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While the economic turmoil caused by the coronavirus pandemic has left some people in Britain counting every penny, the country’s central bank is apparently struggling to keep up with billions of pounds.
A parliamentary report released on Friday said £ 50bn (roughly $ 67bn) of paper money was “missing” in the country’s treasury and the Bank of England “seemed to lack curiosity” as to where everything was going. .
Of the more than 70 billion pounds of banknotes in circulation in Britain, the report found that only around a quarter was spent in stores and on other purchases. This leaves the majority of these invoices – which by nature are not trackable – without any accounts.
The £ 50 billion in cash may be stashed in unreported household savings, squirrel for a rainy day, or used for more nefarious purposes, Parliament’s public accounts committee said in the report, calling the bank from England to investigate.
“50 billion pounds of banknotes – or about three-quarters of this precious and dwindling supply – are hidden away somewhere, but the Bank of England doesn’t know where, by whom or through what – and doesn’t seem very curious. Said Meg Hillier, London’s Hackney South and Shoreditch region lawmaker and chairman of the committee that produced the report.
The Bank of England responded to the suggestion that it was taking a laissez-faire approach to the issue.
“It is the responsibility of the Bank of England to meet the public demand for banknotes. The Bank has always responded to this request and will continue to do so, ”a spokesperson for the central bank said in a statement on Friday.
“Members of the public do not have to explain to the bank why they want to hold banknotes. This means that there is no shortage of banknotes, ”the bank statement said.
The pandemic has led to a decline in cash payments, but demand for bills has increased in recent years and the pandemic has accelerated this trend, according to the report. The value of paper (and polymer) bills in circulation in Britain hit a record high in July of £ 76.5 billion.
A reason perhaps interest rates, which have been low for years, have been cut further this year to stimulate the UK economy.
“With interest rates so low, it doesn’t matter whether you keep money in the bank or keep it in cash,” said Andrew Sentance, senior advisor at Cambridge Econometrics and former member of the Monetary Policy Committee of the Bank of England. The current base rate of 0.1% means that “a lot of people will have more money in their wallets than they usually have.”
Yet the public accounts committee – which examines the economy and spending – is unconvinced by this explanation and is concerned that a substantial proportion of the £ 50 billion has been embezzled and used for illegal activities. such as money laundering in the underground economy. whether in Great Britain or abroad.
“Are more of us putting money under the mattress because of Covid?” There should be a lot of us doing this, ”Hillier said in an interview on Friday, adding that the gap between ratings in circulation and those actually used “must be linked to crime”.
The parliamentary committee hopes that a Bank of England investigation can shed light on, if not where it is held, at least the factors behind the increased demand for liquidity.
For its part, the Bank of England said the amount of paper money used for transactions in Britain – around 20-25% of all cash in circulation – broadly matches that of other major economies.
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