Anger as London councils invest in tobacco while fighting to curb smoking

Ten London councils were today urged to "search their consciences" after a Standard investigation showed them investing up to £100 million in tobacco firms.

Health campaigners accused town halls of hypocrisy for vigorously promoting stop-smoking programmes while bankrolling the tobacco industry through their pension funds.

The boroughs admitted investing up to £10 million each in shares of firms such as British American Tobacco, producers of Dunhill cigarettes, Marlboro-makers Altria Group, and Imperial Tobacco, whose brands include Lambert & Butler. They claim the "recession-proof" stocks offer long-term value for pension funds that pay out retirement incomes to former workers. An estimated 114,000 Britons die each year from smoking-related illnesses.

The widow of Record Breakers star Roy Castle, who died from lung cancer through passive smoking, urged the councils to "search their consciences" and switch to ethical investments.

Andrew Hayes, director of SmokeFree London, said it was wrong to "invest in a product that kills its consumers".

Just one borough that responded to the Standard probe does not have tobacco shares, Newham, which cited health concerns and fears of cigarette firms being sued. Out of the 33 local authorities, another five that responded were "not opposed" to tobacco investments in shares or part of an investment portfolio.

Finance expert Justin Urquhart Stewart, of Seven Investment Management, said: "Tobacco funds are recession-proof, fast cash producers and a godsend for local authorities with a pension deficit to fill.

"So long as you don't have a conscience about the environmental or medical impact, tobacco is a very good investment, yielding six or seven per cent compared to one, two or three per cent in a deposit account." There is increased pressure on local authority pension funds to perform because they are almost all in deficit with a combined "black-hole" of £10 billion, according to an audit carried out by the Standard.

Some councils insisted there was no conflict between investment in tobacco and spending council money to persuade people to give up smoking.

A spokesman for Wandsworth council said: "Just about anyone has got investments in tobacco companies if they've got any sense."

The council runs five weekly stop smoking clinics and NHS Wandsworth spends more than £600,000 a year on stop-smoking programmes.

A Kensington and Chelsea spokesman said: "The investment committee has a policy of non-interference with the day-to-day decision making of investment managers, and their mandates do not rule out investment in any legal enterprise."

In Lambeth, where around one quarter of the population smoke, its council invests £9.3 million in BAT while forming a Tobacco Alliance with the local NHS trust to get people to give up. Mike Taylor, chief executive of London Pensions Fund Authority, said: "I would expect most local authority funds have some investments in tobacco."

Roy Castle was a TV presenter, trumpet player and lifelong non-smoker who died in 1994 aged 62 of lung cancer thought to have been contracted from working in smoky nightclubs.

Fiona Castle said: "I'm horrified that so many London council invest their pension money in this outdated way. It means they lose credibility in telling people to stop smoking."

Additional reporting: Joe Curtis and Katie Linsell.