NOBODY could doubt Durham County Council’s public commitment to the anti-smoking cause. The council routinely educates schoolchildren about the dangers of smoking as part of its health and well-being service, and its website helps to promote local NHS no smoking services, the Smoke Free North East campaign, Fresh, and National No Smoking Day.

How, then, can the same council justify that it also gives over £40m of its employees’ pension fund to international tobacco companies?

The same question is today facing other local authorities in Britain, most of which have parts of their pension funds invested in the big companies around the world which manufacture and market cigarettes and other tobacco products.

Councils usually defend their investments on the basis that they have a duty to maximise returns to their pension funds, and with an estimated one billion smokers in the world, “big tobacco” has been an historically profitable investment.

Yet, a growing number of health experts now believe that local authorities such as Durham should pull their pension money out of tobacco.

They argue that such investments are both unethical and in conflict with councils’ health and anti-smoking work – a conflict which is set to grow in 2013 when the responsibility for public health in England is transferred to local authorities from the NHS.

Senior figures within the health service are hoping that councils will choose to disinvest from tobacco so that this further conflict of interest does not arise.

“For local authorities, which will become the guardians of public health, there would be a clear conflict of interest,” said Professor Eugene Milne, deputy regional director of public health at NHS North-East. “But we are attempting to resolve this issue through discussions in the coming months so that directors of public health do not become conflicted.”

Martin White, professor of public health at the Institute of Health and Society at Newcastle University, said he understands the problems that pension funds are facing. Health service pensions have been cut, too. But he said: “Notwithstanding that, the impact of the tobacco industry on people’s lives, on health, on mortality and so on, is absolutely unequivocal and I would take the view that it is unethical to invest in an industry whose business is basically death. There’s no two ways about it – tobacco kills. And to invest in it is immoral so far as I’m concerned.”

Nobody knows how much money British councils have invested in tobacco companies.

But, based on a recent survey of 90 local authority pension funds in England and Wales, pension fund tobacco investments total at least £1.2bn. However, the true figure will be much larger since most councils chose to reveal only the value of their tobacco shares and not the money they also have invested in tobacco via various equity tracker funds.

DURHAM County Council revealed an investment of £44.5m in Japan Tobacco and British American Tobacco. This represented 2.5 per cent of a £1.7bn pension fund and was one of the highest figures for a single council. The £44.1m reported by Tyne and Wear Pension Fund, which invests the contributions of 112,000 current and past employees of bodies such as Newcastle and Sunderland city councils, goes into Imperial Tobacco, Japan Tobacco and KT&G, South Korea’s leading cigarette maker.

Teesside Pension Fund, which looks after the pensions of employees at Middlesbrough, Stockton, Hartlepool and Redcar and Cleveland borough councils, revealed investments of £47.3m in Imperial Tobacco, British American Tobacco, Japan Tobacco, KT&G and US companies Philip Morris, Lorillard and Reynolds.

North Yorkshire Pension Fund admits its £1.5bn fund includes money in tobacco but says all the tobacco investments are in equity funds and cannot reveal its holdings or values for commercial reasons. The single largest investor is West Yorkshire Pension Fund, with £125m. It, like Durham County Council, argues that it invests in tobacco because it has a duty to its members to maximise financial returns.

“Durham County Council adheres strictly to government regulations when it comes to investment,”

said Don McLure, corporate director for resources with the authority. “The pension fund has 68 employing authorities which includes the county council. This makes it one of the larger pension funds in the country and it therefore has more money overall to invest.

“We have a financial responsibility to obtain the best possible return on investments to keep costs low for Durham County Council as an employer, County Durham tax payers and the other 67 employers in the fund. As part of the investment decision-making process, Investment managers are also required to consider the practices of companies and assess the extent to which this will detract from company performance and returns to shareholders.”

The problems facing the shortfalls in public sector pensions, and the demand that employees pay more and work for longer, have been well publicised through various public sector demonstrations in past months. North Yorkshire Pension Fund, for example, has a deficit of £643m. Yet, the conventional wisdom that councils have an obligation to invest in tobacco companies because they produce attractive returns is now being questioned.

Campaigning groups FairPensions and Action on Smoking and Health recently released a report suggesting that tobacco can no longer be regarded as a safe, high-profit, investment because smoking and tobacco companies are under attack from an increasing weight of law and regulation increasing the tax on tobacco and limiting its marketing appeal.

The counter argument is that tobacco companies are still highly profitable and provide thousands of jobs in many countries, including 5,000 directly employed by the industry in Britain. Of the two companies which Durham County Council has its pension money invested in, British American Tobacco enjoyed profits of £4.3bn in 2010 and last year returned a 15 per cent dividend value increase.

HOW will local authorities justify their position when they take on responsibility for public health next year?

The Faculty of Public Health, which represents directors of public health, has strongly condemned councils’ tobacco investments and urged them to seek ethical investments for their pension funds.

Prof Milne, at NHS North-East, said: “I think it would be unfair to damn them at the outset for past indiscretions when we can work together and talk about how becoming the guardians of public health will affect the way they operate.”

Prof White is more forthright: “I think local authorities will need to ask themselves some searching questions in the future about whether their investments in the tobacco (or alcohol) industries are compatible with their public health responsibilities.

“Tobacco control is in many ways one of public health’s biggest success stories in the last 50 years. And it’s still one of the biggest killers in the world in terms of avoidable causes of death.”