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Currency (Purchasing Power)

Volume 973: debated on Thursday 8 November 1979

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asked the Chancellor of the Exchequer by how much the purchasing power of the half pence coin has depreciated since February 1971; how much the penny is now worth in relation to the penny coin in February 1971; and if he will now demonetise the halfpenny and two-and-a-halfpenny coins.

The purchasing power of the ½p coin has fallen by two-thirds since 1971. It follows from this that the purchasing power of the 1p coin now is two-thirds that of the ½p in 1971. I have no plans to demonetise the ½p coin, which is still in strong demand. On the other hand, the old sixpence has effectively dropped out of use and the question of its demonetisation is now under review.

Will my hon. Friend accept that the ½p coin has been reduced to the role of a supermarket gimmick, which is an irritation both to the housewife and the shopkeeper? Has not the time come when we should face the fact that the housewife would be better served by a discount on a special offer at 49p, for example, rather than one at 49½p?

This is a matter of judgment, but there is a continued demand by the banks for this coin, which does not really support what my hon. Friend suggests. I understand that during this financial year the Mint expects to strike more than 200 million ½p coins in response to the demand from the banks.

Would not the housewives of the country be better served if the Government reversed their policies of increasing inflation so that the value of our money remained static?

The Government's policies are precisely directed to bringing down inflation.

Does my hon. Friend realise that to one hon. Member at least his answer is extremely disappointing? Will he confirm that the ½p coin is now worth little more than a farthing was in 1961 when it was abolished? That was 10 years before decimalisation. Will he also confirm that production costs of the coin now exceed its face value? If savings are to be made, why not in this area? Would not my hon. Friend wish to go down in history as the Minister who abolished the absurdity of a vulgar fraction in our currency and removed us from a league of countries with fractional coins, which includes Ghana, Nigeria, Sierra Leone and the Irish Republic?

My hon. Friend is wrong on at least two counts. The cost of striking the ½p coin is less than so there is still a profit in it. Secondly, the one cent coin that is still in currency in the United States is worth less than the ½p here. However, I am glad to hear my hon. Friend's assurance that I will go down in history.

Will the Minister arrange for some professionals to work out the purchasing power of half of the pound note that the Prime Minister spoke about during the election campaign. Will he make a statement to the House on this matter?

My right hon. Friend the Prime Minister was at that time making the real point that under the previous Administration the value of the pound had halved. In fact, it had gone down to less than half. This points to the mockery of right hon. and hon. Gentlemen on the Labour Benches attacking the Government. We are getting inflation down, although many difficulties are involved in tackling the problems that we inherited from the previous Government.

Is it not the case that the Government increased the cost of living by 4½ per cent. at a stroke in their last Budget and that the increase in the mortgage rate, which is now inevitable in January, as the Prime Minister has admitted, and the increases in fares, fuel charges, rents and rates guarantee that we shall have more than 20 per cent. inflation in the new year?