§ Mr. Austin Mitchellasked the Chancellor of the Exchequer whether the Treasury model can be programmed to take account of a 10 per cent. devaluation of the green pound; and if so whether he will circulate in the Official Reportinformation showing what is the medium-term and the ultimate effect of such a devaluation on (a) the retail price of common agricultural policy products, (b) the retail price of food, drink and tobacco generally, (c) incomes and (d) retail prices generally, assuming that factors other than incomes and prices remain unchanged.
§ Mr. BiffenYes, the Treasury model does allow for changes in the value of the green pound.
505WI am not prepared to make calculations based on a simulation of a macroeconomic model of the effects of the particular change requested by the hon. Member, for the reasons given by the Minister of State in his recent reply to the hon. Member for Newham, North-East (Mr. Leighton) on 14 November [Vol 973, col. 622]. However, as a rough rule of thumb it has been estimated that a 10 per cent. green pound devaluation, other things being equal, would eventually add about 2 per cent. to the retail food prices index, and about ½ a per cent. to the overall RPI. There is currently no published retail price index for the products covered by the common agricultural policy. The speed with which the RPI adjusts will depend, among other things, on the timing of the introduction of the devaluation. The effect on incomes is more uncertain. While consumers in general would suffer a fall in real incomes owing to higher food prices, the incomes of United Kingdom farmers would rise since home production of CAP products would become more profitable.