The decision follows years of campaigning from consumer advocates over the disappearance of cash from the UK's high streets as banks abandon branches and rip out ATMs. The global pandemic has further accelerated the decline of cash, forcing the Government's hand to introduce new rules to ensure that cash remains available for those who prefer it to digital alternatives.

John Glen, economic eecretary to the Treasury, says: "We know that cash is still really important for consumers and businesses - that’s why we promised to legislate to protect access for everyone who needs it.

"We want to harness the same creative thinking that has driven innovation in digital payments to maintain the UK’s cash system and make sure people can easily access cash in their local area."

The Government says Britain's imminent exit from the EU will enable it to skirt PSD2 rules that currently label cashback without a purchase as a regulated payment service.

Alongside legislating for retail cash back, the Government is also proposing to provide the Financial Conduct Authority with overall responsibility for maintaining a "well-functioning" retail cash system.

At present, The Bank of England, Financial Conduct Authority, Payment Systems Regulator, and HM Treasury each have specific roles and responsibilities for oversight of the cash system.

Says the UK Treasury: "Close coordination between these authorities has been highly effective, particularly in managing risks to cash through Covid-19, but there may be significant benefits to giving a single authority overall responsibility for setting requirements to meet the cash needs of consumers and SMEs."

The Government has entered a six-week call for evidence from consumer organisations, businesses, financial institutions, and providers of ATM and payment services in order to seek views on "how to ensure industry continues to offer ways to withdraw and deposit cash, how to improve cashback, what affects cash acceptance, and where regulatory responsibility should sit".

The proposals have already come in for criticism from financial accountancy firm Old Mill. Phil Mills, Old Mill head of food and drink says the proposals could hit already struggling businesses hard due to the cost of handling cashback for free, and – for many who have already gone cashless, encouraged by the Government during Covid-19 – the cost of bringing cashback onto the premises.

"Businesses face costs in handling cash and bank charges, which are factored into the price consumers pay for goods," he continues. "Even if the cashback transaction itself was made free to businesses somehow, without a purchase, there is nothing in this for the business, who is also having to pay the wages of the person processing the transaction."

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