It is known throughout the world as a byword for security. But the Bank of England is evidently a tad unclear on the whereabouts of £50bn of banknotes, and it doesn’t seem to be overly concerned about it, a powerful group of MPs has said.
In a stiff rebuke for Threadneedle Street, the Commons public accounts committee said the money – equivalent to a stack of £5 notes more than 800 miles high – had essentially gone “missing” because the Bank did not keep close enough tabs on cash usage in modern Britain.
Despite walls 8ft thick and an imposing reputation for guarding billions of pounds of gold bars in its vaults, the PAC said the Bank had nonetheless displayed a “lax attitude to whereabouts of bulk of sterling cash supply”.
However, banknotes by their very design are not traceable, making it hard for the Bank to follow the money and know exactly where its notes end up.
According to a report from the National Audit Office, there are about £50bn worth of issued banknotes that may be being used overseas or in the UK, a tiny fraction of the trillions of pounds in money circulating in the UK economy in physical notes and by digital transfers.
The PAC speculated that this money could be stashed away under mattresses as unreported household savings, may have been taken abroad, or used in the shadow economy. “The Bank of England doesn’t know,” it said.
The value of banknotes in circulation has shot up this year, which the Bank has said is probably because more people started hoarding cash during the Covid-19 pandemic in case they needed it.
Coin use has declined over recent years, with the production of new pennies and pounds by the Royal Mint falling by about 65% in the last decade, a trend which could be accelerated by the pandemic as more people move to using contactless debit card payments.
Meg Hillier, chair of the PAC, said: “£50bn 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 £50bn 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.”