Surrey County Council refuses to pull pension millions from tobacco and arms trade

Surrey County Council (SCC) has been accused of a shocking conflict of interest over the investments since taking on the task of helping people quit smoking earlier this year.

It has retained £12m in tobacco companies, including British American Tobacco, which amounts to 0.5 per cent of its pension fund.

On Friday Surrey Pension Fund Board insisted its primary duty was to maximise returns and decided to continue delegating ethical considerations to external fund managers.

Councillors warned that pulling out of tobacco could set a dangerous precedent and lead to them pulling pension money out of the arms trade - SCC has £28.5 million invested in aerospace and defence – alcohol and gambling.

Councillor Denise Le Gal, chairman of the board and cabinet member for business services, said: "Where do we draw the line?

"From my point of view our primary fiduciary responsibility lies with our members.

"If our 80,000 members petitioned and said they wanted us to re-examine it, we would do so but we would have to do so outlining the difficulties."

The meeting had been planned to be held in private offices in the Gherkin in London, but was switched at the last moment to County Hall and held in public after the Epsom Guardian said it wanted to attend.

Martin Dockrell, director of research and policy at Action on Smoking and Health, said local authorities had a duty to act in the best interest of pensioners and taxpayers.

Mr Dockrell said: "You have to wonder whether it is in the interest of the local population to support organisations that kill half their life-long customers."

At the meeting, Coun Le Gal claimed banning tobacco investments would also lead to difficulties in terms of monitoring performance and returns on investments as well as setting a precedent for pulling out of other questionable industries.

Although a number of board members said that personally they might feel uneasy about investing in what they described as "sin stocks", they had to think of the pension fund members, who they assumed, in the absence of any evidence, would not share their ethical concerns.

Councillor John Orrick, Lib Dem spokesman for pensions, said they may well personally dislike the idea of investing in tobacco companies.

But he said: "I do think that one has to set that aside and act solely in the interests of our members."

He said starting to pull out of other "sin stocks" they personally disliked would devastate their portfolio. He said: "I don’t think we can start going down that route."

Councillor Stuart Selleck said: "It’s a very difficult situation. It’s personal against fiduciary duty.

"If we go down this route then there’s gambling, armaments, oil. It could be any commodity which could be used in any sort of environment anywhere in the world."

Councillor Mike Goodman said: "If you say no to tobacco then do you go to people who sell tobacco and all the other things that are not good for our health?"

The written advice provided to board members by the council said that from layman’s point of view investing in tobacco may appear ‘self-contradictory’ but in fact there was clear separation of public health and pension fund responsibilities.

Council officer Phil Triggs had earlier compared stewardship and responsible investment to speaking with a chauffeur if he scraped your Rolls Royce.

He said: "If those companies are not governing in the way they should be then we should be engaging with those companies to put the matter right."

However, Tandridge district Councillor Tony Elias said there was inconsistency between this approach and the approach toward tobacco stocks.

Coun Elias said the council paper implied that it would be appropriate to turn a blind eye to a chauffeur smoking or using the Rolls Royce to transport arms.

He said: "I hear what you are saying but I’m sure there is lot of evidence that supports alternative investments that are just as eventually lucrative, if you like, than those few companies, if we wanted to take a proactive role on these issues."

Green Party Councillor Jonathan Essex, who is not on the board, said afterwards the party would challenge the decision to retain tobacco stocks, which he described as ‘hypocritical’.

Coun Essex said: "Having taken on responsibility for public health, this is the perfect time to review responsibilities to make sure what the council says is what it does.

"If what you say is not what you do, the whole non-smoking campaign is devalued."

He added: "They have very much considered the ends justify the mean which flies in the face of sustainable strategy."