State nets 24m windfall from tobacco shares

HEALTH Minister Micheál Martin has been forced into an embarrassing climbdown in his attempts to stop investment of taxpayer’s money in cigarette companies.

With the ban on smoking just weeks away, it is estimated the Government’s shares in tobacco firms increased in value to 24 million in 2003.

Mr Martin told the Irish Examiner last year he was not happy about the State pension fund’s ownership of tobacco shares and would make his objections known to the fund managers.

But instead of stopping the investments, the value of the Government’s 17 million cigarette portfolio rose by an estimated 7 million in 2003.

Up to 7,500 people die from smoking each year and the treatment of tobacco-related illnesses has cost the State between €500m and €2bn, Department of Health figures say.

Yet according to the Minister for Health’s spokesperson, Minister Martin now accepts the State pension fund managers, the National Pensions Reserve Fund, operate entirely independently and so it is up to them to decide the shares to be purchased.

“The Minister for Finance made it clear that the pension fund managers are independent and outside of the political system ... therefore it wouldn’t be appropriate for any interference or to make any requests or suggestions to them,” the spokesperson said.

The stock portfolio of the fund, set up by Minister for Finance Charlie McCreevy, includes tobacco firms, arms manufacturers and oil conglomerates.

While announcing a 1 billion gain on its overall stock market dealings in 2003 on New Year’s Eve, the NPRF defended its investment in so-called unethical companies.

The NPRF will not reveal the exact amounts of shares it holds in companies until mid-year, but in 2003 it invested a further 2.7 billion on the stock market The rate of return on tobacco industry shares was well ahead of the average increase of 17% on all shares held by the fund.

The value of shares in Philip Morris, makers of Marlboro cigarettes, rose 43% in 2003, shares in British American Tobacco, which makes Benson & Hedges and John Player rose 49% and shares in Imperial Tobacco, which makes Regal and Embassy rose 23%.

Add a healthy dividend on shares from these companies and cigarette shares were a sound investment.

The pension fund, now worth 9.5 billion, is directed by Minister McCreevy to merely invest in ways that will deliver the best return and not to get involved in ethical decisions. The NPRF hires fund managers to invest in shares on its behalf and now owns 6.9 billion worth of shares in 1,286 companies.

Explaining the investment policies, NPRF director John Corrigan said the top US tobacco company did more than make cigarettes and said investments are not made on the basis of a company’s activities, but rather on its performance. ”Philip Morris you would identify as a tobacco company but ... they actually get almost half their earnings from the food industry. .“Just putting a tag on a particular company, it doesn’t facilitate the making of a decision really,” he said.