SURREY County Council’s spending priorities and service cutbacks have come under fresh scrutiny after it was revealed the council’s pension fund has more than £27 million 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 £1 billion in properties outside the county and hand a £400,000 grant to the Watts art gallery - while agreeing to slash Housing Related Support by £3.7m for some of Surrey’s most vulnerable people.

The revelation that the Surrey Local Government Pension Fund, of which the county council acts as administrator, holds investments of between £200,000 and £12m 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 confession, said in response: “It beggar’s belief that on its website Surrey is publicising the STOPtober campaign for people to quit smoking and yet at the same time, they’re milking investments in dodgy tobacco firms. This has got to change.”

Surrey leader David Hodge, in his statement to council, earlier highlighted the “depressing” state of the council’s finances, commenting that Surrey faces a £21m budget overspend this year as a result of “massive funding reductions” from central government amid rising demand for services.

“Seventy pence of every £1 in our budget is spent on adult and children’s services, and these services are facing huge demand pressures,” Mr Hodge told members. That just leaves 30 per cent of our budget to deliver every other services like highways, waste and libraries.”

Later defending the council’s plans to invest more than £1 billion in commercial property outside of Surrey, the county council’s cabinet member for property and business services Tim Oliver added it is hoped this will raise an additional £10m income for the council annually by 2020/21 to help provide key services.

However, with a maximum return of just two per cent anticipated, opposition councillors have questioned whether the strategy is worth the risk and have criticised the council’s cabinet for not consulting members before adopting the plans.

Hazel Watson, leader of Surrey’s Lib Dems group, raised her concerns in a motion calling on Surrey to cease further commercial property investment outside of the county - but saw her motion defeated with 20 votes for, 46 against and one abstention.

A further motion, by Residents Association councillor Eber Kington, called on the leader and cabinet to re-assess their spending and cost-reduction plans through all-member and cross-political group discussions - but was also defeated, albeit by just three votes.

The council’s Lib Dems group also condemned a decision by Surrey’s leader to award a £400,000 grant to the Watts Gallery in Compton, despite a warning by the council’s chief financial officer that Surrey’s financial position is extremely serious and that the gallery was already “financially viable”.

Penny Rivers, Lib Dem councillor for Godalming North, said: “Just last week, the Tory cabinet voted to cut Housing Related Support by £3.7m 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.”

• Waverley Borough Council will lose £176,000 towards its warden supported sheltered housing schemes, including three in Farnham, as a result of Surrey axing its grant.

At Waverley executive on Tuesday last week, 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.