There is much talk about how Covid-19 will change the world. There is less about how it is simply accelerating trends that were already underway (think everything from a cold war with China to rising levels of home working). One to keep a particular eye on is a theme we have been watching for some time – the death of cash.
No one wants to touch cash today. It’s always been known to be pretty filthy stuff; now it isn’t just grubby, it is potentially lethal. No wonder, then, that the use of cash has halved in the last week and that “card only” signs are appearing everywhere. Some large chains stopped taking card payments altogether (even before lockdown) and the contactless upper limit has been moved from £30 to £45.
You might think this is no bad thing. After all, cards are quicker, easier and cleaner than notes and coins – as are all the many ways to use phone apps to pay. Central bankers will agree with you.
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Back in 2015, Andy Haldane, chief economist at the Bank of England, made a speech in which he explained what an irritant the likes of you and me holding cash is for him and his colleagues. It would be much easier if we weren’t allowed it; that way, the Bank could have significantly more control over how and when we spent our money.
We would all hold our wealth electronically. So if they wanted us to spend more, they could charge us negative interest rates (effectively confiscating our unspent money – note that we spend more when we use non cash money anyway). If they wanted us to pull back they could pay us interest at whatever level they fancied. Much easier – particularly in times of crisis when banks would like monetary policy to work faster than it currently does.
Getting rid of cash also suits HMRC down to the ground: the tax gap is largely about the cash economy. No cash equals no cash-in-hand work equals no tax avoidance.
Anyone who thinks the chancellor isn’t thinking about this hasn’t been concentrating: his four-week amnesty for those who have not filed last year’s tax return is a clear message to cash workers (see my last blog on this).
We have never been mad for the idea that cash is a burden, not a benefit. Cash allows us some degree of financial freedom and privacy; 100% digital money removes both completely. We are moving into a world in which the authorities can force the speed of change. There is a good chance this will be one of the things that gets forced.
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