Should producers stick with £ or opt for the k?

9 November 2001

Should producers stick with £ or opt for the k?

By Philp Clarke Europe editor

THREE times as many farmers are against joining the k as are for it, according to a straw poll conducted at a farmers weekly/South of England Agricultural Society business breakfast this week.

With k notes and coins just seven weeks away, HSBC chief economist Denis Turner told the meeting at Ardingly Showground there were two sides to the debate.

In its favour, the k was expected to boost trade within Europe and so lead to greater wealth. By staying outside, the UK faced the risks of exchange rate volatility and the costs of converting money every time it wanted to trade.

But on the downside, it risked throwing away all the achievements of the past decade by joining. "Our economy is the best we have ever had, the strongest in Europe," he said.

Since sterling left the Exchange Rate Mechanism in 1992, the government had used interest rates to control inflation, allowing business to flourish. Joining the k now risked massive inflation, driven by cheaper borrowing, leaving the Chancellor no option but to put up taxes.

Weighing up these two scenarios, Sussex farmer Stephen Carr said he was more convinced than ever about the need to join the k.

"If it is true that we are the strongest economy in Europe, but if we are left outside the k with a strengthening £, the implications for farmers are disastrous." Currency stability was the key to securing farmings future.

Mr Carr also warned against UK farmers turning their backs on Europe and trusting their luck to Westminster.

The confrontational approach of the past had led to the infamous Fontainebleau agreement, which had cost UK farmers more than BSE and foot-and-mouth put together. Without the "protection" of the EU farm lobby they would be even worse off.

But Hants producer Charlie Flindt said there was more to the issue than eliminating currency risk. The k project was about political as well as monetary union.

Numerous EU leaders have openly admitted there was a need to give up more national sovereignty in the quest for closer political ties. "At least they are honest," said Mr Flindt.

But he had deep reservations about giving more power to an unelected commission staffed by failed politicians.

"Joining the k would be like selling all my farm machinery," he said. "In the short term I would have more money in my bank account, but I would be in a right pickle by the time harvest came along."

Most of the 100-strong audience agreed. &#42

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