§ Mr. Foulkes
asked the Chancellor of the Exchequer if he will estimate the increased costs to the draft 1.980 European Economic Community farm budget caused by each percentage fall in the value of the dollar below the dollar/ecu rate of 1.2 specified in that budget, what reserve contingency is available to meet these increased costs and what steps he has taken to seek to ensure that such variations in the exchange rate do not increase the farm budget beyond the agreed budgetary discipline limits.
§ Mr. Gow
Estimating the budgetary costs of a depreciation of the dollar against the ecu below the level of 1.20 assumed in the draft budget for 1986 is a complicated operation, which the Commission is best placed to undertake. Account has to be taken not only of the direct impact on export refunds and certain production aids but also of indirect effects such as the supply and demand response on world markets for agricultural products whose prices are denominated in dollars.
There is no contingency reserve in the draft budget for 1986 to cover such eventualities as a change in the dollar/ ecu exchange rate. However, the Council agreed in its conclusions on budgetary discipline to proceed so as to keep expenditure relating to agricultural markets within the financial guideline and, if an overrun threatened., to take the necessary decisions to prevent this. The Commission has undertaken to avoid an overrun by management measures and by putting necessary policy proposals to the Council and not to introduce a supplementary budget until it has exhausted all these opportunities for savings.