February 15, 1971 Decimal Day

THE OTHER D-DAY: 1971 AND THE DAY BRITAIN WENT DECIMAL, by David McNicoll

In May 1961, the Union of South Africa formally severed the last vestiges of British Imperial rule by narrowly voting to become a republic. Queen Elizabeth II was replaced by a President, the first being the last Governor-General. However, three months earlier, another strong bond of her imperial heritage was also discarded, and the shiny new Republic of South Africa would stride purposefully into the 1960s and beyond with a decimal currency, based on the Rand. The old Pound Sterling, which had been in use in the country and its provinces since 1825 was swept away overnight; lights were switched on in dusty government offices across the old Empire. Britain was no longer the great world power she had been, when her domain covered a quarter of the world’s land surface, but it was still a power to be reckoned with, and Sterling a key global currency. But, all was overshadowed by the Greenback – the US Dollar was the only real gig in town, and having ditched the once feted gold-standard, most currencies by the 1960s were being pegged to the Federal Reserve. Since its inception the US Dollar has of course been decimal, with a hundred cents to that dollar, a monetary system that was part Sterling in some ways, and in others very much borrowed from the French, who went metric with the Franc in 1795 following the Revolution. As a consequence, all new currencies that developed in the post-colonial era after the Second World War also went decimal in order to streamline themselves with the United States. Britain watched on, not entirely disinterested.

Canada had used its own decimal-based currency, the Canadian Dollar since the 1850s, while still firmly part of the British Empire, although Sterling would be used concurrently for the purposes of bookkeeping and federal spending as a ‘unit of account’, and some banks issued dollar bills, while others pound notes, which had to be equated to a value in gold held in reserve, which led to much confusion and probably financial losses. Both American and Spanish-American silver dollar coins were popular, as were bills following the American civil war, and they became a sort of base currency with which Canadians could trade. The other issue was the problem of issue – the UK simply couldn’t supply the rapidly growing dominion with enough shillings and pence coins, and so by default Canadians simply used US Dollars as a de facto currency. But by the 1870s the dominion was being swamped by US coinage, and Sterling too remote that the government from 1876 onwards legislated for a unified Canadian currency from Nova Scotia to Vancouver Island. It was rated against the British Gold Sovereign and the $10 US Gold Eagle, which had a parity, but after the First World War it left the Sterling block altogether and the currency has been pegged to the US Dollar ever since.

Canada, however, was a unique example in the imperial family of nations, but the decision by South Africa in 1961 and the real-world position of Sterling opened the floodgates.

Since 1910 the Commonwealth of Australia had printed its own notes and issued her own coins, but as a mirror of the pounds, shillings and pence of the British system. However, following the Second World War, and with increasingly closer trading links with the United States the government had began to consider seriously ditching Sterling altogether and adopting a progressive decimal currency instead; and in 1958, during the election, Australian Prime Minister, Sir Robert Menzies promised to give the change serious consideration. However, Menzies was an imperialist at heart and he never really made it a priority, instead he set up a commission who were given the remit to kick the thing into the long grass.

The South Africa decision however, changed the game-plan and the mindset. In 1963, the commission finally came back to parliament with a recommendation to go decimal. In that year the ‘Currency Act’ received the Royal Assent and chose the 14th of February 1966 as ‘Changeover Day’. There would be a two-year transition period where both the new Australian Dollar ($AU) and Sterling would both be legal and accepted, and the new currency was pegged at $1 = 10 shillings in the old money, but in reality, it was the exchange rate with the US Dollar that was key, as it remains. As well as the change, a brand-new Australian mint was built, which turned out to be the costliest part of the whole scheme – and the coining of her money in Britain ceased. In 1967 New Zealand, who had also decided to switch from Sterling in 1963, moved to a homegrown currency, the $NZ. The tide was going in only one direction, and by the mid-1960s the British Government under Harold Wilson had decided to follow suit. It’s a long-standing urban myth that Britain was forced into decimalization in order to meet the criteria of joining the fledgling E.E.C. The move certainly helped, but it was the changes across the Commonwealth and the dominance of the US that had made Britain uncompetitive using an antiquated system requiring complex conversion tables that was the key factor in the grand scheme of things.

The true value of any currency is only as good as its buying power and its worth to the parties involved and following the collapse of the Roman Empire Europe had descended into a world of unregulated bartering or simple gold, silver and copper transactions. The only real ‘coinage’ was that left over from the empire, or that coming out of the rump left around Constantinople – it was compromised, chaotic and unwieldy, and utterly corruptible. But in 800 the powerful Frankish king, Charlamagne was crowed by the Pope as the ‘Holy Roman Emperor’, ruling over a vast realm encompassing most of modern-day France, Germany and everything in between. Top of the agenda for the emperor was the standardizing and monopolizing of money, currency and minting. Control the money stream, rule the people – that was the mantra. Mints were established, officials appointed, and discord was replaced by a semblance of order (and wealth creation for the emperor).

Silver was the base, and there was a direct correlation of the weight of the metal to the face value of the coin, and much of what they circulated was deliberately meant to look like the old Imperial system including the names of the coins. The theory contends that continuity equals trust, as was the guarantee by the emperor himself that coins with his head stamped on them were good and would be honoured – a practice continued to this day. The metal itself of course had a value – basically what you got if you melted it down, but that can go up and down with scarcity or glut, so the face value (we use the term because there was literally a face on the coin) meant a stable, standard value accepted across the empire, and abroad. The coin itself thus gained an independent value.

The base unit of Charlemagne’s currency was the Livre, which is the Frankish term for a ‘pound’ in weight of silver. This was then divided into 20 sous and then further split into 12 deniers. The term ‘Sous’ came from name of a pure gold coin dating from late Roman times, the solidus. Eventually, rogue local coins and less valuable foreign currency was either stamped out or regulated, and proper exchange rates established with rudimentary accounting and banking systems, and most importantly centrally controlled issue. So, we ended up with Livre, Solidus, Denarius. In England this evolved into ‘Pound, Shilling and Pence’ (abbreviated to £. s. d.) Shilling comes from the Old English ‘Scilling’ for a ‘twentieth of a pound’, which in turn comes from a Germanic root, ‘Skiljaną’ meaning ‘to divide’; and following the Carolingian system, twelve pence made a shilling, and there were twenty shillings to the pound – and the system stuck. There was a good reason you had to learn your twelve times table at school.

Early English rulers also circulated a domestic coinage, which again were either silver or maybe copper based and which could be exchanged for the more reliable Imperial currency on the continent. The Norman kings were quick learners, and fully understood the wealth and power that a centralized monetary system with royal-operated mints could bring. If the king controlled the silver floating around his kingdom and regulated its worth, then he could command basic trade and lending. The more things change, the more they stay the same.

In 1260, during the reign of King Henry III a new base metal was introduced that would revolutionize the quality, trustworthiness and value of the English currency: an alloy of 92.5% silver with 7.5% copper added, and called ‘Sterling Silver’, and again, this would be a continental borrowing.

The now long-forgotten Hanseatic League dominated northern European trade for over 400 years beginning around the end of the twelfth century. Tracing its origins back to the rebuilding of the German City of Lübeck in 1159, the Hansa, taking their name from the German for ‘convoy’ would establish outposts, a network of offices, shipping routes and a common currency. This was no federation or political union, but a free-trade zone as we’d call it today with associated tariffs, agents and protection scheme stretching from the English Channel to the Baltic Sea. At its height by the fourteenth century it was the biggest economic player in the region. It made the individual merchants, guilds and city authorities fabulously wealthy and with it came Innovation, industry and art. This was the most obvious example of the true power-shift from the Mediterranean to the North Sea. At its heart were the cities of Hamburg, Stockholm, Berlin, Danzig, Cologne and Lübeck. There were also offices in Britain from London to Aberdeen, but neither Scotland nor England formally joined the league.

In its heyday, the League did most of its operating and money making in and around the Baltic, which was known in England as the ‘Ost Sea’ and the traders the ‘Osterlings’. Because their universal coinage, based on the alloy it was not only widely accepted but proved a workable, transferrable currency. In time it became the bedrock of several national systems, including England. Here it was first called ‘Easterling Silver’ and then simply ‘Sterling Silver’. Its sheer practicality was a no-brainer from merchant to monarch, and from the thirteenth century onwards England would use the pound sterling as it's official reserve monetary system. It would prove one hell of a successful decision.

One pound sterling in 1300 would equate to around £1000 of buying power today, and as economies grow and inflation takes hold the face value becomes less than the intrinsic bullion value. But, thanks to the guarantee of value from the State the ‘money’ stuck and broke the umbilical cord with the original base metal from which it was derived which became, if not irrelevant, certainly unimportant to daily usage by the general public who trusted it implicitly.

To keep the money flowing, facilitate trade and grease the wheels of the economy generally, smaller denomination like pennies or half pennies were minted in copper. This was seen to be more economic, practical, and less of a burden on the public purse. So, rather than a shilling being literally a twentieth of a pound weight of silver as it had been once upon a time, it was now one twentieth of the face value of an abstract ‘Pound Sterling’. Copper pennies now no longer linked to the actual value of the metal copper, it simply carried the requisite face value – one copper penny was set as a twelfth of a silver shilling and so on. As well as pounds, shillings and pence the Sterling system also had a raft of other coins and ledger denominations, such as Guineas, Sovereigns, Bawbees and Farthings, and when paper money arrived the central bank issued ten-shilling notes to prevent people simply cutting £1 notes in half. But by this point the trusty Pound was solidly anchored to the government’s own creditor - The Bank of England. For a century and a half, the mighty pound, shillings and pence ruled the world; but, by the 1960s, this near millennia-old system, rooted in the European Dark Ages, was finished.

As with Australia and New Zealand, in 1963 the British Government set up its own commission to look into the question of decimalisation, the Halsbury Committee. It returned with the not-unexpected verdict that the United Kingdom, to remain competitive, would also have to switch to a decimal system, with a transition period to begin in 1966. Initially, suggestions were made that the country should start from scratch with a brand-new currency, but this was quickly dismissed, and it was agreed that with Sterling a reserve currency, that the face-value of the Pound itself, whether pegged to gold or the dollar should remain the same. So unlike the other countries which had to float brand new currencies, Sterling itself was unchanged in the market, instead it was the units that made up that pound that would thus change, going from fractions of 12 to that of 10.

The ‘new money’ would see one hundred pence in a Pound (£1 = 100p), which was departure from a system built on 240 pennies to the pound (in multiples of 20 shillings), and not entirely easy to square. For example: six shillings and eight pence (6/8d), which equated to 80 old pence, became 33p new money. Multiply 80d by three you get 240d, or One Pound; multiply 33p by three and you get 99p – the missing penny! These quirks notwithstanding, the computations were fairly straightforward, and the public were immersed slowly into it.

In 1968 the Treasury introduced the new 5p and 10p coins, which equated directly to one shilling and two shillings and were minted to the same size and metal specifications to provide continuity – the two sets of coins would in fact run concurrently under the decimal value until 1990 and 1992 respectfully when they were resized, and the shilling coin finally abandoned. In 1969 the 50p coin was brought in to replace the Ten Shilling note, lovingly called the ten-bob-note, which was withdrawn in November 1970. This gradual and graded changeover it was felt would make the actual day of decimalisation, which was now fixed for February 1971, less of a shock, and more manageable. At the same time as the new coins came in, the halfpenny and the half crown (2/6d) were taken out of circulation. The scene was set, and while not everyone was happy, it was a well-organized transition when it came. In the weeks leading up to ‘d-day’ there was a significant publicity campaign of information, with the BBC running special programmes. Also, anyone who wished to could get a conversion table, and all business and shops were mandated to post prices in both Pounds, Shillings and Pence alongside the new money. People genuinely felt they’d be gipped by the change, and this was done in no small measure to counter that fear; and for the most part it worked.

On the 10th of February 1971 all banks across the United Kingdom closed for four days. This was done to enable all outstanding cheques and credits to be cleared, to convert all customer accounts to the new money, to ensure all computer systems had managed the switch, and to give staff time for some finally training and to brace themselves for the inevitable questions. On the 15th of February 1971 the United Kingdom left behind the medieval and entered the decimal age – the transfer so smooth that today it has almost become a footnote to our history. There were a few loose ends.

The Crown (5/- or 25p) would be retained, but not as a circulatory coin, as was the Gold Sovereign (£1 face value). The guinea, more of a unit of money than a coin (£1. 1/- or £1.05) was also kept and is still used in the financing of things like horse-racing. A public outcry at the demise of the beloved sixpence, meant it was kept on at the new value of 2½p until finally abandoned in 1980. Initially, the new coins were stamped ‘New Pence’, but this was dropped in 1982 to coincide with the issue of the first new coin since decimalisation, the 20p. A £1 coin would be issued in 1983, and the £2 in 1997.

1971 is a watershed year for Britain, but unlike most of these kinds of momentous events that we’ve had to deal with, this was actually handled rather professionally – the proof is in the pudding: it didn’t take us long to drop old terms, and we embraced the hundred pence in the pound unexpectedly well. Fifty years on, we barely register the bump in the road.