The National Audit Office first raised the issue in September, and now the Public Accounts Committee has called on the Bank to look into the matter.
The Bank estimates that 20%-40% of issued notes are held for cash transactions. About £50bn of issued banknotes may be used overseas for transactions or savings or used in the “shadow economy.”
Money Stashed Elsewhere
Meg Hillier, who chairs the committee, has stated that billions of pounds worth of cash are “stashed somewhere, but the Bank of England does not know where who by or what for and does not seem very curious.”
However, the figure of £50bn is not disputed, even if the terminology is.
The committee stated, “It needs to be more concerned about where the missing £50bn is. That amount of money could have material implications for public policy and the public purse” if a material proportion of the banknotes were being used for illegal purposes.
MPs on the committee say that little attention is being paid to the whereabouts of banknotes today. Demand for banknotes has steadily gone up although their use is in decline, the Bank of England does not “appear to have a convincing reason for why the demand for notes keeps increasing,” says the committee in a report.
The debate over cash has centered on whether people, who might struggle with digital payments, will have access to notes in the future.
“Members of the public do not have to explain to the Bank why they wish to hold banknotes. This means that banknotes are not missing”.
Ill-gotten gains
This rising demand is a “trend being seen with other major currencies,” as the committee itself admits.
It particularly affects the dollar and euro, which are held as reserve currencies around the world. Such currencies are more attractive to criminals because they have higher-denomination notes, making it easier to smuggle or stash ill-gotten gains. The highest value note issued by the Bank of England is £50.
The Final Report
Concerns were also raised about high stock levels of cash. The committee said, “We recognize that the Bank would not wish to risk running out of notes. However, we do not understand the Bank’s rationale for holding such high levels of stocks”.
“The Royal Mint and the Treasury should set out how they are ensuring plans for manufacturing coins are sustainable. There are gaps in oversight of the cash system, where no one appears to be responsible. It should give overall responsibility of the cash system to a single body”, recommended the report.
However, the UK is not the only country to face this problem. A Bank of England spokesperson said, “It is the responsibility of the Bank of England to meet public demand for banknotes. The Bank has always met that demand and will continue to do so.
I’m Ava Paul, an experienced news website author with a special focus on the entertainment section. Over the past five years, I have worked in various positions of media and communication at World Stock Market. My experience has given me extensive knowledge in writing, editing, researching and reporting on stories related to the entertainment industry.
