MPs have expressed concern at a “missing” £50bn in bank notes lost in the UK economy.
In a report the Public Accounts Committee (PAC) called on the Bank of England (BoE) to investigate the missing money, which may be being used for overseas transactions or in the shadow economy.
The PAC said the number of notes in circulation reached a record high in July 2020 of 4.4bn, with a monetary value of £76.5bn. This could be due to people hoarding cash during the pandemic and less cash being deposited at banks by sole traders, window cleaners and gardeners.
It is estimated 20-24% of notes are used for day-to-day transactions and up to a further 5% – between £1bn and £3.5bn – are held by UK households as savings.
“This leaves about £50 billion worth of issued bank notes whose whereabouts or use is unknown,” said the report.
“These notes may be being used overseas for transactions or savings, or held in the UK as unreported household savings or for use in the shadow economy. The bank does not have enough data even to make broad estimates of how much should be apportioned to each category.”
The report said the BoE “seems to lack curiousity about the huge volume of notes not being used or held for day-to-day transactions”.
“There are implications for public policy and the public purse if a material proportion of the large volume of banknotes whose whereabouts or use are unknown are being used for illegal purposes.”
The PAC said oversight of the cash system was “fragmented” between various bodies including the Treasury, the Financial Conduct Authority, the Payment Systems Regulator, and the BoE.
“It is also worrying that the public bodies appear to be unclear on what they are trying to deliver for consumers and businesses, and don’t appear to have grasped the full impact lack of access can have on communities, particularly in rural areas, or the real detriment caused to some groups and consumers,” said the report.
Meg Hillier, chair of the PAC, said: “£50 billion of sterling notes – or about three quarters of this precious and dwindling supply – is stashed somewhere but the Bank of England doesn’t know where, who by or what for – and doesn’t seem very curious. It needs to be more concerned about where the missing £50 billion is.
“Depending where it is and what it’s being used for, that amount of money could have material implications for public policy and the public purse. The bank needs to get a better handle on the national currency it controls.”
She added: “Our run up to Christmas and Christmas shopping is obviously very different this year, but it highlights how increasingly difficult it has become to, for example, choose to support a small local business by paying it in cash – generally the cheapest form of payment to accept.”
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