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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 Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...
, the ''green pound'' was the common name for an
exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...
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 the investor usually purchases some species of property. Types of in ...
within the European Union's
Common Agricultural Policy The Common Agricultural Policy (CAP) is the agricultural policy of the European Commission. It implements a system of agricultural subsidies and other programmes. It was introduced in 1962 and has since then undergone several changes to reduce ...
until 1999.


Background

Prior to the institution of a common currency, the then
European Economic Community The European Economic Community (EEC) was a regional organisation created by the Treaty of Rome of 1957,Today the largely rewritten treaty continues in force as the ''Treaty on the functioning of the European Union'', as renamed by the Lisbo ...
decided in 1962 to denominate its transactions in its own internal
unit of account In economics, unit of account is one of the functions of money. 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 ...
– 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 (; , ; currency sign, 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 amoun ...
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 (; "German mark (currency), mark"), abbreviated "DM" or "D-Mark" (), was the official currency of West Germany from 1948 until 1990 and later of unified Germany from 1990 until the adoption of the euro in 2002. In English, it ...
in 1969, the governments involved considered that agricultural support should not be subject to the fluctuations of
floating exchange rate In macroeconomics and economic policy, a floating exchange rate (also known as a fluctuating or flexible exchange rate) is a type of exchange rate regime in which a currency's value is allowed to fluctuate in response to foreign exchange market ...
s, arguing that lower prices would be unacceptable for farmers, while higher prices would be
inflation In economics, inflation is an increase in the average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI). When the general price level rises, each unit of curre ...
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 (symbol: £; currency code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound is the main unit of sterling, and the word '' pound'' is also used to refer to the British currency general ...
, keeping
food prices Food prices refer to the average price level for food across countries, regions and on a global scale. Food prices affect producers and consumers of food. Price levels depend on the food production process, including food marketing and food di ...
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 and other interests, the
Callaghan Government Callaghan most commonly refers to O'Callaghan, an Anglicized Irish surname. Callaghan may also refer to: People * Aaron Callaghan (born 1966), Irish footballer with Crewe Alexandra and Crusaders * Sir Alfred John Callaghan (1865–1940), Irish po ...
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
backbencher In Westminster system, Westminster and other parliamentary systems, a backbencher is a member of parliament (MP) or a legislator who occupies no Minister (government), governmental office and is not a Frontbencher, frontbench spokesperson ...
s.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
manifesto A manifesto is a written declaration of the intentions, motives, or views of the issuer, be it an individual, group, political party, or government. A manifesto can accept a previously published opinion or public consensus, but many prominent ...
s 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 The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the Kingdom of England, English Government's banker and debt manager, and still one ...
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 The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the Kingdom of England, English Government's banker and debt manager, and still one ...
, 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 (currency symbol, symbol: euro sign, €; ISO 4217, currency code: EUR) is the official currency of 20 of the Member state of the European Union, member states of the European Union. This group of states is officially known as the ...
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


See also

*
Agriculture in the United Kingdom Agriculture in the United Kingdom uses 70% of the country's land area, employs 1% of its workforce (462,000 people) and contributes 0.5% of its gross value added ( £13.7 billion). The UK currently produces about 54% of its domestic food consump ...
*
Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial relations among 44 countries, including the United States, Canada, Western European countries, and Australia, after the 1944 Bretton Woods Agreement until the ...
* List of Government defeats in the House of Commons


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