Will coppers come a cropper?

The people of Wexford have been talking non-cents since the middle of September as part of a trial that has seen the smallest denomination coins scrapped and transactions in 250 of the town's retailers rounded up or down to the nearest five cent.

The shrapnel-scrapping experiment comes to an end this week, and if the penny drops in the southeast we might all be able to say goodbye to the troublesome and almost entirely worthless one and two cent coins by the end of next year.

The lower denomination coins can’t be used in vending machines, at toll booths or to pay for car parking, while there can’t be a shop in the country that likes to get them in any significant numbers or a shopper who likes giving them. About 30 million one and two cent coins have made the journey from the mint to shops and on to change jars since they came into being more than 10 years ago.

Apart from making holes in our trouser pockets and creating virtual copper mines behind our sofa cushions, the smallest of coins also cost us money. These coppers – they are actually made with 94.5 per cent steel and plated with 5.5 per cent copper – cost more to make and transport than they will ever be worth.

A one cent coin costs 1.7 cent to produce, while a two cent coin costs two cent. With about 25 billion of them in circulation across the EU, the total cost of production stands at close to €400 million, and it will keep rising until the coins are put out of their misery.

The only reason they ever existed was fear. When the euro came into being in 2002, our leaders declared that one and two cent coins had to be part of the deal because they were afraid retailers would rip people off by rounding up prices to the nearest five cent.

The European Commission is still a staunch supporter of the smaller coins – not least because, for some inexplicable reason, the otherwise sensible Germans have a love of them and about 70 per cent of the people there are against decommissioning; again because they fear it will lead to prices rising by stealth.

The Dutch Central Bank is on the scrapping side of the fence. When the euro came into physical being the Dutch bankers estimated that it could save more than €30 million a year by not using the smaller coins so it scrapped them almost entirely as did the equally sensible Finns. Instead both adopted what is known in minting circles as the Swedish Rounding model, which meant retailers rounding prices to the nearest five cent if consumers paid in cash. Both still mint a token amount of one and two cent coins for collectors, but no one in either place buys anything with them.

The debate about the worth of copper coins is not unique to Ireland or the euro zone. Last year the Canadian government announced it was eliminating the penny and has stopped distributing coppers, while the coins already in circulation are being melted and the metal recycled. Australia and New Zealand scrapped their one and two cent coins in the early 1990s and in 2006 New Zealand got rid of its five cent piece.

That could happen here. The rules of the Wexford rounding trial are simple. Cash transactions are rounded to the nearest 5 cent at the till. The price of individual goods or services have remain unchanged, with only the bill rounded up while all non-cash transactions have been unaffected.

If something costs €10.21 or €10.22 it is rounded down at the till to €10.20 while those transactions which cost €10.23 or €10.24 are rounded up to €10.25

Programme manager for the National Payments Plan Ronnie O'Toole tells Pricewatch that the trial has gone very well. The NPP will be surveying shop owners and consumers in the weeks ahead and will prepare a report for Government which could, if it wished, roll out a national rounding system before next summer.

O’Toole believes the smaller coins have had their day. “The Central Bank does not produce coins to make money so I would not be swayed by the fact that the one cent coin costs more to produce than it is worth,” he says. “We produce coins to facilitate transactions, and there is no evidence these coins are being used in transactions and the coins are going from us to shops to jam jars”

Ciarán Lynch of Fortune’s Pharmacy in Wexford is also keen to see the back of the coins. “We were the first business to sign up,” he says. “It did not cost us money or save us money but it may make our lives easier and make the lives of the public easier.” Lynch says he has found it “more challenging” than he expected with “staunch opposition from some people”.

He expresses disappointment that Aldi, Lidl or Dunnes Stores did not sign up to the trial. "Not everyone was aware of it, and there was a suspicion as to where the money was going," he says. "If this trial had started in 2006 when we were awash with money it would have been easier, but now there is this feeling that the Government is trying to take more money from people, even though that is not the case."

While the European Commission may be against the scrapping of the copper, Ireland – as has been proved by the Dutch and the Finns – does not need its support, and we can act unilaterally. Shops can also just stop accepting them if they so wish.

There is an almost universal misunderstanding of what legal tender means, says O’Toole. It applies only to debts and not the sale off goods. If you owe someone 90 cent and choose to pay them in two cent coins then they have no choice but to accept it as the coins are legal tender – this is limited to 50 coins no matter what the denomination. But when you are buying something there is no contract in place and no debt owed so the retailer can just send you packing if you try to pay in coppers.

While they have the right to act alone, it seems unlikely that any retailer would act alone in turning their back on the one and two cent coins, so they will have to wait until the official approval is given.

It is worth remembering that we have been here before. Twice. The farthing was last minted in 1956 after being in circulation in some form or other for more than 500 years; 30 years later it was the halfpenny’s time to go. Neither coin is missed. Nor will today’s smallest coins, once we stop making cents.