LONDON LETTER:Kim Rose is urging voters to reject the PM for his decision to sell off gold at the bottom of the market in 1999, writes MARK HENNESSY
SOUTHAMPTON jeweller Kim Rose is nothing if not a man of many parts.
Once upon a time, he stood for the Socialist Labour Party, set up by former National Union of Mineworkers leader Arthur Scargill, before shifting his loyalties to the United Kingdom Independence Party.
Today he is standing as an Independent in the Southampton Itchen constituency against, among others, Labour cabinet minister John Denham. Rose urged voters to reject Denham’s boss, Gordon Brown, for selling off part of the UK’s gold reserves over three years from 1999 when he was chancellor of the exchequer, when the price of gold was tumbling.
Back then, Rose tried to get a court injunction to block the sale but the attempt ran out of steam when Ukip failed to come up with the cash to pay lawyers.
The jeweller, who has run a business in Southampton for almost 25 years, still believes he was right and that recently released Bank of England papers prove it.
“Gordon Brown decided to sell the gold at the lowest prices for 20 years and he carried on selling when the prices were going down. If he had kept hold of the reserves, we would be £7 billion better off now,” he said this week.
“With decision-making like that I wouldn’t let him anywhere near my finances, let alone run the country.”
In 17 trades between 1998 and 2002, Brown traded 395 tonnes of gold – half of the UK’s reserves – at just $275 an ounce, despite outrage from the City of London and less-than-lukewarm support from the then-governor of the Bank of England, Eddie George. And he continued to sell, even as the price fell.
The UK’s store was worth approximately $6.5 billion at the time – half of the UK’s foreign reserves, but the decision in May 1999 to announce the sell-off in advance led the markets to go “short” on gold – betting that prices would fall, which, of course, they did with so much of the precious metal coming up for sale.
Former Conservative prime minister John Major has argued that Brown’s actions cost the UK more than sterling’s “Black Wednesday” crash out of the Exchange Rate Mechanism in 1992 – the event that scuppered his own government’s reputation for economic competence.
By July 1999 the price had fallen to $252 an ounce, and the UK raised $3.5 billion in all, with the revenue used to buy foreign currencies, including the euro.
Disturbed by the possibility that future sales by states would get even bigger, central bankers agreed in Washington in September 1999 to limit themselves to 400 tonnes a year.
The Washington agreement has been renewed twice since. Gold remained low until 2001, when it began to rise – by 2007 it had jumped to $675. By October it had reached an all-time high of $1,048.40. Yesterday, it had gone higher still, standing at $1,150 an ounce – leaving the taxpayer almost £6 billion down because of Brown’s actions.
Since then the Daily Telegraph has fought a four-year battle under the Freedom of Information Act to force the release of confidential papers and finally got clearance last month. Even then hundreds of pages of text were blacked out by the treasury, with the agreement of the information commissioner.
However, it is clear from what has been released that Brown was desperately keen to get the Bank of England involved as a joint sponsor of the idea, and it is equally clear that Eddie George was just as keen not to have his fingerprints anywhere near it.
On December 23rd, 1998, Tom Scholar, Brown’s principal private secretary, wrote in an e-mail: “The chancellor is keen that officials at the treasury and the bank work together to produce a joint proposal.
“As I understand it the latest proposal is not a joint one. The chancellor needs to know the status of the proposal, what the difficulties are in drawing up a joint proposal, how you think we can move forward in achieving a joint proposal.”
Later that day, a second treasury e-mail was sent making it clear that Brown wanted a “joint proposal” he could discuss with George, who has since died, though a note taken of the discussions between the two at a subsequent lunch, where the bank governor made his feelings known, were blacked out completely by the treasury.
By his actions, said John Major, Brown “threw away more than half a century’s worth of the country’s inheritance – at the very bottom of the market”.
Major ridicules the prime minister’s repeated claims since that he was acting on the Bank of England’s “technical advice”.
None of this, however, is likely to do much for Rose, who once ran into bother when he hired Rebecca Loos, briefly famous for claiming to have had an affair with footballer David Beckham, to help flog his jewellery.
Bookies are not even bothering to offer odds on his chances of getting to the House of Commons.