MAGGIE PAGANO: IT outage shows cash still rules
When Russia invaded Ukraine two and a half years ago, Norway raised its national security level to high alert and advised citizens to build up emergency reserves. Sweden soon followed suit.
Ministers did this because they feared that if the war spread to the north, President Putin could launch a cyberattack and, with the push of a button, disable digital payment systems and other vital services. In one fell swoop, such a cyberattack could paralyze the country and leave citizens without food or other basic necessities.
As we saw yesterday, one wrong switch flip – or one technical glitch – can all too easily blow the world away.
Airports, stock exchanges, supermarkets, banks and health services have all been brought to a standstill after a technical glitch in Microsoft’s Windows – caused by a bug in CrowdStrike’s ‘Falcon Sensor’ update – led to what has been described as the most devastating IT outage ever.
Within minutes, the Blue Screen of Death meltdown meant that stores and services around the world could no longer accept payments. Shoppers could not buy food in supermarkets unless they had cash, and travelers could not fly.
Cash is king: The outage once again showed how important it is to have cash on hand
Just imagine how many queues and fights would have happened if the meltdown had lasted a few days?
The outage not only highlighted the vulnerability of how dependent we are on the internet in the sky, but also how essential it is to have cash on hand. Ironically, the more vulnerable we have become as a society to cyberattacks or technical failures, the faster we are moving towards a cashless society. It’s upside down.
Banks and shops don’t like cash: it’s expensive and messy. They’re already forcing consumers to pay via apps and soon it will be digital payments. That’s why they’re closing branches and ATMs at lightning speed.
And it works. In 2007, cash accounted for 61% of all UK transactions. By 2017, this had fallen to a third. Two years ago, the amount of cash in the system was just 14%. Interestingly, the amount of cash in circulation has increased slightly since the pandemic. It’s almost as if the public intuitively knows that cash is more important than ever.
Although Norway and Sweden are tech-savvy societies – only 3 percent of transactions are cash – the threat of war on their doorsteps has drawn attention. Both countries are introducing laws to enshrine consumers’ right to use cash.
The position in the UK is more vague. The Bank of England has said that cash will remain in circulation for as long as the public wants it. Attempts to keep cash in circulation were made by the previous government with its minimum service rules for British banks, which required them to provide cash within certain geographical areas.
This is not enough. We too should have new legislation that ensures that cash can always be used to protect us, not only from major technical failures and external threats, but also from Big Brother surveillance.
Don’t call it war
If Rachel Reeves wants to earn our respect, she needs to stop exaggerating. The Chancellor of the Exchequer needs to believe that if she keeps repeating that Labour has inherited the worst economic conditions since the Second World War, we will eventually cave in and believe her. But we won’t.
The country’s finances are a mess, yes. The pandemic costs of the £400bn Furlough scheme and energy subsidies from Russia’s war on Ukraine are still hitting hard. The national debt is approaching 100 per cent of GDP, the highest level since the 1960s.
But it is nonsense to claim that the financial situation is at its worst since 1945.
When you say that, it is a parody of what the post-war generation, which had to endure so much hardship, experienced.
Reeves – and her finance minister Darren Jones – were at it again after government borrowing hit £14.5bn in June. This was down on last year’s figure and the lowest since 2019 – but up on the OBR forecast. Higher tax revenues and the end of energy support schemes were the main reasons for the lower figure.
Reeves knows she still needs more money to spend on improved public services. That means higher taxes — or much higher growth.
Unless she pulls more supply-side levers, that will be difficult. But scaring us into submission with war comparisons is not going to cut it.
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