As cashless transactions become the norm, Gov't must ensure most vulnerable are not left behind
Writing for PoliticsHome, Matt Warman MP calls for government to eliminate the ‘poverty premium’ experience by vulnerable groups in an increasingly cashless world.
‘It’ll cost you less,’ a local tradesman said to me recently, ‘if you pay in cash.’ After a slightly sheepish pause, he realised it might be best for both of us if he didn’t. While it’s entirely his responsibility to make sure due tax is paid, the subtext was obvious.
Cash isn’t, however, just a problem for those of us who want to see HMRC get all that is due to it - be that from small businesses, whose taxes have recently been significantly cut in many ways, to larger ones who have used the international tax system to avoid it. Cash is a problem for workers who get paid in it and are at risk of being mugged for it; for businesses who having taken it have to cart it to a bank; and for banks who have to take a diminishingly important thing to a host of rural cash points.
Given the choice and an ideal world, I’d abolish cash tomorrow and have done away with cheques a decade ago. But in the absence of an ideal world, cash does remain a lifeline for many vulnerable groups, and in reality it is the market that is making their life somewhat harder by penalising those who do not pay online. These are just the groups who cannot afford to be sentimental about coinage.
Some retailers in big cities no longer take cash – that’s routine across Sweden, by the way – and most tariffs are cheaper online, which is of course the ultimate cashless transaction.
Government has a profound responsibility to those vulnerable groups to smooth that transition, and to find creative ways to hasten it so that nobody is left behind. The poverty premium for not embracing new payment technology must be eliminated, and digital can help people avoid fraud and late payments and put their money in ring-fenced pots that improve financial management.
But this is not simply a nice to have, because with £94tn of cash and digital transactions last year, this cashless society is the inevitable direction of travel. There were, globally, more digital transaction than cash ones in 2016, yet Treasury figures indicate that 2.7m people in the UK are entirely reliant on cash today. Which? found that 46% of people did not like the idea of a solely digital payments future, and it is the elderly and those in the poorest income groups in particular where some four in five say they absolutely rely on cash. Government and business therefore must provide leadership to improve both trust and economics.
So I hope in today’s debate in Westminster Hall briefly to articulate how government can both accelerate progress and become more inclusive when it comes to cashless transactions. High streets must do all they can to cut costs for businesses, and we could start by backing the work of the Financial Inclusion Commission, whose work Visa should be praised for sponsoring.
Part of this progress will be down to the market, which can incentivise businesses not to charge premiums or introduce minimum payments for card use, as well as making it clearer to those businesses where taking cash incurs a cost that could be eliminated. But there is also a significant need for a campaign of public information from businesses and banks to reinforce confidence in simple contactless payments, with the growth in wallets claiming to protect your card from being scammed a testament to the cynical desire to capitalise on legitimately questioned but ultimately reassuring security standards. It is also vital to reassure people that the ending of the anonymity possible with cash would not lead to a surveillance state.
So government should work with businesses such as Square, who have already conducted interesting experiments to make town centre markets adopt cashless technology with real success, but acknowledge that there is no perfect solution to ensure that even those on short term contracts are paid in cash. Many of them still do not even have a bank account.
But it is in all our interests to quicken the pace of this part of the fourth industrial revolution – it used to be said that cash is king, but today moves made to combat money laundering and market forces mean it is on its way out. Government must think creatively about how to incentivise a process that ultimately will see digital triumph, but it must not forget those who rely on it.
PoliticsHome member, Responsible Finance, has responded to Matt Warman MP, saying "access to cash is particularly important for people on low-incomes". Read the full response here.