The War on Cash and the Failure to Make Law

Cash and law preserve human agency, and must be suppressed

To embark on the enterprise of subjecting human conduct to the governance of rules involves of necessity a commitment to the view that man is, or can become, a responsible agent, capable of understanding and following rules, and answerable for his defaults.

-Lon Fuller

Sometimes in life there are genuine conspiracies afoot, not mere theories. One of these is the plan to abolish cash. This is happening in plain sight, and governments show little intention of grappling with the problem. Indeed, the UK government’s vapid response is indicative of a broader malaise at the heart of modern governance, in that it indicates both a lack of willingness to make clear rules, and a lack of openness about what it is doing. This, as we shall see, centres around a dereliction of duty with respect to the State’s most important task of all: the making and enforcement of law.

The fact that cash is disappearing will be clear to all readers. It is sometimes believed that this happening through market forces alone - as though people are simply spontaneously giving up the habit of using physical money. This may to a certain extent be happening (and it was certainly the case that people, entirely irrationally, gave up using cash during the lockdown era). But anyone who thinks this is the only reason it is taking place simply isn’t paying attention. A concerted effort is in fact being made to stamp cash out of usage entirely (see authoritative overviews here and here), and it is happening, as is often the case, through a bootleggers-and-baptists pincer movement.

On the one hand, the bootleggers. These are the fintech companies and payment processors such as Visa, which, since at least 2017, has had the stated aim of ‘putting cash out of business’ and has been giving large bribes to restaurants and other retail outlets to go cash free. These organisations have been aided and abetted by intensive lobbying by management consultants such as McKinsey, who have been beating the drum for the ‘war on cash’ for a decade. Here, the motives are as clear as mountain stream water: cash is a competitor for cards and digital payments, and therefore the fewer cash transactions there are, the better.

On the other hand, the baptists. These are the central bankers and government advisers - like Daniel Korski, former adviser to then-UK Prime Minister, David Cameron - bumptious and breathless (and, it goes without saying, unelected), who extol the virtues of a cashless society. These include ‘increasing productivity’, giving central banks more power to set negative interest rates (the use of cash as an alternative to digital money being a break on this), and combating crime. The motives of such people are probably pure; I think in most cases they genuinely believe they are striving to make the world a better place. They just have a lionised sense of their own wisdom and an incomplete understanding of the foundation of political legitimacy - common failings in ‘men of system’ throughout history.

Governments are of course aware that even while the general public across the world is using cash less, people want to have the option of using it. So very few politicians will come out and say openly that they are in favour of the abolition of cash. What we see instead is a general nudge-nudge-wink-wink approach to those forces who are perpetrating the anti-cash war, combined wih mealy-mouthed commitments to vague principles surrounding continued cash ‘access’, as can be found, for example, in the UK government’s own Cash Access Policy Statement.

This document is a classic in the genre of contemptuous disingenuity. It begins with a lengthy declaration of context. And this context is not ‘We are committed to continuing to make cash available for use by the general public in perpetuity.’ Instead, we get, straight out of the gate, an extended paean to the virtues of digital payments that is worth restating in full with key phrases highlighted:

The adoption of digital payments that has been taking place across our economy and society over the past decade continues to provide opportunities for people and businesses across the UK. The proportion of the number of payments that do not involve cash in the UK has risen from around 45% a decade ago, to 85% as of 2021.

Digital payments can offer people and businesses convenient, tailored, and flexible ways of making and managing payments safely and securely. They have the potential to help facilitate enhanced competition in payment services in the form of new entrants and more choice for consumers, as well as innovations that can further improve access to financial services. Increasingly, digital payments can enable and may be accompanied by additional services, such as ways to help budget or keep a record of transactions. Digital payments may also reduce opportunities for the criminal minority who seek to exploit the characteristics of cash for physical theft, evading tax or laundering money. The government believes that it would be wrong for its approach to cash access policy to impede these many benefits and opportunities, and encourages steps to ensure that digital payment products and services are inclusive and accessible.

Got that? Digital payments are better for a whole host of reasons and, if you are in favour of using cash, then definitionally you are ‘imped[ing]’ these ‘many benefits and opportunities’ and should hang your head in shame. But just in case you are one of the poor benighted fools who still wishes to use cash - perhaps a little old lady, who will soon ideally expire and cease standing in the way of progress - then we will do what little we can to help:

[T]he government recognises that digital payments may not yet be a suitable option for many people who still rely on notes and coins, for example to manage their finances, do their shopping, or to help out friends and relatives.

The condescension is palpable, and the message clear. There are some people who are not yet ready, and are still wedded to their petty notes and coins and their grubby, proletarian concerns (shopping, budgeting, ‘helping out’). They are not like us in government, who buy everything we need online, have so much money we don’t even know whether we have dipped into our overdraft this month, and whose friends and relatives are just as well-off as we are, thankyouverymuch. But sadly we still have to act as though we care about those people. So we suppose with reluctance we will have to make sure that these deplorables still have access to their precious tenners.

What ‘access to cash’ means, though, has been carefully circumscribed. It most certainly should not be taken to mean ‘the ability to pay for things in cash’. Rather, it very strictly means cash deposit and cash withdrawal services - i.e., the ability to pay into, and withdraw from, one’s bank account in cash. This in itself, of course, makes government policy in this area (undoubtedly deliberately) sound radical, while actually in practical terms achieving very little. Whoever is responsible for the Cash Access Policy Statement knows perfectly well that the ability to make withdrawals and deposits in cash means nothing if there is nowhere to spend it because all the retailers in one’s local area are being bribed by Visa to refuse non-digital payments. This, in other words, has all the hallmarks of a wheeze designed to sound good as an announcement (‘We are taking practical steps to maintain access to cash’) while making no movement whatsoever to change the direction of travel.

This alone would be bad enough, of course, but it gets worse. The real problem with the Cash Access Policy Statement is the piece of legislation from which it derives (the Financial Services and Markets Act 2023, amending the Financial Services and Markets Act 2000). And the issue here is not so much that the Act is ineffective in achieving its aims. Rather it is that, like almost all modern legislation, it makes the law harder to access and understand, less subject to democratic oversight, more arbitrary and unpredictable, more technocratic and interventionist, and much more subject to the discretion of unelected regulators.

Let us turn to a subject which I have touched on briefly before - Lon Fuller and his famous (to legal scholars) ‘Eight Ways of Failing to Make Law’, namely:

1. Producing no rules at all or making only ad hoc decisions

2. Failing to make rules public

3. Using retroactive rules

4. Producing unclear rules

5. Producing contradictory rules

6. Producing rules with which it is impossible to comply

7. Changing rules too often

8. Deciding cases in such a way that outcomes bear no relation to the rules

Fuller’s point here was that law had an ‘inner morality’ which was contingent upon its adherence to the opposite of these failings. A legal system which is based on rules that are public, clear, not contradictory, not retroactive, etc., is one which is predicated on respect for those who are subject to the law. It assumes that they are thinking, reasoning, free-willed agents who are capable of understanding rules and of basing their conduct upon the existence of them. On the other hand, a legal system which does not comprise rules at all, or in which they are unclear or applied retrospectively or contradictorily, etc., is one which has contempt for its subjects: it is totally indifferent to their agency and sees them as mere pawns.

We could, as a parlour game, get a statute book from any of the last ten years and go through its contents to identify just how many of these Eight Ways of Failing to Make Law are in evidence in each piece of legislation contained therein (take a drink each time one finds an unclear rule). And we have a ready example right here in front of us in the form of the Financial Services and Markets Act 2023. Before turning to it, though, it is worth asking briefly what a legislature committed to law’s inner morality would do in regard to the war on cash.

The answer here is not complicated: it would make a short statute providing that for any transaction between a trader and customer under a certain value (say, £300) it is unlawful to reject cash payment, and making any physical retailer refusing to accept cash payment in a given circumstance liable to a fine. This would hardly be perfect (it would, amongst other things, impose costs of handling and storing cash on retailers), and the mode of enforcement would need careful thought, but it would have the not inconsiderable virtues of being clear, simple to understand, and rigid in the appropriate way: everybody would know where they stood, and could organise their affairs accordingly.

It would also actually meaningfully achieve the aim of maintaining access to cash in perpetuity for those who need it or prefer to use it, not in the sense of merely being able to deposit and withdraw physical money, but in the sense of being able to pay for things with it. But, of course, this isn’t really the aim of government at all, and this can be readily discerned in the manner in which the Financial Services and Markets Act 2023 has been set up.

The provisions of the Act concerning cash access can be found in Schedule 8. And here we immediately find ourselves in Lon Fuller’s dystopia: the diametric opposite of the elegance, simplicity and clarity of simply prohibiting the refusal to accept cash. For here there are really no rules at all. Instead, we find the classic modern regulatory approach, with all of its pitfalls - a framework handing discretion to unelected ‘experts’ (in this case, largely the Financial Conduct Authority (FCA), a company) to make ad hoc rules in view of broad standards, and giving license to organs of the State (in this case, the Treasury), to make sweeping statements of ‘policy’, of ill-defined legal status.

The way the Act works is as follows. First, it provides that the Treasury must prepare the aforementioned Cash Access Policy Statement (131P) after consulting the FCA and ‘having regard’ for any reports it has issued; the Treasury can then review the statement and revise it as it sees fit. Next, the Treasury is given the power to ‘designate’ any current account provider that it deems appropriate (131R), again after consulting the FCA, and ‘having regard’ to the distribution of cash access services in the UK (meaning, to repeat, services allowing deposits and withdrawals). And the FCA is then given the power to subject designated current account providers to rules, ‘as necessary or expedient’, based on the overring purpose of ‘seeking to ensure reasonable provision of cash access services in the United Kingdom’ and also to ‘direct’ them to take specified actions, refrain from taking specified actions, or take ‘remedial action in respect of past conduct’ (131U, 131V and 131W). And it must do this, again, ‘having regard’ to the Cash Access Policy Statement.

In short, then, the Act in effect makes no rules of general application at all, but essentially delegates power to the FCA to command current account providers as it sees fit by decree, in view of the nebulous overarching objective of making sure that cash access services are ‘reasonably provided’, and on the basis of broad statements of policy issued by the Treasury. Note how the elected legislature plays no part in the process; note how there is no democratic oversight beyond the Treasury itself (which is to say, the executive branch); note how wide a discretion is granted to the regulator to determine what ‘reasonable provision’ of cash access services requires and what rule would be ‘necessary or expedient’; note how sweeping and poorly-defined the powers of the FCA are in respect of the ‘specified actions’ it may ‘direct’.

But note also how many ways of Failing to Make Law are on display in the Act’s contents in this regard. Are these rules clear? Are they sufficiently transparent to be called ‘public’? Is it possible to comply with them in advance? Might they be changed often, and arbitrarily? Are they even rules at all - or are they merely license for ad hoc decision making by the regulator? In the Failing to Make Law drinking game the Act would therefore be a popular choice, although it has many recent competitors in its flagrant disregard for law’s inner morality and the contempt for the agency of its subjects which it correspondingly displays.

The more immediate point, of course, is that this is a piece of legislation which is not designed to make clear rules, but rather which is designed to give government more direct, flexible and pervasive tools with which it can more minutely regulate society as it considers appropriate. There is no need to belabour the reasons for this at length, as it is a subject which I have written about extensively before (for example, here); suffice to say that the modern State, for philosophical reasons which are deeply ingrained - and which indeed are essential to its makeup - is driven to seek to render society transparent to its action, and that minutely managing the extent to which cash is made available, and is or is not used, is an important element of that process.

More broadly, of course, the war on cash and the failure to make law are closely related. The State despises physical cash because it is intrinsically anonymous, cannot be directly controlled, and acts as a break on the monetary policy levers which government functionaries love to pull. It can also, to a certain extent, function as a hidden source of wealth and a means of avoiding the tax man. In short, physical cash is the tool of a people who are, to a certain extent at least, opaque to State action. The State despises law - meaning the making of clear, intelligible rules of general application - for much the same reason: rules constrain its field of action, and preserve and respect the agency of those who are its subjects. What the State likes is not law, but discretion, so that it can rule more directly and responsively. The relationship between cash and law is therefore intertwined, and it is no accident that the State has both in its sights.