TNAG-0717-FCO40-914-Banking-and-monetary-matters-in-the-Dependent-Territories-is-1978 — Page 104

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6.3

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The Royal Mint's practice in issuing coins has been, on the whole, to treat them simply as a commodity to be sold to the public

(through the banking system) at the face value at which they are legal

tender. The demand for them rests on the need for them as a medium

of exchange which people are bound to accept (within limits) in discharge of a debt or other obligation. The excess of face value

over metal, minting, handling and distribution costs (which has from

time to time been negative for a particular denomination because of the inflation of metal prices) represents a profit which accrues direct to the Exchequer. The Mint has accepted no liability to buy back (redeem) coins which are at any time surplus to the requirements of the public and the banking system for small change. On the whole this has not been a problem in recent years, not just because of the small part played by coins in the total money supply, as indicated above,

but, more importantly, because inflation has led to a steady increase in the currency in circulation. So far as the general public is concerned, surplus coins can always be "redeemed" in exchange for

equivalent deposits with commercial banks because in practice the banks

are always prepared to accept coins for credit to a customer's account.

But the Mint is not prepared to take surplus coin stocks from the

banks. It is legally obliged to "redeem" (in the sense of exchanging) only those coins which have been withdrawn from circulation, i.e. which have ceased to be legal tender, for equivalent coins of a new series; and this "redemption" facility has then been available only for a limited period. But to the extent that payment is involved (to the banks), for example for the half-crowns withdrawn in 1970, and

not directly replaced, the Mint had to apply for a vote from Parliament

for the necessary funds.

6.4

Commemorative coins of ordinary standard are dealt with in

the same way as for coins of ordinary circulation. Only in the

case of proof coins is a token sum of seigniorage (1% of face value)

paid over to HMT. The proportion is purely arbitrary, being intended

to represent that part of the issue that might eventually find its

way into ordinary circulation. This reflects the doctrine that in

respect of coins going into circulation the difference between the manufacturing costs and the face value should accrue to the Treasury

rather than to the Mint.

6.5

To sum up, there is thus no redeemability for UK coins. Because of this, and also because there are no problems of confidence in the coinage or of needing to have a facility to "get out" of the