The Royal Mint regularly conducts surveys to estimate the level of counterfeit £1 coins in the UK. A survey undertaken in November 2013 found that the rate of counterfeit UK £1 coins in circulation at the time had risen from 2.74% to 3.04%.
Ok, so there's a claim I don't understand: ""One in 30 pound coins is counterfeit, and that costs businesses and the taxpayer millions each year," Mr Osborne continued." - but if they take ~2M of them out of circulation every year (which I assume means only a bit more are added), that means we effectively cancel (using £2.2 trillion M4 money supply in 2010) 0.00009% inflation. Since the current inflation is at ~2%, this should not even register. I mean, for others it doesn't matter who produces the new money to regulate inflation (apart from the problem of someone gaining <£2M from it, but if that's spread between many parties... who cares?). 35M 1£ coins were minted in 2013 anyway - I get an impression that the cost to businesses and the taxpayers would be lower if they just subtracted the predictions of fakes from the next year's minting.
Happy to be proven wrong of course
(I couldn't find an official estimate of number of coins lost every year, it would be interesting to look at that too)
Well eventually businesses have to take their money into a bank (or similar), at which point any counterfeits will be removed and destroyed. The business therefore takes the hit and loses income, which means they also pay less tax. For a bus company, for example, I'd imagine it would be a significant problem.
Bus companies in the UK have big coin counting machines. The total cash at the end of the route is tallied off at the end of a route against the charge sheet from the ticket machine which is printed out. Rejected currency is seen as an operating cost and is handed back in crates to be disposed of. It's also why you see lots of bus companies giving huge discounts on pre-paid cards etc.
The annoying bit for is that if they accept a high percentage of bad currency this is tracked and the drivers get disciplined so they tend to try and give it back as change before the end of the route (which is why you'll sometimes see them fumbling around in a pocket for change rather than the coin dispenser fitted to the bus).
Therefore always check the change from a bus driver meticulously!
Also if you know a bus driver as a friend, watch your change too as the total amount handed back to the mint for disposal is usually less than the amount collected. Some of it gets stolen usually and pocketed by staff as it's still pretty easy to use in pubs etc.
Source: I used to write route management and payroll software for bus companies that tracked this sort of thing.
Buses I've been on in disparate areas of the UK [England, Scotland and Wales] have all [so far as I recall] had a coin receiving slot - you put the coins in, they are held between plates to enable counting. The drive activates a lever that deposits the coins (in a safe box behind the drivers security screen I think). The drivers don't get to touch the coins. No change is given.
I don't ride the bus very often, it's a bit too expensive. It seems either these are being phased out or you travel on buses in posher areas than I do.
I also rarely get on a bus, but I've never come across ones where the driver didn't touch coins in either Oxfordshire or Cambridgeshire (does make it sound like a posh area thing, but both have shitty areas that buses operate in too..) nor in London (which I think now requires tickets to be bought before boarding.. but could be wrong as I've only ever used my oyster card).
This was London. They still operate busses with trays almost universally and the driver gets to deal with the cash themselves. I've never actually seen that system in London - I have in Nottingham though. I don't tend to get busses now though :)
I used to work for Almex Control Systems who made bus to ket machines.
One of the problems we had was bus drivers who would push coins into the machine through gaps near the ticket printer.
This would short out something in the machine, allowing them to switch to hand written tickets which made it much easier to steal from the bus company.
I was always pleased that they used £1 coins and not, for example, paperclips.
Cool stuff. I worked with wayfarer kit. Absolutely indestructible by bus drivers by design. Right bunch of sods though bus drivers are. The worst class of "user" I've ever had to deal with.
Are the coins really checked / refused? I mean, I realise why that would happen (to prevent someone simply dumping their fake coins straight into their account), but I never thought the coins go through more than a sorting machine. Maybe there are more checks for businesses taking payments almost entirely in coins...
This provides some interesting incentives though... if you can sort the fake/real coins yourself in some way, you can deposit the real ones and use fake ones to pay all small bills (pay utilities, petrol, etc. with coins only)
Comparing to M4 is somewhat of an apples to oranges comparison. M4 encompasses the money multiplier effect (e.g. assuming a reserve ration of 1:10, a bank receives 10 units of currency, keeps 1 in 10 units in cash, and lends out 9 units; the 9 units in circulation result in 0.9 units - 90% or 1:10) being deposited and still assuming a 1:10 ratio - a further 8.1 units being lent out, ad infinitum, or until they fall down the back of the sofa).
In particular, M4 includes liabilities of non-deposit taking financial companies (Other Financial Companies, or OFCs) which tend to be very active in repo (sale and repossession) markets with billions often in one transaction. OFCs include non-banking subsidiaries of banking groups - a trading subsidiary of a Highly Complex Financial Institution (HCFI, industry term) is likely not to have a deposit taking license (and this subsidiary, in theory, should not be bailed out; practice has proved different).
High powered money, or M0, or roughly Notes and Coin, is the best comparison. The latest edition of Bankstats http://www.bankofengland.co.uk/statistics/Pages/bankstats/de... , the Bank of England's monthly statistical release, shows ~68bn sterling outstanding at end January 2014 seasonally adjusted, and ~67bn non seasonally adjusted.
Still, my 0.015% is not a large number, even compounded over many, many, many years.
I also agree that as MV has to equal PY, perhaps the counterfeiters are doing a service! Monetary Easing for no minting / production costs!
QE finances itself by the government issuing debt purchased by a private buyer - liability issued and asset secured - the balance sheet balances. As purchases, the BoE issue cash (a liability) for purchase of gov't debt (an asset) - balance sheets again balance. Therefore, despite their charitable service, counterfeiters are procreating government debt for coin, and governments tend not to like this.
An interesting quirk in the UK that I'm not sure is present in many other countries or jurisdictions: The Mint (the producer of coins) has minting power independent of the Bank of England i.e. the Bank of England (the UK's central bank) cannot tell The Mint the mix or quantity of coins to, ahem, mint. They are completely different government entities with no power over each other (disclaimer: this was the case, circa 2005, the last time I checked).
My feeling on this particular story: All governments strive for a credible currency, and despite the alternate low % numbers you and I mention, is abhorrent to the idea of the public losing trust in it, even a little bit. Plus the budget could have appeared somewhat underwhelming to some, so why not have an easily digested story thrown into the mix to read with some tea and digestives.
From the Royal Mint:
The Royal Mint regularly conducts surveys to estimate the level of counterfeit £1 coins in the UK. A survey undertaken in November 2013 found that the rate of counterfeit UK £1 coins in circulation at the time had risen from 2.74% to 3.04%.
http://www.royalmint.com/discover/uk-coins/counterfeit-one-p...
And:
The move comes amid concerns about the 30-year old coin's vulnerability to counterfeiting, with an estimated 45 million forgeries in circulation.
http://www.bbc.co.uk/news/uk-politics-26632863