It’s the smell that hits you first. As the doors to the Bank of England’s lifts slide open, the underground corridor that greets you doesn’t feel like it leads somewhere important.
Obsolete computers lie abandoned in the corner, while fork lift trucks are parked along the labyrinthine passages. Even the signs in the lift are cryptic.
“Four filled cages plus two persons or two scooters”, one declares.
“I don’t think I’ve ever seen a scooter before,” says Victoria Cleland, the Bank’s chief cashier and director of banknotes. As the light at the end of the corridor gets brighter, a musty odour fills the air.
Instead, we’re outside one of Threadneedle Street’s bank vaults.
The Bank houses eighteen of these strongrooms. Nine for gold, and nine for cash.
“We like to keep them equal,” says Ian Hann, the Bank’s vault manager.
As the door to one swings open, the reference to cages in the lift suddenly becomes clear.
Rows and rows fill the room, four levels high and packed full of brand new banknotes. The cages are identical, and most contain fifty pound notes, £10m in each to be exact.
With at least ten cages in each row, it’s hard to stop thinking about what you could buy with all that money. “This one feels quite empty,” says Cleland. “I’ve been in some rooms where you can hardly walk.”
“Earlier this year this room was full,” Hann adds. “We’ve had nearly 900 cages in here.”
The room itself is plain and full of security cameras. But that doesn’t stop people from wanting to see what’s inside.
This is the third visit Hann’s supervised this week.
The Telegraph was granted special access. Another request came from Mark Carney himself, with the Governor taking advantage of one of the more unusual perks of the job.
There’s a reason for the interest. At 12:01am on Tuesday, shops and banks will start to distribute a new £5 note from their tills and ATMs when the Bank launches the new fiver.
The new note is 15pc smaller than the current one, and will feature Sir Winston Churchill, the former prime minister, who replaces prison reformer Elizabeth Fry.
The newest feature though is it will no longer be made of paper – but plastic.
Polymer is stronger than paper. It’s also waterproof, meaning it’s very hard to tear and can survive the wash.
The Bank believes the move to polymer, which follows a public consultation in 2013, will extend the life of an average £5 note from less than two years to around five.
For Cleland, who has been planning the launch of polymer since she became chief cashier in 2014, it’s an exciting time.
“I’ve known the design for a while, but to actually spend them is really exciting.”
Years of planning have shaped this moment, from choosing the images to getting the security features right.
She even had to ensure the Queen was happy with her portrait on the new see-through window.
“This one was approved by the Queen a while ago,” she says, pointing to the image on the reverse of the note.
“This one was based on it, but we sent it to her in order to make sure she was happy”.
Four hundred and forty million of the new fivers will be distributed across the country over the coming months, including the first batch, which has been printed and will leave cash centres across the UK in the early hours of Tuesday morning.
Most of the notes stored in this underground vault are contingency stock, says Cleland, and will sit in these cages for up to two years before being passed to one of the four members of the notes circulation scheme.
These companies, including G4S and the Post Office, are responsible for moving money up and down the country.
The Bank’s role is to ensure supply always meets demand, and Cleland’s team is constantly looking for periods where there could be a spike.
Staff even keep a close eye on the weather forecast.
“On hot days you get more spontaneous payments,” says Cleland. “People will say, oh I’ll get an ice cream, I’ll buy a beer.”
While she insists the Bank’s job is to meet demand rather than trying to “sell” notes, she says it pays to plan in advance.
New notes can create issues, and there were concerns that the new fivers could leave unwitting consumers out of pocket.
A Q&A on the Bank’s website warns that brand new banknotes can“sometimes stick together”. But Cleland believes the risk of this has been exaggerated.
“If you have a big pile and flick them they shouldn’t stick together,” she says, reaching for a few notes and placing them on the palm of her hand. The notes separate easily. “Are these notes sticking together?”
While the vaults are closed to the public, the Bank’s museum is putting the finishing touches to a new banknote exhibition that opens alongside the launch of the new £5 note.
Visitors can see items never been put on display before, including test prints for the Queen’s portrait and huge printing plates for old £50,000 notes. A replica cage stuffed with “£50 notes” is even on display.
From old to new
The old £5 notes featuring Elizabeth Fry will remain legal tender until May 2017.
While you won’t be able to spend them in the shops after this date, old notes never lose their face value.
Steve Pearce and his team on the Bank of England’s cash desks in London know this well.
“We still get a lot of the old ten shilling notes that were withdrawn in the 1960s,” he says.
Holders of these will get 50p back. But they’re used to seeing much larger sums, and Pearce says that on an average day counter staff will exchange between £80,000 and £100,000 from face-to-face and postal requests.
Sometimes TV references trigger a rush. Last May, an episode of Coronation Street triggered a flood of requests after Tim Metcalfe foolishly binned a £50 featuring Sir John Houblon, the first Bank of England governor, after learning it was no longer legal tender.
In the show, he claimed he was “scammed” by a customer, but was left with egg on his face after another character informed him the note could have been exchanged for a new one at the Bank.
“Our volumes trebled,” says Rachel Keepax, who also works on counter services.
“It demonstrates the reach of a show like that. I just wish they’d told us in advance!”
Damaged and mutilated notes are sent to the Bank’s Leeds office. More than 20,000 of them ended up there last year.
Claims need to state how the damage occurred and what happened to any missing portions of notes.
The reasons range from the weird to the wonderful.
“There was one where someone said: my grandchild was holding the note and the wind blew and tore half the note off,” says Cleland.
A cashless future?
It’s clear that many people still attach great value to cash.
“If we do 100 exchanges a day, only three or four of them will want the money paid into their bank account. The rest ask for cash immediately,” says Keepax.
Cleland says Brexit hasn’t triggered a surge in demand for banknotes, Bank data show that cash is still king when it comes to spontaneous purchases.
While by value cash accounted for less than half of payments in 2014, by volume, it was still the dominant method of payment.
The use of debit cards has grown significantly since they were introduced in the 1980s.
Today, people can pay for their sandwiches with a fingerprint on their iPhone or by tapping their card on a reader.
Some have embraced the change. Hann, who deals more cash than most at the Bank, rarely carries banknotes. “It’s just easier,” he explains.
“If I go out of the vault and have a few notes in my pocket, it’s a bit of a pain explaining why they’re there.”
Andy Haldane, the Bank’s chief economist, believes there will be a “tipping point” that will “fundamentally re-engineer the plumbing of finance” and change the way transactions are conducted.
“There comes a point with all technologies where critical mass is achieved and all of a sudden everyone is using this or that technology, whether its steam, sanitation or electricity,” he says from his office at the Bank.
“It’s likely that at some point in time we’ll find more efficient, more effective payment methods, both for central bank money and commercial bank money. I really hope so.”
In an era where many central banks have taken their interest rates negative in a bid to boost the economy, does cash have any role to play in this brave new world?
Ken Rogoff, the former International Monetary Fund chief economist and author of: The Curse of Cash, argues that scrapping paper currency would supercharge central banks’ ability to fight downturns by making negative rates more effective.
In his words: “Hoarding cash may be inconvenient and risky, but if rates become too negative, it becomes worth it.”
Haldane agrees with Rogoff’s main points.
In a speech last year, he said abolishing paper currency would not only remove the zero lower bound constraint but enable authorities to crack down on “illicit activities”.
Haldane plays this element of his speech down, and even suggests that negative rates are not the right way forward for the Bank of England today.
“This is not an abolition of cash agenda,” he insists. “There is a monetary policy dimension to this, but it’s not the only dimension.”
The Bank has also taken an interest in Bitcoin, or rather thetechnology underpinning the digital currency.
Its research in this area is well underway. Earlier this year, the Bank collaborated with computer scientists to explore how societies could harness distributed ledger technology to make transactions easier, cheaper but just as secure.
The answers could reshape society as we know it.
For centuries, people have relied on authorities such as central banks and governments to settle questions like “who owns this money?” and tell us how the world works.
But what if a piece of code could do this and create a system of trust that wouldn’t need to be underpinned by any authority?
These are big questions, but Haldane thinks distributed ledger technology is very much like a big eBay.
“If you asked an economist when eBay was invented whether it would work, they’d tell you it wouldn’t because it was the classic ‘market for lemons’ [where an information mismatch between buyers and sellers kills the market].
“What makes it work is this reciprocity of trust and repeat business, and that’s what distributive ledger technology provides.”
He says a switch to digital payments isn’t so much a leap of faith as a small step forward.
“People get hung up on cash being digital and often talk about it like it’s this wild venture into the unknown, but almost all money is digital already.”
“What we’re talking about is the tiny sliver left called cash, that currently has a physical manifestation, for reasons that are understandable.”
For now, blockchain is just a part of the Bank’s “voyage of exploration”.
Cash, he insists, will be there as long as people want it.
“We know from history that money is very much more than a payments medium. It’s a statement of sovereignty.
“That’s why the demand for cash, whether it’s paper or polymer or digital will be down to the decisions of individuals, not central banks.”
Keepax is also confident that cash is going nowhere. “As long as there are notes that say: I promise to pay the bearer, we’ll still be in a job.”