Merton Council still has investments of nearly £5m in tobacco companies to fund its pensions despite spending £164,000 on NHS stop smoking services.

In April this year the council came under fire after it was revealed it held just over £5m invested in the British American Tobacco Company, makers of Lucky Strike and Benson and Hedges cigarettes, and Imperial Tobacco, which makes Lambert and Butler.

This was despite the council taking over responsibility for public health in the borough, including cutting smoking.

Despite promises to review the policy, six months later the council’s pension fund investment in tobacco companies is still £4.9m, now spread across three organisations.

This year the council will invest £163,044 into NHS Stop Smoking services as one of its key strategies to reduce smoking in the borough, while continuing to support tobacco companies.

Councillor Suzanne Evans, leader of Merton’s UKIP, said: “How can the council justify spending £163,000 on NHS stop smoking initiatives as part of our new public health responsibilities while continuing to invest £5m in tobacco companies?

“Both Labour and Tory made very public pledges to end these investments. Their promises have gone up in smoke. Neither party can be trusted. 

“It’s rank hypocrisy. These investments should be stubbed out now.”

A council spokesman said the pension fund advisory committee (PFAC) was not legally obliged to take into account social, ethical or environmental factors when investing in pension funds.

The spokesman explained the council could only withdraw investment in tobacco or alcohol if it was advised there was another asset which would provide the same potential return.

Failure to act in the financial interests of its beneficiaries could result in a claim against the council for “breach of duty” and excluding tobacco could “seriously limit” the companies the PFAC could invest in as similar issues could be raised against other industries including oil and gas, mining, gambling, defence and the arms industry.

A special meeting is set to take place in December, at which the committee will look at its investment approach as a whole.

Councillor Richard Williams, chairman of PFAC, said: “Ensuring the pensions of thousands of former and current Merton staff are invested well is a responsibility I and my colleagues that run the fund take very seriously.

“If the Government were to change the law to allow us to choose to exclude certain companies from our investments, I would be keen to look at how we might do so.”