British politicians are investing millions of pounds in companies involved in activities ranging from weapons making to tobacco.
The parliamentary pension fund, which includes Tony Blair among its members, has retained the controversial shareholdings despite agreeing recently to switch to an 'ethical investment' policy.
All MPs contribute 6 per cent of their parliamentary salaries to the £300 million fund, but have not been told how its managers, City firms Barings and Cazenove, invest their money.
But confidential papers seen by The Observer reveal that the fund's portfolio includes substantial shareholdings in corporations such as:
* Gallaher and Imperial Tobacco, Britain's largest cigarette firms and makers of Silk Cut and Lambert & Butler (£2 million worth of shares);
* BAe Systems, criticised for exporting arms to Indonesia and other repressive regimes, and for seeking contracts from the US 'Son of Star Wars' missile system (£800,000);
* BP Amoco, the oil giant accused of making excessive profits at home and under fire because of its involvement in occupied Tibet (£9 million);
* Shell, targeted by environmental campaigners and facing claims of human rights violations in Nigeria (£2.5 million).
Additional multi-million-pound investments have been made in drugs companies lambasted for their reluctance to make medicines cheaply available in poor coun tries, and mining firms allegedly involved in 'conflict diamonds'.
The fund also holds shares in Railtrack, which has seen its share price battered in the wake of the Hatfield and Paddington train disasters.
Last night MPs and pressure groups reacted with fury to the dis closures. David Hinchliffe, chairman of the House of Commons health select committee and a critic of tobacco companies, said the shareholdings were 'very, very disturbing'.
He added: 'I am very uneasy about any involvement with a fund which gains profits from compa nies like these. A large number of MPs will feel the same way.
'I would hope that, now this information has come to light, there will be steps taken to withdraw from such companies.'
Hinchliffe and fellow Labour MP Ann Clwyd, a longtime critic of the arms industry, said they would write to the pension fund trustees demanding an explanation.
Martin Salter MP, who has called for a 'windfall tax' on oil company profits, said: 'The idea that my hard-earned pension money may be contributing to these companies leaves a pretty unpleasant taste in the mouth.'
Greenpeace, Friends of the Earth, Global Witness and other groups also condemned the shareholdings yesterday.
A spokesman for Campaign Against the Arms Trade, which persuaded the Church of England to disinvest from arms firms, called the investments 'deplorable'. He added: 'We call upon all MPs to realise their inadvertent error and divest immediately.'
Clive Bates, director of Action on Smoking and Health, said: 'MPs should want to have their money managed in funds associated with health, welfare and the other things that people go into Parliament for, rather than in peddling tobacco.'
The shareholdings appear to fly in the face of the Government's pension policy. It introduced new rules last year forcing pension funds to reveal how much social, environmental or ethical considerations govern their investment decisions.
The board of trustees of the parliamentary pension fund, which comprises eight MPs, last year instructed Barings and Cazenove to follow 'socially responsible investment' guidelines.
But the guidelines did not insist on divestments from tobacco companies and arms manufacturers and were a compromise between Labour and Conservative board members.
John MacGregor, the former Tory Transport Minister and outgoing chairman of the trustees, defended the fund's portfolio. 'I think, for example, Shell and BP Amoco are on nearly every ethical investment fund,' he said.
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