§ Mr. Marlowasked the Minister of Agriculture, Fisheries and Food what he estimates would be the effect on United Kingdom food prices and cost of living, and on the United Kingdom contribution to the European Economic Community, of a revalution of the green pound.
§ Mr. Peter WalkerIt is impossible to make any precise estimate. Much would depend on whether exporters in other members States reduced their prices to reflect the revaluation or increased their profit margins instead. In so far as the revalutation reduced support prices for UK agriculture, it would affect the price received by the fanner, which accounts for a small proportion of total consumer expenditure on foods. During the period of the last Government, when Britain suffered from negative MCAs of up to 45 per cent. food prices doubled, of which the larger part arose from increases in processing and distribution costs and in the cost of imported foods not subject to MCAs.
§ Mr. Marlowasked, the Minister of Agriculture, Fisheries and Foods if he will set out briefly the workings of the green pound and state the arguments for and against its revaluation.
§ Mr. Peter WalkerGreen rates are the fixed rates of exchange used to convert prices, subsidies, levies and other amounts set under the common agricultural policy from European currency units into the national currency of each Community country. The green rates are set by decision of the Council of Ministers.
If a country's currency depreciates and its green rate remains unchanged, so that its faun support prices fall below the common price level, monetary compensatory amounts (MCAs), approximately equal to the price gap, are applied as subsidies on its imports of farm products from other member States and levies on its exports.
The United Kingdom was in this position from the time of its accession to the Community until January 1980 (August 1980, for some products). At its maximum, the price gap was some 45 per cent. If a country's currency appreciates so that its farm support prices rise above the common price level, the MCAs act as levies on its imports and subsidies on its exports. Due to the appreciation of sterling, the United Kingdom has been in this position since April (or, for some products, August) 1980.
341WMCAs apply to grain, sugaf, meat (except sheepmeat), milk products and eggs, and to certain goods derived from or containing these products. They are financed from, or accrue to, the Community budget. Subsidies on exports to, and levies on imports from, non-Community countries are increased or reduced, as the case may be, by the MCAs.
Decisions on changes in green rates depend on weighing the interests of consumers on the one hand and farmers on the other. I have no intention of proposing a revaluation of the green pound at the present time. It should be noted that during the period of substantial negative MCAs, food prices rose sharply. It should also be noted that at the present time food prices have been rising at a lower rate than the rise in prices in general.
342WOther countries which in the past have had positive MCAs have been exceedingly reluctant to reduce them. West Germany, which over a period of years has enjoyed low rates of inflation, has had a very long period of positive MCAs.
§ Mr. Marlowasked the Minister of Agriculture, Fisheries and Food what factors affect the relationship between the pound sterling and the green pound.
§ Mr. Peter WalkerFor any given level of green pound, the relationship varies with changes in the market rate of sterling against the West German, French, Belgian, Dutch, Danish and Irish currencies.