Risk of ‘two-tier society’ if Government does not act on cash acceptance

A new report by the Treasury Committee has found that the Government’s failure to act to tackle declining cash acceptance could lead to a two-tier society, with the most vulnerable bearing the cost.

The Committee heard directly from vulnerable groups, including people with learning disabilities, domestic abuse victims and the elderly, that buying essential goods and services can cost more as the number of places where they can spend their cash is reduced. People who are already at increased risk of poverty will, therefore, face a poverty premium if businesses and other organisations do not widely accept cash.

The acceptance of physical currency for goods and services in the UK is not currently specified in any legislation. This means UK businesses and organisations could choose not to accept cash, with no legal duty to accommodate customers’ varying needs.

Evidence submitted during the inquiry sets out the challenge when attempting to assess levels of cash acceptance in the UK. For example, data from LINK in 2024 found that half of respondents had been somewhere that did not accept cash or discouraged cash usage in the previous eight weeks. However, when polled by Savanta, 98% of small businesses said they accepted cash.

The lack of consistent evidence makes it difficult for anyone, including the Treasury, to determine the state of cash acceptance in the UK. In its report, the Treasury Committee calls on the Government to undertake vastly improved monitoring and reporting of cash acceptance levels. If it doesn’t, it risks creating a two-tier system where vulnerable groups become excluded from community spaces such as leisure centres, theatres and public transport.

When appearing before the Committee, the Economic Secretary to the Treasury stated, “We have no plans to regulate businesses, big or small, to compel them to accept cash.”

Having heard evidence on the impact of declining cash acceptance on vulnerable communities, MPs on the Committee believe there may come a time in the future when it becomes necessary for the Treasury to mandate cash acceptance if those who rely on physical cash are not adequately supported.

The report also highlights the national resilience benefits of maintaining the ability to spend physical cash, particularly in relation to recent bank outages which Members were told led to a surge in cash withdrawals.

Chair of the Treasury Select Committee, Dame Meg Hillier MP said “The Government is in the dark on how widely cash is being accepted and that is completely unsustainable. We are at risk of a two-tier society where the most vulnerable bear the brunt and this needs to be a wakeup call.

“Our Committee has sought to give a voice to those groups which are at severe risk of not being heard by Government policymakers. A sizeable minority depend on being able to use cash and they must not be forgotten by Whitehall.

“As a society, we must avoid sleepwalking into a situation where cash is no longer widely accepted. This is the beginning, not the end, of our scrutiny of this issue. The Government needs to take this seriously.”

Tina McKenzie, Policy Chair, Federation of Small Businesses (FSB) said “For thousands of small businesses, cash remains an essential payment method – and it’s vital they continue to have the option to accept cash, as well as other payment methods, now and in the future. Small firms must have the freedom to choose the payments mix that works for their individual circumstances, be that cash-only, card-only, digital or fintech solutions, or a combination of any or all of these.

“But for cash to remain a viable method for small firms and consumers, including many vulnerable groups, the right infrastructure has to be in place. We’ve seen a huge decline in the bank branch network over recent years, with the infrastructure supporting use and access to cash steadily contracting. These closures have led to more small firms opting for digital-only payments, as the logistics and costs of cash handling become unmanageable.

“We need to see facilities like shared banking hubs brought in at speed, providing services to both businesses and consumers. Yet the current pace of agreeing and setting them up doesn’t currently match the speed of bank and building society branch closures in local high streets. Our research found a third (34%) of local businesses say reduced ability to accept cash payments in the future would pose a big risk to their local high street.

“In areas where bank branches have closed, banking hubs provide consistent and secure facilities for cash withdrawal and deposit for businesses, as well as financial advice. This is particularly crucial in rural areas, which are the hardest hit by closures and often have higher demand for cash payments.

“Our communities are also being hit by closures of post office counters, which need to be maintained to help small business owners deposit cash. We want to see UK banks sign up to maintain their cash services in post offices for the next five years – including small business owners being able to deposit cash takings. This will guarantee continued cash infrastructure for small firms and their customers.

“Cash is also a key competitor to cards and other kinds of payment, acting as a brake on rising fees for other forms of payments, as well as acting as a reliable backup if digital systems are unavailable. It’s also key in places with poor digital connectivity.

“We need to make sure there’s a flexible, adaptable and inclusive payment system, which allows small firms to choose the payments mix which works for them – while making sure cash is still very much part of the equation.”

Conor D’Arcy, Deputy CEO of Martin Lewis’ charity the Money and Mental Health Policy Institute said “For many of us with mental health problems, cash is hugely important in our day-to-day lives. It helps people to budget, stay in control of their spending or to get support from a family member or friend to manage money. 

“As we move towards an increasingly digital society, it’s vital that we protect the use and acceptance of cash for those who rely on it, and we welcome the Treasury Select Committee’s call for the government to prioritise this issue.”