Dishonourable Members Conal Walsh uncovers the unethical investments behind MPs' pensions

Dishonourable Members  Conal Walsh uncovers the unethical investments behind MPs' pensions 

https://www.theguardian.com/business/2001/jun/24/houseofcommons.politics

Special report: House of Commons
Sun 24 Jun 2001 01.58 BST First published on Sun 24 Jun 2001 01.58 BST
Thegrowing appetite in Britain for ethical investment will be reflected by the Stock Exchange next month when it unveils a new FTSE ethical investment index. The FTSE4Good will exclude tobacco companies and arms manufacturers and provide benchmarks for 'socially responsible investments'. Yet the same rigorous principles have yet to govern the pension fund of our elected representatives.

In common with half the occupational pension schemes in this country, the MPs' pension fund now has a 'Socially Responsible Investment Statement' which guides its investment managers.

But that has not prevented the fund investing freely in firms such as Imperial Tobacco and arms exporter British Aerospace, nor from sinking millions of pounds into a host of other controversial corporations.

The investments are revealed in confidential documents seen by The Observer. Some MPs are unlikely to be concerned by the news. Former Tory Health Secretary Kenneth Clarke, for instance, avoided questions about a possible Tory leadership challenge last week by joining a trade mission to Vietnam on behalf of British American Tobacco, where he is a director.

But other MPs are outraged by the pension fund disclosures. Peter Bradley, Labour MP for the Wrekin, said: 'Ken Clarke may think it is acceptable to take money from the tobacco companies, but I don't. At a time when we are rightly encouraging others to invest ethically, I would have have hoped that we could set a better example.'

David Hinchliffe, Labour chairman of the House of Commons Health Select Committee, said the fund's investments were 'news to me.'

'My banking arrangements are with the Co-op Bank, which has an ethical investment policy,' Hinchliffe said. 'I find suggestions that my pension contributions are involved with tobacco companies very, very disturbing.

'I will pursue it personally with the pension fund trustees to see if we can do something about it.'

His fellow Labour MP Ann Clwyd, a persistent critic of the arms industry, said she would demand an explanation from the trustees who oversee the Parliamentary Contributory Pension Fund.

Virtually all MPs, including Tony Blair, are beneficiaries of the fund, to which they contribute 6 per cent of their £48,000 basic parliamentary salaries. The fund's managers regularly send them reports on how it is performing.

But only the trustees - a committee of eight MPs, chaired by the Tory former Cabinet Minister John MacGregor during the last Parliament - are told precisely how the money is invested.

Reports submitted to the trustees by the fund's two investment managers have now been obtained by The Observer. The first, by Cazenove Fund Managers, is dated 29 September 2000. The other, from Baring Asset Management, is dated 31 March 2001. The two firms manage more than £300 million in shares, bonds and other investments for the MPs' fund. The firms refused to comment last week, citing client confidentiality.

Following a round of infighting between Labour and Conservative fund members, the trustees finally agreed a 'socially responsible investment' policy last year. But critics such as Labour MP Tony Colman complain that this has been watered down to appease Tory trustees.

Colman, chairman of the House of Commons all-party ethical investment group, said: 'I strongly disagree with the trustees' claim that they now have an effective ethical policy. The fund retains investments in companies that do not fulfil the criteria of a normal pension fund taking account of environmental, social and ethical concerns.'

Aside from tobacco and defence companies, many of the other firms in the fund's portfolio have attracted criticism. Oil companies Shell and BP Amoco, drugs giant GlaxoSmithKline and mining groups Anglo-American and Rio Tinto are all 'bogeyman' companies to environmental activists and pressure groups.

At the end of last September the fund also held more than £600,000 worth of shares in Railtrack, which has been criticised over safety after the Hatfield and Paddington disasters.

These disclosures mean that MPs may be in an awkward position when legislating on issues affecting firms in which their fund has invested. They will, for instance, debate the Government's flagship Communications Bill: millions of pounds of their money is in such companies as BSkyB and Granada.

Vincent Cable, the Liberal Democrat trade spokesman, said a more stringent ethical pensions policy was unlikely because MPs' views differ on the idea. 'Investments should have an ethical dimension, and the MPs' fund should reflect that. But it is not practical or desirable that the pension fund should be dominated by heavily politically correct principles.'

Labour's Nick Palmer, a trustee who wants a stricter policy, said: 'The problem is that some MPs militantly oppose ethical investment.'

He added: 'I propose we split the fund in two - into an ethical fund and a non-ethical fund, and MPs will be able to choose. That would be something that would interest constituents too: whether their MP had chosen to go for the ethical fund or not.'

MacGregor, who will soon step down as chairman after retiring as an MP at the last election, defended the fund's investments. 'I think, for example, Shell and BP Amoco are on nearly every ethical investment fund.'

He did not know whether Barings or Cazenove had sold shares in any controversial firms since the ethical policy was adopted, but he pointed out that Cazenove had intervened on the fund's behalf at one company's general meeting to vote against big bonuses for directors