The committee said there are implications for public policy and the public purse if a material proportion of the large volume of banknotes whose whereabouts or use are unknown are being used for illegal purposes. also said that the Bank of England does not “appear to have a convincing reason for why the demand for notes keeps increasing” or any real understanding of where around £50 billion of issued sterling notes are, although it acknowledged that it is a trend being seen with other major currencies. The Bank estimates that 20% to 24% of issued notes are used or held for cash transactions. This leaves about £50 billion of issued banknotes that may be being used overseas for transactions or savings, or held in the UK as unreported household savings or for use in the shadow economy.

Meg Hillier, chairwoman of the Public Accounts Committee, said, quote: “In many areas where you can use cash you’d be hard-pressed to find it, at least without paying an ATM fee that may be a substantial percentage of a small withdrawal – yet making frequent, small withdrawals can be a key budgeting tool for those on low incomes, and least able to afford those fees.

“Conversely, £50 billion of sterling notes – or about three-quarters of this precious and dwindling supply – is stashed somewhere but the Bank of England doesn’t know where, who by or what for – and doesn’t seem very curious. It needs to be more concerned about where the missing £50 billion is. Depending on where it is and what it’s being used for, that amount of money could have material implications for public policy and the public purse. The Bank needs to get a better handle on the national currency it controls.”

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