Exclusive: Oil spill will worsen pension crisis

The region's four taxpayer-funded schemes, which handle the

contributions and payments for ex-council, court and police authority staff, all have substantial sums invested in BP, which has seen its stock market value tumble by nearly a quarter since the devastating explosion last month.

The blast killed 11 people and generated the worst oil spill in US history. The funds have seen their investment in BP plunge by an estimated 78.53m because of the oil well blow-out in the Gulf of Mexico on April 20. The explosion was BP's third disaster in five years – wiping out most of the stock market recovery it has enjoyed since the financial crisis.

BP faces a soaring clean-up bill, currently standing at $930m (643m), and last week President Barack Obama vowed to make it "pay every dime they owe for the damage they've done".

BP shares closed at 494.8p for the holiday weekend, a 24.5 per cent

drop since the day of the disaster.

The fall piles more pressure on deficits in Yorkshire local government pension schemes, which have ballooned over the last decade because of an ageing population and risks the survival of the final salary schemes.

West Yorkshire Pension Fund had 197m invested in BP, according to figures in last year's annual report, which would mean its investment has sunk 45m over the last five-and-a-half weeks.

The region's other funds have also suffered. South Yorkshire has admitted the value of its BP stock is down by more than 17m while East Riding's investment is estimated to be down by more than 11m.

North Yorkshire's thought to be down by more than 1m.

Last night campaigners called for urgent action. Chief executive of the TaxPayers' Alliance Matthew Elliott said: "The pension funds must move quickly to make up the loss. The pensions black hole in Yorkshire is only part of the catastrophe, with a 53bn deficit in UK local government pensions.

"The real problem is that no matter how well the stock market performs, council pensions urgently need to be reformed.

"We'd support a freeze on existing local entitlements at their current level and an increase in employee contributions."

Ros Altmann, former advisor on pensions to Tony Blair, said that

although BP paid good dividends, there was a great risk in

concentrating too much money in one place.

"Share prices can be volatile and BP may recover, but clearly the important message is do not rely too much on any one investment, even if it seems really strong and safe, as unforeseen circumstances can really hit your portfolio hard. Remember Marconi? Or the banks?"

The funds insist they are being managed over the long term and that BP is only a small part of their portfolio.

A spokesman for the North Yorkshire fund said: "The impact on the fund as a whole has been negligible. It continues to rely on specialist investment managers to invest in companies with good long-term prospects, and on their ability to navigate through difficult times."

East Riding said: "While there has been a recent fall in the value of BP's share price...we would expect the price to recover in the longer term.

"As with any other investment we will keep the situation under review."

South Yorkshire said BP's closing price on the day of the disaster was a six-month high while West Yorkshire, which is six years into a 25-year plan to address its deficit, said no-one was available to comment.