GUARDIAN (London) Monday July 5, 1999

Labour was forced on to the defensive yesterday after it emerged that
millions of pounds from the party's pension fund have been invested in
companies that produce genetically modified foods and tobacco.

A spokesman insisted that the party had no qualms about such investments
because managers of Labour's 30m fund pension are under an obligation to
secure the best returns from the market.

But the disclosures came as an embarrassment to ministers who are
struggling to calm public fears over GM foods and who are spending
millions warning of the dangers of smoking.

Labour defended its investments yesterday after it emerged that the City
firm Phillips and Drew fund management has ploughed substantial amounts of
the party's pension fund into companies which have been the focus of
protests.

They are GM food conglomerates Novartis and AstraZeneca, and five of the
world's leading tobacco firms, including BAT, Imperial and Seita of
France.

The investments were made possible two years ago when the party relaxed
its guidelines on how funds in the Labour party superannuation society,
which provides pensions for 600 party workers, could be invested.

A party spokesman said yesterday that there was nothing wrong with the
investments. "In common with many funds, the trustees have chosen to
delegate management of the fund, in this case to Phillips and Drew.

"They have an enviable record in harrying firms about unethical policies,"
he said. "But they are obliged to get the best return for the fund.

"You cannot place tight restrictions on such investments."

The spokesman added that the government's position on GM food - to press
ahead with research because of the potential benefits - was well known.
"The idea that we should be embarrassed about investing in companies with
a stake in GM foods is ridiculous," he said.

However, the disclosure has come at an awkward moment for the government.

Only last week Stephen Timms, the pensions minister, unveiled new rules
which will force all occupational pension schemes to state their position
on social, environmental and ethical investment.

The government hopes to discourage investment in firms that cause damage
to the environment.

Mr Timms said: "Ordinary people want to know what is being done with the
money invested on their behalf."

AstraZeneca leads the market in producing GM tomatoes. Novartis produces
GM maize.