Councils take charge of public health while their pension funds invest in tobacco

By News Reporters

Smoke free banner.

Pension funds smoke from investment in tobacco companies.

This month local authorities take over responsibility for a multi-billion pound public health budget as part of the government's Health and Social Care Act 2012. Camden Council and Westminster City Council now have new responsibilities for public health, yet both local authorities' pension funds collectively still invest over £40m in the tobacco industry. Smoking remains the main cause of preventable disease and premature death in the UK. Mental health nurse John Warren submitted freedom of information requests to both Camden and Westminster councils asking about their investment in the tobacco industry. While neither authority says it invests directly, both said their pension funds consist of investments in companies selling tobacco products.

The London Borough of Camden Pension Fund invests in global equities, which include companies selling tobacco. The total Pension Fund value on 31 December 2012 was £1.035bn. The value of shares in tobacco companies, run through their investment managers Aberdeen Asset Management, Fidelity Investments Limited and Legal & General Investment Management were £34.323m. This represented 3.3 percent of the total Fund value.

Westminster City Council’s pension fund on 15 March 2012 had approximately £8m in tobacco stocks, which represents about 1 percent of the fund’s value.

On 13 March 2013 which was national no smoking day the Smokefree Camden team ran a number of promotional activities describing the free support available for residents trying to quit the habit.

Healthy Westminster.

Westminster Council runs stop smoking classes but their pension fund invests in tobacco.

The BBC reported that Westminster Council said it will reduce Council Tax benefit for people who refuse to take measures to improve their unhealthy lifestyles, including smoking. 

John Warren told Fitzrovia News: “It is contradictory for any council to allow their pension fund to invest in a product that they want people to stop using, and to financially penalise those who don’t take measures to stop smoking”.

However, a spokesperson for Westminster Council told Fitzrovia News they are no plans to cut council tax benefit for people who live less healthy lifestyles. Media coverage about a “fat tax” was from a think tank report in January (which WCC commissioned) which looked at options for encouraging better health. “We haven’t said we will cut any benefit on the back of lifestyle choices,” said a spokesperson.

Cllr Suhail Rahuja, Westminster Council’s deputy cabinet member for finance and customer services, said: “Pension fund decisions are made by fund managers on behalf of the council’s superannuation committee. The pension fund has strict fiduciary duties to its pensioners, and delegates investment decisions to its appointed fund managers.  Their job is to secure the best return possible to cover the local authority’s pension liabilities.”

Warren who works as a mental health nurse says he has witnessed first hand the devastating effects of emphysema. He says people with mental health problems are more likely to smoke than the rest of the population.

Mr Warren says local authorities should be taking a global responsibility for their actions. “Due to the declining smoking rate in the western world the tobacco industry is targeting less developed countries with less stringent regulations.

“The UK is a signatory to the World Health Organisation framework on tobacco control which while does not directly prohibit the investment in tobacco it certainly does question any involvement with the industry,” says Warren.

Councillor Theo Blackwell, Cabinet Member for finance, said he recognised the concerns raised and the contradictions, but defended Camden’s position by saying:

“This is a longstanding issue and these points are raised annually, and is more of an issue now because of the public health role.

“Pension fund investments are a complex area and Camden’s pension fund employs experts within the financial sector to maximise returns as ultimately, any deficit between the assets of the pension fund and its liabilities are met by council taxpayers. In other words, the less successful our pension fund, the more pressure there will be on frontline services.

“Like every pension fund across the country we have a legal responsibility to our members and in the case of local government funds, council taxpayers to secure the best investment returns available.

“In such a time of severe financial pressure for local authorities it is prudent that the pension funds should not become a further burden on local council taxpayers.

“There is an obvious contradiction here as central government have passed down responsibility for public health to councils yet do not give us the flexibility to take appropriate decisions relating to pension fund investments now we have public health responsibilities. Instead we are legally bound to invest in high performing and profitable companies, of which tobacco companies are one.

“I am sympathetic to concerns raised and have already raised this issue with the new Health and Wellbeing Board as the Council is rightfully being asked about these two conflicting positions,” said Councillor Blackwell.

But in the long-term investing in tobacco does not make financial sense, says Warren. “How much do smoking related illnesses cost the respective councils in comparison to their returns from their investment in tobacco?

“Tobacco is not the same safe investment that it has been. With global tobacco sales falling and analysts predicting that smoking could disappear entirely, there are questions whether tobacco is a prudent long term investment. Shareholders in tobacco companies may be particularly concerned by the raft of regulations that are set to affect the industry over the next few years,” says Warren.

But until that day comes, local authorities are spending money on stopping people smoking while their pension funds invest in an industry that promotes it.

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