Precious Metal Markets

Debate between Jim Shannon and Jeremy Lefroy

Monday 8th July 2019 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

It is a pleasure and an honour to speak about this subject. In fact, my good friend the Minister may be a bit surprised that I wish to speak about it, because I think that he would, like me, agree with the biblical verse which states:

“Lay not up for yourselves treasures upon earth, where moth and rust”

can damage them. However, I think he would also agree that trust in all things is incredibly important, and it is on that aspect that I wish to concentrate tonight, rather than the treasure that precious metals represent.

I am raising this subject for a number of reasons, which I shall go into in a moment. First, however, I must declare an interest, in that I have invested an extremely limited amount in precious metals as part of my pension provision.

My first reason for raising the subject is the importance of gold and silver as a store of value internationally. There are those who say that gold in particular is a relic of the past with little relevance to the modern financial system, but many countries do not seem to agree. Russia is steadily building up its gold reserves, which, 20 years ago, were well below those of the UK; now they are seven times as high. China rapidly increased its gold reserves in 2015. Several European countries, notably Germany and France, hold more than 60% of their reserves in gold. The United States—the owner of the world’s main reserve currency, which would perhaps have the least reason to hold gold reserves—still believes in gold, which comprises some 73% of its official reserves. And what of the UK? With just 310 tonnes—pretty much the same quantity for more than 15 years—we hold 8.5% of our official reserves in gold. However, this debate is not about the merits of the UK’s policy on official reserves, although I will refer to that briefly at the end of my speech.

If gold plays such an important role in nations’ reserves, it is vital that the means of trading it and establishing its price on the exchanges be fair and transparent.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on securing this debate. I sought his permission to make an intervention beforehand. Does he agree that there is a real need to safeguard investors and that the present procedures do not go far enough to protect them? They appear to be weighted on the side of the market, and this truly is not equitable or just.

[Jeremy Lefroy]

The hon. Gentleman makes a good point, and that is what I want to talk about: trust in the markets—and I am asking questions, not giving answers, because I do not have them.

We should note that gold and silver both act as currency crosses, trading as components of the $5-trillion-a-day foreign exchange marketplace. That is an astonishing figure. Clearly gold and silver are a very small part of the crosses market, but nevertheless they form part of it, and I have to say personally that I get increasingly worried by the huge volumes of daily trades on international markets and the vast amounts of derivatives that are outstanding at any one time. The last report I saw from the United States, I think from the last quarter, showed that something like $200 trillion-worth of derivatives were open at that time.

My second reason for raising the subject is that considerable quantities of gold and silver—and indeed the other precious metals, palladium and platinum—are mined in low and middle-income countries. As with other commodities—such as coffee and cocoa, with which I worked for many years, and still do a little bit—the price has a major impact on the economies of the producers; it has an impact on those who work in the mining industry and on the taxation revenues of the countries.

The third reason is that London is at the heart of the global trade in precious metals and has been since the late 17th century. At a time when institutions and businesses are under intense scrutiny, it is vital that we in this country uphold the highest standards, and I am sure my hon. Friend the Minister entirely agrees with that.

Just last year, a former vice-president of a major US bank pleaded guilty in the US to spoofing precious metals markets

“hundreds of times with the knowledge and consent of his immediate supervisors.”

Sentencing has been delayed; the implication is that the person is assisting the US Department of Justice’s investigation into others, possibly both within and outside the bank. Spoofing is a technical term, defined in the USA’s Dodd-Frank Act 2010 as

“the illegal practice of bidding or offering with intent to cancel before execution”,

or, in other words, to deceive the market. In another case, in January 2018, Deutsche Bank, UBS and HSBC paid $46.6 million in the US to settle Commodity Futures Trading Commission charges relating to spoofing in the precious metals markets.

I was first alerted to this subject by a constituent who had bought limited quantities of silver as an investment from Deutsche Bank while he was resident in Germany. Over the period in which he purchased the silver, the price peaked at $48 an ounce in 2011, and declined to below $20 by the end of 2014. It is always very difficult to determine the precise causes of a market’s movement; this was at a time of global uncertainty, financial stress in Europe and North America, and increasing demand for physical silver in electronics and other industrial purposes. My constituent stated in courts in both Germany and Birmingham in the UK that the bank had been manipulating the precious metals market. His cases were dismissed; nevertheless, shortly afterwards, in 2016, Deutsche Bank and others confirmed that market manipulation had indeed been taking place, and they paid penalties in the USA.

My constituent’s contention, with which I have considerable sympathy, is that it is the small retail investor who pays the price for such illegal behaviour of traders and the banks for which they work. The regulators, and hence the Governments, receive the fines, but investors find it almost impossible to prove a loss directly, because a number of factors affect market prices, not simply the illegal activity.

My intention in calling for this debate is not to seek any conclusions at this stage, or to go into the details of precious metals trading—still less of the complexities of derivatives contracts that piggyback on the metals—but rather to ask the Minister and the Government some questions and to call for action. My reasoning is that our country depends, more than any other major economy, on the stability of and trust in our financial services sector. The sector provides much well-paid employment, not just in London. Here I should express my regret at the job losses announced today in Deutsche Bank. At least 2 million people are employed in financial services throughout the UK, not just in London, and the sector contributes up to 10% of Government revenue. It also includes our heavy responsibility for and stewardship of the precious metals that we store and trade on behalf of most of the countries in the world.

I wish to ask the Minister a number of questions. First, have the Treasury, the Financial Conduct Authority or the Bank of England made an assessment of the result of the recent J.P. Morgan case involving the rigging of precious metals markets and its potential impact on the UK? After all, we are talking about financial institutions with a global reach. Secondly, do the UK authorities believe that any similar activity could take place, or has already taken place, in the UK, or by a bank domiciled here? Thirdly, if there is evidence that the manipulation of bullion markets by banks over a period has resulted in lower prices than would otherwise have been the case—that is clearly something to be proven—what recourse do producers and retail investors have against banks for that manipulation?

Fourthly, it is estimated that the quantity of so-called paper gold—that is, delivery contracts for gold—is approximately 100 times the quantity of available physical gold. That is not peculiar to the precious metals market; it happens with other commodities as well, but it is nevertheless a noteworthy situation. I accept that it is unlikely that most such contracts will end up requiring the delivery of physical gold, but what assessment have the authorities made of the risk that if delivery is required, those requirements might not be met? We have to take into account the steady increase in demand for gold—and, indeed, all precious metals—by states as well as by industry.

I suggest that, in addition to answering these questions, the Government commission an independent inquiry or review into the bullion market, particularly in the UK. Gold and silver are not simply commodities like coffee, cocoa, sugar or copper, vital as those are; they are a bulwark of the global financial system, the importance of which is possibly increasing. The UK is a relatively minor holder of gold as part of our reserves, but gold constitutes the majority of the reserves of many other countries. We have a significant role in the stewardship of the reserves of others, both physically and in their valuation. The trust that others place in our country and our institutions in this area matters enormously. An independent inquiry or review at this time would underline the fact that we value that trust greatly, and that we will strengthen controls wherever necessary. Indeed, I believe that some controls have already been strengthened in the recent past. Such a review or inquiry would also flag up risky or illegal activity and ensure that those responsible were brought to book, including by being required to compensate those who have suffered from it.

As I said at the beginning, my aim in this debate is to see whether there has been any activity in these markets in the United Kingdom that we should be taking a closer look at on behalf of investors, particularly the small retail investors who put some of their savings into these commodities; but it is also about the trust in our system in the United Kingdom. There is a huge amount of trust in the UK and its institutions. I believe that that trust is almost always well placed, but it can only continue to be well placed if we constantly scrutinise the system and check instances where we have an indication that things have not always gone well, or perhaps are not going well now, and take action quickly.

Traidcraft and Fair Trade

Debate between Jim Shannon and Jeremy Lefroy

Tuesday 18th December 2018 Westminster Hall

[Jeremy Lefroy]

Does the hon. Gentleman agree that one of the great supporters and promoters of fair trade in retail over the past 30 years is the co-operative movement? Alongside Traidcraft and others, it has really taken forward fair trade and made it a household name in the United Kingdom.

[Jim Shannon]

I wholeheartedly agree. The hon. Gentleman brings wisdom and knowledge to this type of debate—to every debate, but to this one in particular. I thank him for that.

Unfortunately, that school of thinking has been somewhat lost, as some of the big companies look to the dividends of their shareholders and do not concern themselves with how suppliers lower the bottom line to meet their profit margin need. It is good that some companies have realised that they have to adhere to a moral compass. That is why Fairtrade and Traidcraft exist. I thank everyone who works in those wonderful organisations and takes part in what they do.

I am given to understand that there has to be a cut in staff numbers. That is unfortunate, and I encourage the venture to hold fast and keep doing good. There is a verse in scripture that always encouraged me: it says that we should not be weary in doing good, for we shall reap what we diligently sow. It is my belief that there are countless families in communities throughout the world who are reaping the benefits of what these organisations sow in fairness, respect, hard work and honesty.

Before making this contribution, I was thinking of the advert on TV for Fairtrade coffee, which tells the story of the young boys in the fields. If they were not doing that farming and that work, the alternative would be to go into criminal activity. By buying Fairtrade and Traidcraft goods, we enable people in other parts of the world to gain a wage, to have families and to grow, and we also keep them away from criminality.

UK Development Bank

Debate between Jim Shannon and Jeremy Lefroy

Wednesday 20th June 2018 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

I start by declaring my interest as chair of the international Parliamentary Network on the World Bank and International Monetary Fund.

In this debate I will put forward the strong case for the United Kingdom to establish a development bank. I believe it is needed now more than ever, and for two particular reasons. As we leave the European Union we will also leave the European Investment Bank as a shareholder. That bank is based in London and has provided large sums of very important capital to projects throughout the UK, not least the Thames tideway tunnel not a million miles away from here and being developed right at this moment. I realise that this particular area does not fall within the Minister’s responsibilities, but they do cover the context of an international development bank, and both the UK aspect of development, which is at present done through the EIB quite considerably, and the international aspect of development financing can come through the same institution; in fact, that would probably be mutually beneficial.

We are one of the few major countries in the world that does not have its own development bank, whereas France has the Agence Française de Développement, or AFD, the Germans have the Kreditanstalt für Wiederaufbau, or KfW, and many other countries also have development banks, often on a very substantial scale. I shall address that point later.

As one of the major challenges the world currently faces, alongside climate change and the environment, is the creation of jobs and livelihoods, particularly for young people, a development bank is needed more than ever. The World Bank estimates that at least 600 million jobs need to be created in the next 10 or so years globally; my estimate is that well over 1 billion new jobs are needed. It is estimated that the population of sub-Saharan Africa will double between now and 2060, to 2.4 billion. If we do not tackle the question of economic development and livelihood-creation around the world and support countries to ensure that their young people have opportunities there, the migration crisis of 2015 onwards will be chicken feed compared with what we will see in future. That is of huge relevance to those young people who are forced to take perilous journeys, and also of great concern to nations in Europe, such as the UK, and elsewhere which will be forced to countenance huge migration on a scale we have not yet seen even in the last few years. This is not a theoretical question of whether it would be nice to have such an institution; it is absolutely fundamental for the development of major public and private projects in the United Kingdom and internationally that we establish a UK development bank, and the sooner the better.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Gentleman for giving way. I spoke to him earlier to get an idea of what this was about, and I congratulate him on bringing forward the debate. I have seen too many cases in my constituency of small businesses that are cash poor and asset rich and that are unable to make payments of even 1p more than the required amount. Does he agree that a development bank such as the one he has outlined that was friendly to small businesses and enterprises would encourage the bigger banks to remember their duty not only to the bottom line but to their local communities, which we represent, and to trust them to do the right thing with their money? Also, if he was looking for somewhere for this investment bank, would he agree that Belfast would be a great place for it?

[Jeremy Lefroy]

The hon. Gentleman is right, although I am sure that many places will bid for it when it is established, as I hope it will be.

Unaccompanied Child Refugees: Europe

Debate between Jim Shannon and Jeremy Lefroy

Thursday 2nd November 2017 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

I am pleased to be called to speak in the debate. I can say, hand on heart, that I cannot begin to imagine the plight of these children. My heart goes out to them. We have all seen the images on TV and have been disturbed by what we have seen. The children are in this predicament through no fault of their own, so we must help them. We have taken steps to do so, and we must take further steps. As hon. Members have said, we must think about these children as though they were our own and respond accordingly. We acknowledge that we have a role to play, and we must exercise wisdom in playing it.

In the short time that I have, I want to refer to some of the things that we have done in Northern Ireland, with Government help. The first Syrian refugees to arrive in Northern Ireland through the Syrian VPR scheme came to Belfast in December 2015. We had some 51 people—10 families—and they settled and were housed in north, south and west Belfast. As of June 2017, nine groups of refugees had been brought to Northern Ireland, bringing the total number to 558. Another 192 have come since then, and we now have some 750. Northern Ireland hopes to take 2,000 refugees over a five-year period. That may not seem like a terrible lot, but we are a small region and we are doing our bit. I want to put our commitment on the record in the Chamber.

[Jeremy Lefroy (Stafford) (Con)]

May I say what tremendous work is being done in Northern Ireland? Sadly, we have this refugee crisis, and there will be refugee crises in the future. Does the hon. Gentleman agree that it is vital that the networks of support for refugees are maintained in all our regions, because they will be crucial in any future refugee crises that we come across?

[Jim Shannon]

I agree wholeheartedly with the hon. Gentleman.

As well as bringing refugees in, we have to think about what we need to do afterwards. In order to support the Syrian refugee families with full integration into Northern Ireland, we need to support them with housing, health, benefits and school places for children. The costs of those things are met by Home Office allocations for the first year. I subscribe to what other Members have said: we have 250 places, so let us fill those places and do our bit. Let us make it clear what we in the United Kingdom are about. We must work out which situations merit opening our doors and which merit stepping in and doing what we can.

Let us put on the record what our Government and the Home Office do. When I looked up the funding allocation for Northern Ireland, I found that the Home Office provides some £11,120 per refugee to cover the first year’s costs. That covers resettlement costs and includes housing, education and healthcare, as well as key worker support, which is very important. Those things are all part of the integrated system—the full package—that is required. The Home Office agreed to make additional money available to cover additional educational costs and medical costs for any complex needs cases, of which there are many.

The Home Office also provides reducing levels of financial support for the resettlement of the refugees for up to five years after their arrival, so our Government provides ongoing support. When we bring in refugees, we give them the full package to keep them educated and get them settled. The funding from the Home Office will be sufficient to cover the costs of managing the arrival and resettlement of the refugees expected to arrive in Northern Ireland.

The Government have many methods of helping to settle refugees. As Members will know, I come from Northern Ireland; I fly over every time and then fly back. On the plane, the staff give a safety demonstration every time, and it never changes; we could probably recite it off by heart, but it is still important. They make it clear that in the case of oxygen being needed, we must first put the mask on ourselves before helping others to ensure that we can actually help others. I believe the same applies here, except for one difference: we have the oxygen, and we should try to help where we can.

In conclusion, may I ask the Minister whether if we can do more, he can show how? If we can do more, why are we not doing it? If we cannot, then what can we do for these children—and, indeed, for children in similar circumstances across the world? That is what this debate is about, and right hon. and hon. Members have made it very clear that we want action.

Drones: Risk to Aviation

Debate between Jim Shannon and Jeremy Lefroy

Tuesday 18th July 2017 Westminster Hall

[Jeremy Lefroy (Stafford) (Con)]

I beg to move,

That this House has considered the risk to UK aviation from drones.

It is a pleasure to serve under your chairmanship, Sir Roger. On Sunday 2 July, the runway at Gatwick Airport was closed twice—once for nine minutes and once for five minutes—as a result of the incursion of a drone. Five flights were diverted to other airports and several others were put into holding patterns, at great cost and inconvenience to airlines, the airport and, most importantly, passengers. In 2014, Airprox Board investigations into aircraft near misses with drones found that there were three, of which one was of the most serious category A. In 2015, the figure had risen to 27, with 13 category A incidents. In 2016, it had risen to 71, with 26 category A incidents—a huge increase in the most serious type of incidents. I secured this debate to find out from the Government what action they are taking and considering to counter that increasing threat to the lives of aircraft crew, passengers and those living under flight paths.

I am not anti-drone, and nor is the British Airline Pilots Association. I thank BALPA, along with the Civil Aviation Authority, Heathrow Airport, National Air Traffic Services and the House Library, for providing information on this subject. When properly and safely controlled, drones are of great value in, for example, precision agriculture, inspection of power cables, aerial photography, mapping and police work. Just this morning, I spoke with a constituent who runs Cloudbase Images Ltd. He was recently asked to carry out some work in the proximity of an airport. He contacted air traffic control there and they discussed a safe way of carrying out that work, which meant modifying the client’s requests. That is an example of how drones should and can be operated safely and professionally.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Gentleman for bringing this issue to Westminster Hall for consideration. He mentioned the British Airline Pilots Association, which has warned that the use of drones could cause what it refers to as a catastrophic crash. Does the hon. Gentleman agree that now is the time to step in and, perhaps, draw up the protocols used by the firm that he referred to and make them part of aviation law? There is not much sense in closing the door after the horse has bolted. Now is the time to get the protocols in order.

[Jeremy Lefroy]

I am most grateful to the hon. Gentleman for raising that point, and I will come on to it. He is absolutely right. One of the reasons for having this debate is to find out what the Government are doing and urge them to take action quickly where it is necessary.

My constituent was concerned because the airport said that very few people contacted them, even though it is adjacent to a big city where a lot of professional drone work is carried out. He was worried that others were not taking steps to contact air traffic control or to make the appropriate safety arrangements.

There has been enormous growth in the ownership of drones. Some 530,000 were bought in 2014 alone. Of course, the vast majority are for leisure use. When used responsibly, they are a great asset. They encourage interest in aviation and aerodynamics and lead to innovation. But there is also irresponsible or downright dangerous use, which poses a risk to aircraft and passengers. The key is regulation and enforcement that protects aviation without seriously damaging what is becoming an important sector of the economy.

Drones are currently subject to the Civil Aviation Act 1982 and the Air Navigation Order 2016, which stipulate—for all drones—that they must not “endanger persons or property” and that whoever is controlling the drone

“must maintain direct, unaided visual contact”

at all times. Drones weighing more than 7 kg must not be flown at a height of more than 400 feet, or 500 metres horizontally, nor in

“Class A, C, D or E airspace”

or

“within an aerodrome traffic zone during the notified hours of watch of the air traffic control unit”.

To operate a drone outside those limits, or to carry out aerial work—even non-commercial work—requires an operating permit from the Civil Aviation Authority. That permission is given on a case-by-case basis by the CAA. By September 2016, 2,500 permits had been issued, which strikes me as a small number compared with the number of people who I believe are carrying out work with drones at the moment, whether commercial or non-commercial. There are further requirements for someone who wishes to operate regular flights with a drone. The CAA will also wish to be assured of the competence of the person piloting the drone.

I wonder how many people who purchase drones for recreational or commercial use are fully aware of the requirements. I spoke with someone recently—someone who I and presumably they themselves would regard as responsible—who had lost control of a drone. It had flown more than 10 miles at a height of 100 metres before running out of power.

So my first question to the Minister is what work is being done to ensure that all purchasers of drones, whether for leisure or commercial use, are aware of existing regulations. Although I believe that further, tighter regulation is essential—I will come on to that—the Department and CAA can do much right now.

Looking ahead to what needs to be done, the first task is to establish how much damage the collision of a drone with an aircraft would cause. The Government, together with the CAA, BALPA and the Military Aviation Authority, have carried out research on that and the report is complete; I understand that it will be published soon. When will that be and what action does the Minister intend to take on publication?

From speaking to those involved in this area, I understand that the risks arising from a drone impact are likely to be serious, even with very small drones, and that there is a particular risk to helicopters, military or civilian, such as those used by the police, search and rescue or air ambulance services. The possibility of a drone strike is now listed by the Joint Helicopter Command of our armed forces as one of the five greatest risks to life in its sphere of operations.

BALPA believes that a drone of only a few tens of grams could cause serious damage in a collision at speed. The most popular drone weighs 1.5 kg— 1,500 grams. We will need careful and comprehensive regulation covering all but the smallest and least powerful of drones.