HL Deb 10 June 1975 vol 361 cc117-8
The Earl of ONSLOW

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government why the NAAFI in BAOR has to convert its sterling selling price into deutschmarks at the fixed forces rate of exchange and not the floating rate thereby increasing NAAFI prices.

Lord WINTERBOTTOM

My Lords, the rate at which NAAFI convert sterling prices to foreign currency is a matter falling within NAAFI's management responsibility. However, in Germany their practice is to use the rate of exchange fixed by the Ministry of Defence from time to time for the conversion of Service pay and allowances into deutschmarks and for determining the rates of local overseas allowances payable to the Services. NAAFI then convert their net deutschmark receipts into sterling through Ministry of Defence channels at the fixed rate of exchange. These arrangements have been agreed between NAAFI and the Ministry of Defence. Their object is to maintain stability in prices of goods of British origin and consistency between those prices and the related element in local overseas allowances.

The Earl of ONSLOW

My Lords, I thank the noble Lord for that Answer. May I ask him whether he is aware that as a result of this fixed forces rate of exchange for NAAFI goods some German supermarkets are undercutting NAAFI in British goods, are having to pay value added tax and import duty, and are probably having to generate capital and to pay higher wages? Would it not therefore be a good idea for the Treasury to allow NAAFI, now that the pound is floating, to exchange at the floating rate so that the morale effect on the troops would be better?

Lord WINTERBOTTOM

My Lords, the noble Earl is right at a moment in time, but since the pound is floating the fixed forces rate is reviewed at regular intervals. In fact, a new rate will be brought into existence on 1st July, which may remedy the problems which the noble Earl has indicated.

Lord BLYTON

My Lords, is the Minister aware that the referendum which is keeping us in the Common Market is designed to achieve togetherness and to lead ultimately to monetary union? Why, then, should the noble Lord complain about this expenditure?

Lord WINTERBOTTOM

My Lords, that is really another question. I would only say to the noble Earl and my noble friend that it is not the law of the Medes and Persians which works in this way; it is a commercial decision of NAAFI that they are tying their prices to the fixed forces rate.

The Earl of ONSLOW

My Lords, do they not also have to get Treasury approval to do it, and if the Treasury said, "No, this is a bad idea" they could not exchange at anything other than the market rate?

Lord WINTERBOTTOM

My Lords, perhaps the noble Earl will table a Question on that point, because it is another issue. As I understand the situation, this is a matter agreed between NAAFI and the Ministry of Defence.