§ Mr. Austin Mitchellasked the Chancellor of the Exchequer, further to his reply dated 2 December, Official Report, c. 128, to the hon. Member for Grimsby on the exchange rate, whether he will now calculate the corresponding figures for changes in the real exchange rate using the measure which he believes most realistic; and what effect, if any, the change in the notional central rate against the European currency of account has had on United Kingdom prices under the common agricultural policy.
§ Mr. Bruce-Gardyne[pursuant to the reply, 9 December 1981, c. 407]: Calculations of "real" exchange rates involve applying measures of relative prices to nominal exchange rates. The resulting calculations can vary significantly according to which measure of inflation is used and which other countries are included in the comparison. The correct choice would vary according to the purpose to which the figure was going to be put. The most relevant indicators of United Kingdom relative cost competitiveness are those calculated by the IMF for actual and normalised relative unit labour costs which are published in "Economic Trends" table 46.
United Kingdom prices under the common agricultural policy are determined by the agricultural, or green, rate of exchange between sterling and the European currency unit. Changes in the notional central rate of sterling against the European currency unit are only one of a number of factors affecting decisions on the green pound, and are generally of marginal, if any, importance.