Imo
City and
oining money Our grubby banknotes make the Treas- ury a billion pounds a year straight profit. Not satisfied with that, the Govern- ment is now calling in the pound note in order to make even more. Pound coins, says the Chancellor, cost twice as much to Produce as pound notes, but last 50 times longer. What a pity! It means today's Charmless little chocolate buttons will be With us well into the next century — when, for a tiny proportion of the Treasury's rake-off, we could have been given money Worthy of the name. It is not a choice we have ever been offered, for successive Chancellors have kept understandably quiet about that lucrative monopoly, their licence to print money. To. see what it is Worth, you must turn to an obscure page in the accounts of the Bank of England, headed 'Issue Department'. This shows that in the year to 29 February last, the cost of the note issue was £45 million. That paid for printing the banknotes, issuing them, sending them out, getting them back, taking care of them and finally burning them. The income generated by this busi- ness was £1,243 million. That left the useful profit of £1,198 million, all of which Went, not to the Bank of England, but (under an Act of Parliament of 1844) direct to the Treasury. How was the money made? Easily. Once you have run off a few green paper oblongs and persuaded David Somerset to sign them, you sell them, at their face value, to the banks. At some later time the banks sell them back to you. ut in the meantime you have been able to Invest the proceeds and enjoy your invest- Men income. With £12,036 million of notes at present in circulation, you can see that this is remunerative. You may even make a capital gain —f19 million, last year, apparently — to ice your cake. Given that You make all this money, who loses it? Anybody holding banknotes — the banks (for no longer than they can help), the shops (ditto), the rest of us. We lose in two ways; indirectly, by forfeiting our chance of investment income (or, to put that another way, giving the Government interest-free credit), and directly, by infla- tion. Holding coins can be more expensive ,stilic• Surplus notes can be sold back to the ank of England (and are, after the circulation reaches its seasonal peaks in August and at Christmas) but there is no selling surplus coins back to the Mint. The Chancellor is Master of the Mint, and the profits of the coin issue go to the Treasury, uEider the name of seigneurage — which means that Nigel Lawson has now en- hanced the value of his droit du seigneur.
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