Gordon Brown’s decision to sell off part of the country’s gold reserves 10 years ago cost the public purse nearly £5billion, official figures show.
The sale of more than half of the country’s gold reserves between 1999 and 2002 has proved to be deeply controversial.
Critics say that signalling such a large sale of bullion to gold traders helped to drive the precious metal to a 20-year low.
In 17 auctions, Mr Brown as Chancellor of the Exchequer sanctioned the sale of 395 tonnes of gold.
Figures released by the Treasury show that the total proceeds from the sales was around $3.5billion. According to a Parliamentary answer, if the gold was sold last month, on December 15, it would have raised $10.5billion.
The difference – $7billion – would be worth £4.7billion if the proceeds were converted into pounds yesterday.
The figure, which moves with the value of gold, is far higher than previously thought. Grant Thornton calculated two years ago that the figure lost to the Exchequer was £2billion.
The news comes as the Government considers whether to sell major public assets, including a stake in the Royal Mail and the bookmaker the Tote, to raise funds for public finances.
Treasury minister Ian Pearson attempted to defend the gold sale. He said: “The gold sales between July 1999 and March 2002 reflected a prudent decision to reduce over-exposure to a single asset in the net reserves portfolio.”
However official confirmation of the scale of the loss was severely criticised by the Conservatives, who claim that by signalling the gold sale in advance, the Government drove down the price of gold to a 20 year low.
Philip Hammond, shadow secretary to the Treasury, said: “Gold traders confirm that it was because the Government announced in advance that it was planning to sell such a large quantity of gold that the markets became depressed.
“The low price Gordon Brown got for selling our gold wasn’t caused by bad luck. It was a staggering display of economic incompetence that has landed taxpayers with a £7 billion black hole.”
(It wasn’t incompetence. Gordon Brown was just following orders from the elite.)
Mr Brown has fiercely resisted attempts to release private advice to the Treasury about the sale and has claimed that it was backed by then-Bank of England Governor, Sir Edward George.
Matthew Elliott, chief executive of the TaxPayers’ Alliance, said: “The disastrous sale of the gold reserves was a huge blunder that cost taxpayers vast amounts of money.
“For the Government to pretend it was a strategic move is absurd – it was a foolish decision that the Prime Minister should be held accountable for.
“The Government is right to be considering selling unnecessary public assets, but they must first prove they have learned the lessons of the gold fiasco.”
Cash raised from the sales was reinvested in foreign currencies. A Whitehall source insisted that the Government could not have been expected to behave like a precious metal trader when it sold the gold.
The source said: “The Government could not predict the future rise in the price of gold, however, we knew that gold historically pays less interest and has more volatile returns than bonds. This is still the case.”
A Treasury spokesman added: “This was a long-term investment decision designed to reduce the risk to the Government in our foreign currency reserves, not a short-term attempt to play the market.
“It would be inappropriate to measure gains or losses resulting from fluctuations in market values on a particular day over the short-term.”
By Christopher Hope, Whitehall Editor
Last Updated: 7:47PM GMT 07 Jan 2009
Source: The Telegraph