Chancellor Philip Hammond to announce fate of 1p and 2p coins this week

Case to scrap was bolstered by bank of England last year

Chancellor Philip Hammond will make an announcement regarding the fate of 1p and 2p coins (iStock)

Chancellor Philip Hammond is to rule on the fate of 1p and 2p coins later this week, a year after the Treasury’s spring statement announced they could be phased out and he called them "obsolete."

The Treasury has declined to comment on whether or not the coins will stay but said "the result of the review will be announced shortly."

Further information about the decision was confirmed to the Daily Mail by a government source who said: “We will confirm the penny coin won’t be scrapped. You’ll still be able to spend a penny under this government.”

Last year the Treasury announced a consultation into the use of cash in the “new economy” in which an increasing number of people were making digital payments.

It stated that eight per cent of copper coins were thrown away while 60 per cent were used just once before landing in jars. The shortfall meant the need to produce more than 500 million 1p and 2p coins to replace those that fell out of circulation.

But the government backtracked within 24 hours of making the surprise threat when PM Theresa May announced the coins will not be scrapped.

This was the second time that an attempt to wipe out 1p and 2p coins had been made after David Cameron blocked an earlier suggestion by George Osborne in fear of public opposition.

Last year’s Spring Statement triggered strong criticism from various newspapers including one which branded Mr Hammond a ‘pennies pincher”.

Some have suggested that removing the coins from circulation would cause prices to rise as retailers round up up prices to the nearest pound.

But the case for scrapping the copper coins was bolstered by The Bank of England in a paper August last year when it said the move would not cause inflation. BoE analysts stated: “Overwhelming weight of literature and experience, suggests it would have no significant impact on prices”.

The bank said the inflationary argument was "deeply flawed". It said without pennies, sellers would round up or down their cash transactions to the nearest 50 instead of changing prices on individual items. Many countries had implemented this system and not experienced inflation.