Sunday, 10 January 2016

The cost of the Bristol Pound

On the introduction of the Bristol Pound I wrote a cynical spoof of the life cycle of this new local currency and was subjected to some vehement admonishment for decrying a scheme that was going to bring prosperity to Bristol by 'preventing money from leaving Bristol'.

The idea that preventing your currency from being used anywhere else, thus staying local, supports your economy, if realistic, would see every village, hamlet and even household issuing their own currency. Of course this isn't efficient otherwise economies would have evolved that way naturally centuries ago. Running your own monetary policy, flexible exchange rate and maintaining a belief in the value your currency holds would be impossible. This is why the trend has been the other way with larger currency blocks evolving.

But the Bristol Pound tries to get around the difficulties of managing a different monetary policy by piggybacking that of the rest of the UK by pegging itself to the UK pound. The Bristol Pound is therefore a UK pound that can only be accepted in Bristol shops that have decided to accept it, much like a gift voucher. Or rather - exactly like a gift voucher.

I could go on about the value of local currencies but Tim Harford does better HERE deciding that any benefits are social as a currency pulls people together in a common cause, something a well organised traders committee can do anyway, and not economic with relation to the transmission or retention of money.

Though the benefits are at best murky, the costs of the system are quantifiable and my discovery of the latest Bristol Pound accounts is what has prompted this post. I have been watching their website for a while eagerly anticipating the 2014 accounts but, unlike the 2013 figures, these have not been released at an annual general meeting during 2015. I have not seen any proposed AGM or mention of the accounts on the Bristol Pound website but they are available from Companies House directly - (H/T to  for locating them for me)

So, 2014 -  Circulation in mid 2015 was quoted as Bristol Pounds (BP) 700,000 but let's assume that was the same at end 2014 (though probably less).

Administration costs for the scheme in 2014 were £340,000, up from £78,000 in 2013. 

£280,000 was contributed to the scheme by the government in grants.

The directors' remuneration was £115,000.

That means that in 2014 nearly 50p was spent in administration costs for each Bristol Pound in circulation. If this was the cost ratio for running UK notes in circulation (£66.03bio on 31st dec 2014) the treasury would be paying £30bio per year just to maintain the currency in circulation. If we cranked this up to the GBP equivalent of M4 (as B£ includes an electronic version) the costs would be £1 trillion a year.

So who is paying for this huge administrative expense? It looks as though the rest of the UK population is as profits jump from £1000 to £282,000 after adding in Government grants. So the tax payer paid about 30p towards the maintenance of every Bristol Pound in circulation in 2014.

The net assets of The Bristol Pound are listed as £9,000. If you consider that they have received £280,000 is State aid in one year alone, one could say that the scheme run by non-bankers pretending to be bankers because they don't like bankers is costing the State more in bailouts than RBS or Lloyds ever did on an aid/asset basis.

The scheme is a volunteer led project but there are staff costs (they are hiring paid staff to join in the marketing of the project ). The directors are also remunerated.
taking 15% of the face value of Bristol Pounds in 2014. This puts the odd 0.01% of the FX fixing scandal into perspective.

I can only anticipate the 2015 figures and expect that by then each BP in circulation would have cost £1 to administer. At which point one would wonder if it would have been easier just to hand that amount of cash to the Bristol traders involved.

Bristol Pound have never stated what their performance metrics are other to imply that the more currency in circulation the more successful it is. The part of the CIC report filed citing success solely rests upon the marketing success of the project with no proof of association between the Bristol Pound itself and economic improvement.

But when we consider the costs involved as shown above we should wonder if the benefits justify the scheme as an alternative to using Sterling which has no incremental costs and would have saved £340,000 in 2014 alone.

The lack of publication of the annual accounts on the Bristol Pound website may be due to the organisers not wishing to attract attention to the costs. Indeed there is very little reference to any of the downsides of the scheme anywhere (the wikipedia entry appears to be tightly curated by the supporters) but rather than this being due to a lack of sceptics I assume it's due to those who consider the project a farce just leaving the believers to get on with it.

There is an interesting part to the CIC declaration that needs to be completed annually that asks if stakeholders are regularly in consultation.

As for that part about "making the currency available in more disadvantaged areas", why? Using Bristol pounds doesn't make goods cheaper in fact by definition it must be making them more expensive otherwise users would be buying local anyway without the need for a Bristol Pound to force them to. The disadvantaged areas are just as well served being handed cash instead of gift tokens. 

As the main stakeholders are the holders of Bristol Pounds and those that fund them, us, I would suggest that the annual reports and accounts are of primary importance with regards to consultation and should be raised for debate and at least published on their website. 

Finally as a tongue in cheek footnote - Bristol should beware. Their mighty Bristol Pound is also leaving the community. There is a place on the south Dorset coast taking them.  Which then opens up another point - How would Bristol justify the success of the Bristol Pound in supporting local business if the rest of the UK abandoned GBP and adopted the Bristol Pound instead? A huge circulation would result but there would be no local differentiator. The value of using 'highest circulation' as a success metric is thus disproved. 


Luna said...

I have been aware of the Bristol pound since its inception, in fact before, because I knew about the precursors, the Totnes pound and the Lewes pound. I was in fact involved in the Transition initiative in Brighton and always argued that it would be silly and pointless to get volunteers involved in a project with no clear benefits, as opposed to any other possible project the could dedicate their times to, that would support the goals of the Transition initiative.

Brighton never tried to go for a Brighton pound, but I doubt it was because the members of the initiative saw the wisdom of what I said. I was in a position to see how people in green groups normally reason, and it seems to be more of a case of "do people that I respect support this?" instead of trying to use their own ability to reason. It's really herd mentality at its most extreme, combined with rebellion against anything that big corporations do.

The sad thing is that there is a valid point that some areas are disadvantaged economically, and that it's worth attempting to do projects that improve their situation. And trying to keep more money circulating locally is a valid way of attempting to deal with the issue. There have been some examples of successful projects with that underlying concept. But Transition Totnes just jumped on the first idea that somebody had to try to keep money local, without thinking for a minute of doing some serious analysis whether the idea was likely to work. And then other communities copied the idea, without ever asking if the idea had proven to have any success whatsoever. The assumption seemed to be "They are doing it, so it must work, right?" Like I said, it's herd mentality run amok.

Polemic said...


Thank you for a fantastic comment. Great to hear from someone with such direct experience. I totally agree with your points expressed especially the part about blind faith that it must work becauses others do it. The part that really irks though is the information game that seems to quash any opposition in one of those.. 'if you aren't with us you are a [insert nasty sect from history of your choice]' political mindwashes.

But it is interesting to see people who hate banks so much play bankers themselves and end up having the State pay them 28 times the size of their balance sheet's net assets a yearto keep them running. That must beat any bank bailout of 2008.

Josef said...

I used to have a strong interest in communities currencies, but I've always thought mutual credit networks would likely have more impact than gift voucher currencies (which imho serve mostly as marketing tools and can also get people thinking about the fact the way money and banking is organised in society)... and interestingly some of the funding Bristol Pound has received requires them to set-up a mutual credit network too... see for more info

Anonymous said...


I am currently writing a master's thesis on the Bristol Pound. I have had huge difficulties to find any objective analysis of local currencies and especially about the Bristol Pound. I have written to the Bristol Pound founders and no one has accepted to answer my questions...I have just discovered your analysis that is in line with what I have previously found out myself... Would it be possible to talk about this by email ?

Best regards,


Polemic said...

Hi Marie.

I would be delighted.
Please email me at the address under 'contact' or tweet to me at @PolemicTMM and we'll link up there.

Polemic said...

Hi Marie.

I would be delighted.
Please email me at the address under 'contact' or tweet to me at @PolemicTMM and we'll link up there.

Polemic said...

Hi Marie.

I would be delighted.
Please email me at the address under 'contact' or tweet to me at @PolemicTMM and we'll link up there.