Page last updated at 13:34 GMT, Friday, 27 February 2009

Council has 27m in tobacco stock

Highland Council has a smoking ban in its premises and vehicles

A local authority has 27.2m worth of shares in tobacco stock, it has revealed.

Highland Council officials provided the figures in response to concerns about whether such investments were ethical.

The tobacco shares are held by its pension, Inverness Common Good and Inverness Burial Grounds Commutation funds.

Officials said the council's investment manager could not legally exclude investments on ethical grounds.

In a report, council officers said they had sought legal advice on whether it could instruct managers not to make investments on the grounds of ethical or social issues.

The report also said tobacco stocks provided high and stable returns.

Officers wrote: "The current consensus among the council's investment managers is that, whilst they appreciate that tobacco investments can be controversial, the tobacco companies have strong cash flow and balance sheets.

"Tobacco stocks can provide relatively high, stable and predictable returns, particularly relative to other potential investments, particularly during difficult economic times such as these."

A promise had previously been made by Highland Council that it would divest itself of "unethical investments" but officials claim they are legally unable to enforce this.

Since January 2006, the local authority has had a complete smoking ban in all its premises and vehicles.

A press statement from the time reads: "As the major employer in the Highlands, the council is demonstrating its clear commitment to public health and to improving the health of its 12,800 employees by implementing the ban, ahead of the Scottish-wide ban which takes effect from 26 March, 2006."

Last October, the local authority revealed it can be investing up to 100m a day with banks and building societies to spread the risk on money raised from grants, tax and fees.

It was not affected by the collapse of Iceland's banking system.

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