SURREY County Council’s spending priorities and service cutbacks came under fresh scrutiny after it was revealed the council’s pension fund has more than £27million invested in tobacco companies.

In a fiery full council meeting at County Hall, in Kingston, the council’s Tory administration was also grilled on plans to invest more than £1billion in properties outside the county and hand a £400,000 grant to the Watts Gallery in Compton, while agreeing to slash Housing Related Support by £3.7million for some of Surrey’s most vulnerable people.

The revelation that the Surrey Local Government Pension Fund, which the council administrates, holds investments of between £200,000 and £12million in five tobacco firms, comes amid pressure on UK local authorities to divest all their shares in the tobacco industry.

Labour councillor Robert Evans, whose question prompted the admission, said: “I’m alarmed the council still has £27million tied up in tobacco companies and I’m sure Surrey’s cabinet member for property and business services Tim Oliver would agree it sends all the wrong messages to young people and others who are trying to quit smoking.”

Surrey leader David Hodge highlighted in his statement the “depressing” state of the council’s finances, commenting that it faced a £21million budget overspend in the current financial year as a result of “massive funding reductions” by central government amid rising demand for services.

Defending the council’s plans to invest more than £1billion in commercial property outside Surrey, Mr Oliver said it was hoped this would raise an additional £10million income for the council annually by 2020/21 to help provide key services.

Lib Dems group leader Hazel Watson put forward a motion calling on the council to cease further commercial property investment outside of the county, but it was defeated.

Lib Dem councillor Penny Rivers (Godalming North) said: “At a time of huge spending cuts in Surrey, it is quite incredible the priority of the Conservatives is to spend hundreds of thousands of pounds on an art gallery which appears to be in good financial health and well-supported.

“Just last week, the Tory cabinet voted to cut housing related support by £3.7million to some of the most vulnerable people in our community.“

“The leader of the council undermines his own case for better funding from the Government if he thinks that these spending priorities are sensible and in the best interests of Surrey residents. How on earth can he look residents of sheltered housing in the face who are about to lose some of their warden schemes and tell them that this is a sensible use of public money?

“This decision should be reversed as quickly as possible, with the money re-invested in council services to the benefit of Surrey residents."

• Waverley Borough Council will lose £176,000 towards its warden supported sheltered housing schemes, including Rolston, Haslemere, as a result of the county council axing its grant.

At Waverley executive on Tuesday, members agreed to write to the Prime Minister and the Communities Secretary protesting about the impact of central government funding cuts on services for older people.