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Comment: tobacco may be profitable, but surely the only way is ethics
Hertfordshire County Council is currently in the throes of attempting to kick a bad habit: Tobacco. Well, investing in tobacco shares to be precise.
It emerged this week the authority’s pension fund has made around £20 million from funnelling cash into cigarette giants, such as British American Tobacco, in the last decade.
But despite the mounds of wonga this strategy is raking in, the council is clearly not completely at ease with its tobacco holdings. Ruling councillors have ordered a review of the investments and asked financial consultants to look into the possibility of switching to a more “ethical” approach to managing its pension fund.
This may have something to do with its newly-acquired role as Hertfordshire’s public health authority which has the job of getting people to live healthier lives – which includes running the county’s stop smoking services. If you want to be stickler for appearances, this does not seem to be the most joined up policy approach in the history of local government. At the moment the council is the equivalent of a taxpayer-funded nutritionist-cum-personal trainer who spends their working day haranguing the unhealthy denizens of Hertfordshire to shape-up but then chain smokes in their personal time.
However, although the council may be having second thoughts about its tobacco shares, the money men are not convinced. The problem is tobacco is lucrative. According to the council’s financial consultant, Mercer, tobacco companies are “relatively stable and very cash generative businesses able to withstand recessionary downturns much better than most.” Reading between the jargon, it would seem that an industry based on addiction is a sound bet investment-wise. It has a loyal customer base that won’t be put off by a little financial misfortune.
Also, as a quickly addictive pastime, smoking will always have fantastic potential for market growth. It just makes financial sense.
Likewise, Mercer was unable to find any “robust supporting evidence” that “ethically-based investment funds” could generated as much cash ones “with no such biases” – i.e. ethics are expensive.
Clearly the council knows what best for its political heath. It has to quit. But it’s tough. At least when smokers think about quitting there are reams of literature at hand to tell about all the hideous ailments their habit with give them. But when the council asks experts for advice all they get is spiel about how good tobacco is for their financial health. And it’s not like there are financial patches or placebo investments available for the council can use as a crutch during this difficult period.
If it is going to beat this fiscal foible it will have to do it cold turkey. Either way it is going to have to make a choice, as it is currently in the absurd position of actively trying to undermine an industry in which it invests. Does British American Tobacco know one of its shareholders is dedicating thousands of pounds to reducing its customer base?
More importantly, why should smokers in Hertfordshire take any heed of the council’s exhortations for them to give up if it cannot overcome its own dependency on tobacco.