and South Africa which have all enjoyed smoother-than-expected decimal changeovers. Apart from obvious differences in the size of .their economies, they all adopted systems based on 10s, which make instant mental [conversion much easier than under the £-pence-halfpence system, with 2.4 old pennies 'to one new one. Evidence [from experimental £-decimal [supermarkets suggests that, 'until they have got used to them, shoppers take up to; jtwice as long to pay in deci-] 'mats than in the old' £.5.d.,l band the adjustment takes I several weeks. ! j ■! Pricing The Goods The most serious question, mark hangs over post-D-day , prices. Although there will be an 18-month period of J grace, when both currencies can be used side by side, th“ banks will go over to decimals-only operation immediately. and most major businesses are expected to follow within a few weeks, three months at the very 1 most, and will then be confronted with the problem of how to price their goods under the new system. The official conversion table, which works on a swings-and-roundabouts principle, does provide a fair guide, but there will be no legal compulsion to use it. Consumers certainly seem to have little faith in their retailers’ honesty: in a recent survey three-quarters of them: were found to expect price increases after decimalisation, with shopkeepers round- | ing prices up to the nearest decimal equivalent rather than down. In practice competition, if nothing else, will probably keep ' ill-begotten [ gains to a minimum in the case of retail shops—though prices may be put up now to a level with a suitable decimal equivalent which can then be virtuously maintained through D-day and after. But once D-day comes, opportunities for unjustified profits are limited. The Halsbury Committee worked out that even if retailers rounded up rather than down in every single case, the maximum impact on the retail price index would be around II per cent—hardly staggering. Smallest Step But even if the effect on [the overall level of prices is likely to remain small, individual increases in sopie | low-value items could be [much more worrying. The smallest decimal step will be Jnp, 20 per cent more valuable than the old penny and unlikely to be very popular; because of the awkwardness] of using fractions with a ; decimal system. (It is a fair prediction that, within a decade or two, this bastard element will be phased out). Meanwhile there are a number of items which cannot be rounded down because of too-tight margins, and will have to go up by as much as the equivalent of the present penny—and ■ sometimes more. For the prices of newspaper and beer, the Prices and Incomes Board has already virtually given its blessing to this. The Post Office so far has decided only on coin box charges, where the minimum price will be 2 new pence, a commend-

[able 20 per cent reduction,] [which will, however, buy less [ time. New letter rates have [yet to be announced, but; [after £35 million pay offer .[for this month's 250.000] [workers, and on the principle) that there should be no crosssubsidisation between separate Post Office services, first ] (class letters are bound to go Jup to at least 21 new pence, ;[ or 6d, after D day. Rise Already Planned ’ And it is only too tempting to put decimalisation forward as an excuse for a price rise that had been . planned anyway. This is what ! happened over London Transport's announcement that [minimum tube fares were to i[go up from 6d to Is, albeit l with a revised fare structure, [(because the cost of converting ticket machines to mixed [[decimal coins, at £1 million, s'would be unacceptable. It i[turns ,out that decimalisa- > tion had merely speeded up [ the already-planned introduc'[tion of the Is minimum. > It was this London Transport announcement that gave I the belated save-the-6d campaign its impetus. It appears the Government has given in ton this to buy a little peace. I and to avoid the impression that the country is being steamrollered into decimalisation without consultation. The arguments for keeping the 6d have been persuasive enough all along. It is a popular coin: retailers, in particular, find it useful' and have been pressing for its retention. It does have an [exact decimal equivalent (2|[ new pence), even if this

(means more widespread use [of the inconvenient j new penny fraction, and its continued circulation would save millions on converting slot machines. It could also •help to keep down prices byproviding a single low-value coin where there might be a 'temptation to move upward to a shilling for all slot [machines. Money Spent The trouble is that the changeover was planned on the assumption the tanner would be dropped, and the probable reprieve has come so late in the day that some of the money involved in phasing it out has already been spent. The Post Office, for one, has already shelled out £500,000 and handed out contracts worth £2 million in preparation for converting its 225,000 coin boxes to take [the 2 new penny coin, instead of the 6d. It will • now have to rethink on this investment, but money will have been wasted whatever is decided. In a way users are now worse off than before, because the 6d may still be kept on for only a few years to smooth the passage of decimalisation and then be phased out. There can be little question of abandoning plans for the bronze 2 new penny piece, which will be perilously close in value to the 6d. The mint already has a stockpile of 650 million of these, ready for use. Under a 10s system the question would never have arisen, the tanner would have been the natural 5 new penny.