Archive for April, 2013

Competing duties: MUST councils divest?

The Health and Social Care Act 2012, which transferred public health duties to local authorities includes this wording:

“Each local authority must take such steps as it considers appropriate for improving the health of the people in its area.”

I’ve underlined the word MUST, as it seems to me this is rather important.  We are constantly told that local authority pension funds have a legal (fiduciary) duty to maximise returns and therefore have to be invested in tobacco, even though LA pension funds are empowered to consider ethical issues in their statement of investment principles, and even though pension funds in other jurisdictions with similar fiduciary duties have successfully divested from tobacco.

The 2012 Act uses a very strong word in ‘must’, a word which may be helpful to those of us who wish to see LAs divest.   Given that remaining invested in tobacco would send, at best, mixed messages to the population about the desirability of smoking, and given that any such investments would be used to maximise smoking, by the industry, it seems fairly clear that it is inappropriate for a local authority to be invested in tobacco.  Such investments are used to further the business objectives of the tobacco companies which are in direct contradiction with the duty to improve public health.  If a local authority concludes that divesting from tobacco is appropriate for improving the health of the people in its area, then on my reading it must divest.

Of course if an organisation has contradictory duties then a judgement has to be reached about which duty overrides the other, a decision ultimately for the courts.  What does seem clear though is that quoting the fiduciary duty as a defence, without regard to the other duties of the local authority, may not be a sufficient response.





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Merton Council to consider withdrawing ‘awful’ £5m tobacco investments From Wimbledon Guardian

Council to consider withdrawing ‘awful’ £5m tobacco investments From Wimbledon Guardian.

Encouraging noises from the council leadership at the London borough of Merton, where it sounds like tobacco divestment is very much on the agenda.  Coun Stephen Alambritis, leader of Merton Council, said the council would be reviewing the council’s investments adding that the council should be “mindful” that it was not fighting to reduce something harmful on one hand, and on the other investing in it.

That sums up the argument in one simple sentence.  This is a conflict of interest that is now untenable for local authorities leading on public health improvement.



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‘Anti-smoking’ town halls in Greater Manchester invest £54m in cigarette giants – Manchester Evening News

‘Anti-smoking’ town halls in Greater Manchester invest £54m in cigarette giants – Manchester Evening News.

Too many councils are holding to the line that they have no choice but to invest in tobacco companies to comply with the law.  It is fair to say that the law lacks clarity.  One might suppose then that comments from councils about what the law says on this issue would reflect that lack of clarity.  But it is just the opposite; they say they have to invest in tobacco to comply with the law.  Fair Pensions and ASH produced a briefing on the law, which if nothing else makes it clear that the legal position is not as black and white as the councils and their advisers suggest.

There is in this story a welcome call from a councillor for government to address this issue.  It would be a very simple matter for the government to clarify the law in this area by either:

1. Prohibiting public sector bodies from holding tobacco investments (which would bring the UK into line with FCTC Guidelines that say no branch of government should invest in tobacco companies; or

2. Expressly permitting public sector pension funds to bar tobacco investments from their portfolios.

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Council invests in tobacco firms while promoting anti-smoking (From This Is Local London)

Council invests in tobacco firms while promoting anti-smoking (From This Is Local London).

Local authorities throughout England now have new duties to improve public health.  Among their responsibilities are tobacco control and smoking cessation.  As this story about the London Borough of Merton shows, these new responsibilities conflict with pension fund investments in tobacco companies, in this case to the tune of over £5 million.

It is welcome that the Council leader has committed to review these investments.  He will hopefully be seeking the views of the Director of Public Health and take full account of the UK commitment to the Framework Convention on Tobacco Control, the guidelines to which state that local authorities should not invest in tobacco companies.

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