A £1.4 billion council pension fund has millions of pounds invested in arms and tobacco companies.

The East Sussex County Council fund has shares in BAE Systems, Imperial Tobacco and British American Tobacco (BAT).

The Argus first revealed the investments in 2002 and councillors asked the fund to consider moving its portfolio to more ethical companies.

But The Argus has learned that it has not done so and in some cases it has increased investments in some firms targeted for criticism by ethical investment campaigners.

In 2003 the fund had 46,800 shares in BAE - today it has 653,300. The arms manufacturer controversially sold Hawk aircraft to Indonesia and has done business with Saddam Hussein and ex-Chilean dictator Augusto Pinochet Meanwhile British American Tobacco makes about 900 billion cigarettes a year, controlling 16 per cent of the global market.

The East Sussex fund is one of the largest in England and Wales and its 50 members include East Sussex County Council, Brighton and Hove City Council, the University of Brighton, all five district and borough councils in East Sussex, and some schools and colleges.

Robert Brynin, director of Hove-based National Stop Smoking Centres, said: "It's about time people started seeing tobacco companies as unacceptable investments."

Two years ago Brighton and Hove Green Councillor Bill Randall proposed a notice of motion, passed by Brighton and Hove Council, to ask the fund to shift its investments.

He said: "There has to be a balance between prudent investment and ethical issues."

The fund also has £5 million invested in Rolls Royce, which has provided engines for about a quarter of the world's military aircraft, £7 million in mining company Rio Tinto, and more than £1 million in food company Nestle.

One of Britain's biggest consumer boycotts is against Swiss giant Nestle, which campaigners say markets artificial baby milk in contravention of World Health Organisation (WHO) rules. In recent years, Rio Tinto has been accused of dumping 40 tonnes of toxic waste in the OtomonaAjkaw river in West Papua.

West Sussex County Council's pension fund has jettisoned the £1.6 million worth of shares it held in Rolls Royce but still has money in Imperial Tobacco, BAT and Rio Tinto.

A spokesman for East Sussex County Council said: "The aim of the pension fund is to generate returns, within a reasonable level of risk, to help support the local government pension scheme liabilities falling on the individual employers in the fund and the consequent impact on the council taxpayer."

A spokeswoman for West Sussex County Council said fund managers are asked to consider the effects of social, environmental and ethical issues but their primary objective is the fund's long-term return.