UK Gold Policy: African Representations (Hansard, 21 July 1999)

§ Lord McIntosh of Haringey
My Lords, we have received representations from South Africa and from the Southern African Development Community, which also represents Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, the Seychelles, Swaziland, Tanzania, Zambia and Zimbabwe.

Lord Lucas
My Lords, I am grateful for that reply. I do not suppose the Minister is surprised that the representations are being made. Is not the gold market in a delicate condition, to say the least? Were the gold price to fall another 10 per cent, we might expect major mine closures and financial difficulties in those and other highly indebted developing countries. Under those circumstances, it behoves the British Government to show a lead. It is not just a question of the 100 tonnes that we are selling, but of people's belief that the 34,000 tonnes that are in government and similar hands in the world—a third of all the gold that has ever been mined—may come on to the market and depress the price even further.

§ Lord McIntosh of Haringey
My Lords, of course the Government are sympathetic to the concerns of gold producers, wherever they may be, but particularly, in terms of the original Question, those in southern Africa and East Africa. However, we must consider the quantum involved. The sale of 25 tonnes of gold which took place on 6th July, which was the first of the five tranches of sales by this country, represents only 1 per cent of the annual mining supply of the gold industry and 3 per cent of the daily bullion turnover in gold. From those figures, I cannot think that it can be asserted that the British sales of gold with which the Government are concerned have had a significant effect on gold prices.

§ Lord Shore of Stepney
My Lords, is the noble Lord aware that the impact of the sale of gold is particularly 973 strong on South Africa? Gold is its largest single industry and the country's prosperity relies on it. Is my noble friend telling us that we did not consult the Government of South Africa before embarking on this., frankly, dubious practice of selling gold, and, if not, why not?

§ Lord McIntosh of Haringey
My Lords, I do not accept my noble friend's assertion that it is a dubious practice. It is a proper portfolio decision, as was confirmed by the Bank of England, which advised us on the matter. As to consultation, a decision on sales of gold is market-sensitive. It would be unwise of us to consult in private before making market-sensitive decisions. The Government of South Africa and all the governments of the Southern African Development Community were informed immediately after the decision was taken.

§ Lord Tebbit
My Lords, can the noble Lord say why, if the decision was market-sensitive, it did not make any difference to the market? Can he further dispel the rumours which have been widespread in the City that several finance houses, one in particular, had gone heavily short on gold? Had not the price fallen sharply, they would have made significant losses. Can he say whether any employees or the spouses of any employees of that house had access to the Treasury and had knowledge of the discussions?

§ Lord McIntosh of Haringey
My Lords, an issue is market-sensitive if it could be market-sensitive. The Government are pleased that the decision did not have the effect on the price of gold which might have been anticipated. As to the rumours to which the noble Lord referred, I know nothing of them. If he cares to write to me about them, I shall investigate and reply.

§ Lord Mackay of Ardbrecknish
My Lords, the Minister may not think that the selling of British gold had any impact on the market, but President Mbeki of South Africa thinks that the action exhibits smug moralistic naivety. Will the Minister pause, even for a moment, in his answers, to consider the 2,000 people made unemployed from the gold mines in Ghana, in addition to the 5.000 so affected last week in South Africa? I wonder whether he saw the television programme last week on the demonstrations in South Africa, with people carrying placards saying, "Britain: stop killing poor countries". Is that an ethical foreign policy?

§ Lord McIntosh of Haringey
My Lords, I do not pause for a moment before making my answers, but I pause very long and hard before thinking out what my answers should be. I am confident that we are doing the right thing in these matters. The support being given by the Department for International Development for retrenched miners in South Africa is significant. In addition, there is a considerable contribution from this country to the HIPC trust of £171 million. We are the largest contributor to that trust and we are conscious of our responsibilities. But, as I made clear, the portfolio decision which we took cannot be held responsible for the long-term decline in gold prices which is the cause of unemployment in gold industries.

§ Lord Barnett
My Lords, I assure my noble friend that I am delighted not to have the noble Lords, 974 Lord Tebbit and Lord Mackay, or my noble friend Lord Shore advise me on my investments. Does the Minister accept that there are two separate issues? The first is how we can best help developing countries. The other is how we can best manage our financial affairs in this country. What is being done with the sale of gold is obviously in the best interests of this country.

§ Lord McIntosh of Haringey
My Lords, the longer-term decline in the price of gold is extremely serious for this country. Let us examine the record of the previous Conservative government from 1979 to 1997. The Bank of England has calculated that our failure to adjust the balance between gold and currencies in our portfolio, as a result of which we have forgone the interest payments which are available on currencies but not from gold, has amounted to a loss of £9 billion. That is money which we can use for many worthwhile purposes, but it was forgone deliberately and callously by the previous government.