Brown 'ignored warnings over sale of gold reserves'

Gordon Brown faced renewed pressure over his leadership ambitions yesterday, amid claims that he disregarded warnings over the sale of British gold reserves estimated to have lost the Treasury £2bn.

Senior Bank of England figures are alleged to have warned that the decision to auction 400 tonnes of bullion between 1999 and 2001 risked losing money because of the low price of gold.

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Since the auctions, the value of gold has trebled, leaving the Treasury with a £2bn loss on the deal, it was alleged. The Treasury issued a strong denial of the claims, which comes before a Commons clash with George Osborne tomorrow over the Chancellor's decision to axe tax relief on pension funds.

Mr Brown was facing a renewed challenge to his leadership ambitions as the former home secretary Charles Clarke predicted that up to three challengers could vie with Mr Brown for the leadership. He warned that "the week between Tony Blair's resignation and the close of nominations for the leadership will be the longest of all," adding: "Time and again, this short period has turned expectations upside down."

Mr Brown insisted that he welcomed challengers for the Labour crown, telling Sky News: "I've always said if people want to stand they should be free and encouraged to do so. That's a matter for them as individuals."

Meanwhile, Tony Blair insisted that said he would spend the last days of his premiership putting in place the "final building blocks" of reforms to schools and the NHS. He told the BBC: ""When you ask the question 'Will our changes stand the test of time?', the answer is they will."

Controversy over the Treasury's decision to sell gold reserves between 1999 and 2002 was reignited yesterday when The Sunday Times claimed that senior Bank of England officials warned of the risks of selling the gold in 1999.

Maurice Fitzpatrick, of the accountancy giant Grant Thornton, said he had estimated that the Treasury lost £2bn on the deal, when he compared the rising gold price with the performance of the foreign currencies bought with the proceeds of the gold auctions.

Yesterday, Conservatives and Liberal Democrats criticised the timing of the gold sales but the Treasury insisted that the decision to sell the gold was "made in the proper way" and insisted that the Governor of the Bank of England Eddie George had described the gold sale as a "perfectly reasonable portfolio decision".

George Osborne, the shadow Chancellor, said: "First it was discovered that Gordon Brown ignored advice on pensions; now it is revealed he ignored advice on gold sales and the taxpayer has lost millions.

"The Chancellor is in danger of getting a reputation as someone who has very poor economic judgement."

Vince Cable, a Liberal Democrat spokesman, said: "The principle of diversifying British reserves out of gold was entirely sensible but the Government seems to have got the timing spectacularly wrong.

Yesterday, the Treasury insisted the sales had been in the national interest.

A spokesman said: "This is a decision the Government made in the proper way. It has been examined by the National Audit Office, who concluded that the Treasury had met its objective selling in a "transparent and fair manner while achieving value for money" and has been debated regularly in Parliament over the last few years, most recently four weeks ago. All the issues have been dealt with before."

He insisted that a string of other countries had also made similar decisions to sell gold reserves.