HL Deb 21 March 2000 vol 611 cc142-4

2.59 p.m.

Lord Fraser of Carmyllie

asked Her Majesty's Government:

Whether the outcome to date of their auction of United Kingdom gold reserves is satisfactory.

Lord McIntosh of Haringey

My Lords, the purpose of the programme of gold auctions is to achieve a better balance in the reserves portfolio. It is a medium-term programme. The auctions held to date have demonstrated that they can be successfully used to sell gold in an open and transparent way.

Lord Fraser of Carmyllie

My Lords, I am grateful to the Minister for his reply. In rejecting the unequivocal advice of the Governor of the Bank of England that those bullion sales should not take place, was it not the declared intention of the Government that those decisions should make the poor people of the world richer? Can the Minister say whether those poor people of the world have been made richer or poorer as a result of those decisions?

Lord McIntosh of Haringey

My Lords, the original decision was a matter for the Government, not for the Governor of the Bank of England. As to what happened to the money received from the sale of gold, as the noble and learned Lord may know, it has been invested in dollars, euros and yen. The Governor has described that policy as perfectly reasonable.

Of course, the issue of the poor people of the world has been in our minds at all times when considering the policy, but 25 tonnes, which is the amount sold at each auction, is 1 per cent of the annual world gold mining supply. The groundstocks of gold are something like 100,000 tonnes. We must keep the size of the auctions in proportion.

Finally, if the auctions had had an effect, they would have reduced the price of gold. They have not. The price of gold now is within a few dollars of what it was on 6th May 1999.

Lord Taverne

My Lords, are the Government aware that the speed of the sales is causing considerable concern to the government of South Africa?

Lord McIntosh of Haringey

My Lords, that concern was expressed at the beginning of the programme and has been expressed from time to time since then. We believe, frankly, that it is 'wrong. It is not the speed of the sales but the size which matters. Our views, which we expressed to the government of South Africa at that time, have been confirmed by the fact that there is no evidence that the sales have forced down, or helped to influence, gold prices internationally.

Lord Dubs

My Lords, at a time of floating exchange rates, what purpose do the gold reserves actually serve?

Lord McIntosh of Haringey

My Lords, that is a good question. Of course, gold reserves bring nothing to us in interest payments. Since the gold disposal policy began in May last year, we have received in five auctions, including one this morning, over 1.2 billion dollars in receipts and we have made something like 1.9 million dollars up to 15th December in interest received on the currency reserves; I do not have the more recent figures. That is of considerable benefit to the Exchequer.

Lord Forsyth of Drumlean

My Lords, will the Minister indicate why the Government chose to announce in advance of the sales their intention to sell the gold? Will he tell the House what is his estimate of the cost to the taxpayer of that decision and whether, with the benefit of hindsight, it would have been better not to have done so?

Lord McIntosh of Haringey

My Lords, the decision to announce in advance the auction of gold was taken in accordance with our general principles of transparency in our economic policy. There is no evidence that there has been any cost to the taxpayer. As I said, the gold has been sold at, or very close to, market prices, including the sale this morning. The market price has not come down since the commencement of the gold sales policy. I do not know what other evidence the noble Lord can adduce to say that the policy has cost the taxpayer money. I have shown that the interest on currency reserves has been nearly £2 million.

Lord Saatchi

My Lords, in terms of cost to the taxpayer, is the Minister aware that on the Bank of England's website he will find confirmation that the Chancellor decided to sell gold just before it went up in price and to buy euros just before they went down, and that the net cost is £40 million?

Lord McIntosh of Haringey

My Lords, Ihe Chancellor did not decide to sell gold just before it went up. The price at 6th May 1999 at the beginning of the process was 289.5 dollars per ounce. The sales this morning were at 285.25 dollars per ounce. There has been no increase in the price. There had been a decrease in the price prior to that. As to the investment in the dollar, the euro and the yen, I have given the figures to show the benefit that there has been to the taxpayer.

Lord Pearson of Rannoch

My Lords, if the Government were so fortunate as to reach their Elysian field of joining economic and monetary union, does the Minister agree that that would require us to commit all our gold reserves—and, indeed, all our foreign currency reserves—to the control of the unelected bankers in Frankfurt? The Minister would then no longer be able to pursue the brilliant policy about which he is presently telling us.

Lord McIntosh of Haringey

My Lords, I am glad to have the noble Lord's support for the policy which his noble friends on the Front Bench and elsewhere attack. The noble Lord is, strictly speaking, correct—if we remove his emotional language—that our reserves would be merged with those of the European Central Bank.