Brown lost £2bn selling the UK’s gold reserves
GORDON BROWN is to face questions in parliament after revelations that he disregarded advice from the Bank of England before he sold off more than half the country’s gold reserves at the bottom of the market.
Insiders involved in the decision have broken ranks after an 18-month battle in which the Treasury has blocked attempts by The Sunday Times to make public the official advice received by Brown before he sold the gold.
They have revealed that Bank of England officials had serious misgivings over the chancellor’s determination to sell 400 tons of bullion in a series of auctions between 1999 and 2002, when the price was at a 20-year low. Since then the price has almost trebled, meaning the decision cost the taxpayer an estimated £2 billion.
This Tuesday the chancellor will face a Commons grilling over the affair as the Tories seek to undermine his reputation for economic competence.
From interviews with key Treasury, Bank of England and gold market insiders involved in the decision, The Sunday Times has established:
o The Bank of England, which has managed Britain’s gold reserves for more than 300 years, was never asked for its advice on whether Britain should sell the gold. A senior Bank of England executive said the timing of the sale was “not debated”.
o At a secret meeting with senior gold traders, Bank of England officials were warned that the proposed auctions would achieve the worst price for taxpayers. The officials are understood to have agreed with the analysis but said they were powerless to influence the Treasury.
o Several Asian countries including China are named by an insider as having bought the gold “on the cheap” from the Treasury. The Chinese may have made more than £1 billion from Brown’s botched sell-off.
Warnings over the risks of losing money from the gold sell-off are understood to be set out in internal correspondence sent by Bank of England officials to the Treasury in 1999.
Last night the Bank of England sought to distance itself from the decision to sell off the gold. In an unusual intervention, it said: “In regard to the gold sales, the Bank acted solely as agent and the decisions were taken by HM Treasury.”
Its statement casts doubt over previous assurances given by Treasury ministers and Tony Blair to parliament that the decision to sell the gold reserves was made on the “technical advice of the Bank of England”.
A senior investment bank director, present at a meeting held by the Bank of England in May 1999 to discuss the sell-off, said: “We were told this was a Brown thing and that the Bank had no say over what was going on. The officials were unhappy.”
The gold sell-off is seen in the City as Labour’s equivalent of “Black Wednesday”, when John Major’s government lost £3.3 billion in a day in its failed attempt to prop up the pound.
The Treasury insisted last night that the Bank of England “recommended auction as the best method to achieve the programme’s objectives of transparency, fairness and value for money”. It declined to comment if the Bank was consulted on whether gold should be sold, or whether alternative forms of sale were advised to maximise revenues.
George Osborne, the shadow chancellor, said: “First it was discovered that Gordon Brown ignored advice on pensions; now it is revealed that he ignored advice on gold sales and the taxpayer has lost millions. The chancellor is in danger of getting a reputation as someone who has very poor economic judgment.”
