HC Deb 29 November 1973 vol 865 cc563-4
3. Mr. Dalyell

asked the Chancellor of the Exchequer if he will make a statement on decision to abolish the two-tier pricing system for gold.

The Chancellor of the Exchequer (Mr. Anthony Barber)

The Central Bank Governor signatories to the 1968 Washington Agreement decided at their November meeting that the agreement should be terminated. This is clearly right since the agreement had for some time outlived its usefulness.

Mr. Dalyell

Why did the Chancellor agree to a decision which, at least in its timing, will give yet one more nudge to the inflationary upsurge throughout the world?

Mr. Barber

I do not agree with the hon. Gentleman. The decision was entirely consistent with all the possibilities for future treatment of official monetary gold which had figured in the discussions on international reform which we have been having for a long time. It has been common to everyone concerned in those discussions that the rôle of gold should be gradually reduced and that monetary authorities should be permitted to sell gold on the free market.

Mr. Bruce-Gardyne

Does my right hon. Friend agree, in the light of that decision, that the foreign exchange value of the United Kingdom's reserves would have been many times what it is today if we had retained the proportion of gold in our reserves that we had 10 years ago? What purpose has been served by the running down by the Bank of England of that proportion over the years?

Mr. Barber

At the end of June 1970 the dollar value of the gold component of the reserve was £1,469 million. In June this year it was £901 million. We inherited considerable repayment obligations in June 1970, and that inheritance, broadly speaking, accounts for the difference between the two figures. It is certainly true that on the free market the price of gold has gone up ; that is a fact of life.

Dr. Gilbert

Will the right hon. Gentleman confirm that the central bank agreement relates only to sales of gold from central banks' stocks and not to purchases of gold at anything other than the official price? Will he undertake to resist any proposal that intra-EEC settlements be made at the commodity rather than the official price for gold?

Mr. Barber

The position is quite clear. Under Article IV of the IMF Agreement, monetary authorities are not permitted to buy gold at above the official price. That is the legal position, and we shall abide by it. Under the same article, sales have always been permitted in the free market above the official price.