In the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...

, the ''green pound'' was the common name for an exchange rate that was used to calculate the value of

financial support An investor is a person who allocates financial capital with the expectation of a future return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Type ...

within the European Union's

Common Agricultural Policy The Common Agricultural Policy (CAP) is the agricultural policy of the European Union. It implements a system of agricultural subsidies and other programmes. It was introduced in 1962 and has since then undergone several changes to reduce the ...

until 1999.

Background

Prior to the institution of a common currency, the then European Economic Community decided in 1962 to denominate its transactions in its own internal

unit of account In economics, unit of account is one of the money functions. A unit of account is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of rela ...

– initially the gold parity unit of account, fixed to the value of gold, and equivalent to the US dollar.B. Steiner (1993
"Of Snakes in the Tunnell, Green ECU's and the EMU"
University of Reading. Accessed 9 January 2012. Following the

devaluation In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national curre ...

of the

French franc The franc (, ; sign: F or Fr), also commonly distinguished as the (FF), was a currency of France. Between 1360 and 1641, it was the name of coins worth 1 livre tournois and it remained in common parlance as a term for this amount of money. It w ...

and the

revaluation Revaluation is a change in a price of a good or product, or especially of a currency, in which case it is specifically an official rise of the value of the currency in relation to a foreign currency in a fixed exchange rate system. In contrast, ...

of the

Deutsche Mark The Deutsche Mark (; English: ''German mark''), abbreviated "DM" or "D-Mark" (), was the official currency of West Germany from 1948 until 1990 and later the unified Germany from 1990 until the adoption of the euro in 2002. In English, it was ...

in 1969, the governments involved considered that agricultural support should not be subject to the fluctuations of floating exchange rates, arguing that lower prices would be unacceptable for farmers, while higher prices would be

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...

ary.Brian E. Hill. ''The common agricultural policy: past, present, and future''. Instead, they continued to use a form of fixed exchange rates for agricultural support, resulting in the so-called 'agricultural conversion rates' or 'green exchange rates', including the green pound after the United Kingdom's accession to the EEC on 1 January 1973.

Revaluations, devaluations and politics

Although the value of the green pound was changed from time to time, initially such changes could only take place by agreement between the governments, making the value of the green pound a significant political issue. At certain points during the 1970s the green pound was overvalued by up to 30% compared to the

pound sterling Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and ...

, keeping

food prices Food prices refer to the average price level for food across countries, regions and on a global scale. Food prices have an impact on producers and consumers of food. Price levels depend on the food production process, including food marketing ...

and British farmers' incomes artificially low. On 23 January 1978, following a campaign by the National Farmers Union (NFU) that was opposed by the

trades unions A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits ...

and other interests, the

Callaghan Government Callaghan most commonly refers to O'Callaghan, an Anglicized Irish surname. Callaghan may also refer to: Places * Callaghan, New South Wales, Australia * Callaghan, Edmonton, Canada * Callaghan, Virginia, United States * Callaghan, Texas, United ...

was defeated in a vote in the House of Commons when a Conservative amendment to devalue the green pound by 7.5%, rather than the 5% devaluation proposed by the Government, was passed with the support of other opposition parties and some Labour backbenchers.The Campaign Guide Supplement 1978
Conservative and Unionist Central Office, published March 1978, accessed 2012-01-11 Cabinet papers later revealed that the Government considered that a 5% devaluation was the minimum necessary to stem the decline in the UK's beef and pig sector in the face of competition from Danish bacon and Irish pork, potentially saving several thousand jobs, but that this was forecast to increase the cost of food by 1%. In practice, the Government applied the devaluation selectively and in stages, with an initial 5% devaluation applying to livestock only. The value of the green pound went on to become an issue in the 1979 General election as well as featuring in manifestos at the following elections. In February 1989 Sir Simon Gourlay, President of the NFU, attacked the Thatcher government for maintaining the level of the green pound while sterling fell, a call he repeated a year later. From 2 August 1993, all green rates were subject to automatic adjustments linked to market exchange rates. Between 1992 and 1995 the green pound was devalued by over 20%, raising Common Agricultural Policy prices by over 27%. Between November 1996 and May 1998 the value of the green pound increased by nearly 20% as it was revalued five times as sterling strengthened, with the Bank of England observing that this had caused 'severe problems' in the agricultural sector.Minutes of the Monetary Policy Committee meeting held on 3 and 4 June 1998
, Bank of England, published 1998-07-15, accessed 2012-01-11 The series of rises included an unprecedented increase of 5.4% on 21 January 1997, resulting in a reduction of 5.2% in support prices. The green pound ended with the introduction of the

euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...

in 1999, since when all payments have been based on the euro exchange rate. Europedia, accessed 2012-01-09Memorandum submitted by the Department of Agriculture for Northern Ireland
House of Commons, published 2000-03-14, accessed 2012-01-11

References

{{reflist, 2 Agriculture in the United Kingdom European Union and agriculture Currencies of the United Kingdom Currencies of Europe Politics of the United Kingdom

Background

Revaluations, devaluations and politics

See also

References