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A LOCAL councillor has hit out at the Government’s plans to stop councils withdrawing pension fund investments from companies they deem unethical.
Leader of Frome Town Council, Peter Macfadyen, has described plans to stop disinvestment as ‘draconian’ and ‘undemocratic’.
The proposal could see councils’ pension funds banned from withdrawing investments or boycotting companies on ethical or political grounds. This could mean councils are forced to keep their money invested in fossil fuel, arms and tobacco companies.
Cllr Macfadyen said, “The plans are draconian legislation which ignores the views of the community, and the LGPS (Local Government Pension Scheme) will be placed in areas of constant conflict.
“The town council invests money ethically – avoiding companies that invest in arms or tobacco for example – and we believe we should be able to make these decisions without interference from central government.
“The UK has a long and proud tradition of councils acting democratically to take investment decisions that represent the views of the local community.
“In recent years, dozens of local councils have passed motions to adopt fair trade principles and disinvest from fossil fuel companies, tobacco companies and the arms trade.
“These new proposals place the UK and the LGPS on the wrong side of history. They are undemocratic and are completely at odds with any plans for devolution.
“By restricting the ability of local councils to divest from companies operating in violation of international law, we are also gravely concerned the government may find itself in breach of these international standards.
“It is noted that no other government in the EU places this kind of restriction on local councils, and that in the Coalition when the LGPS reforms were made, we were informed that there would be no more changes for 25 years. We haven’t had 25 months yet and already we are seeing large scale changes to the LGPS. This has to cease.”
Employees of Frome Town Council are members of Somerset County Council’s pension scheme, so cannot control those investments directly, but can lobby for changes.
Mendip district councillor for Frome, Shane Collins, recently called on Somerset to disinvest its pension fund from fossil fuel investments. He revealed that the council holds over £121million in companies such as Shell and BP; investments he described as being part of a ‘risky and polluting’ industry.
Cllr Macfadyen noted that as well as being ethically dividing, investing in fossil fuels and tobacco would be a bad financial decision in the long term.
He continued, “The value of funds disinvesting in fossil fuels has soared to $2.6trillion in a year, and yet if these proposals were adopted, LGPS funds would legally have to keep staff members’ contributions in such investments.
“This would be disastrous on the valuation of pension funds, which are already under great strain. There is already a strong ethical and financial case for local councils to disinvest from fossil fuels and to reinvest into infrastructure fit for the 21st century.”