The Government will consult on whether to scrap 1p and 2p coins, along with the £50 note.
As part of his spring statement on Tuesday, the Chancellor announced a call for evidence on encouraging cashless and digital payments.
In documents released alongside Philip Hammond’s update on the UK economy, it was revealed the Government wants to know whether the “current denominational mix meets the needs of cash users”.
In a paper titled “Cash and digital payments in the new economy: call for evidence”, Treasury officials highlighted how – as the use of cash declines and contactless payment increases – the continuing processing and distribution of coppers may not be cost-effective.
It is noted how 60% of 1p and 2p coins are only used in a transaction once before leaving the cash cycle, with coppers then either saved or, in 8% of cases, thrown away.
It is estimated the Royal Mint has needed to produce more than 500 million 1p and 2p coins each year to replace those falling out of circulation.
But the cost of processing and distributing these low denomination coins is the same as higher denomination coins.
This means there is a high cost to distributing 1p and 2p coins relative to their face value and usage.