CRITICS last night rounded on a Suffolk council after it emerged it had agreed a secret loan to a London-based cinema firm.

St Edmundsbury Borough Council has refused to state how much the loan, which will be paid to City Screen, is worth because it was agreed in private.

The council said it had been approached by the firm for the money because “banks and commercial investors are unlikely to invest in a venture with such marginal expected returns”.

The loan, which will be used for works at the Abbeygate Picture House in Bury St Edmunds, has been agreed in principle.

The council, which said it was carrying out further security checks before paying out, defended its move claiming it would boost a “leisure facility” and earn a good rate of interest.

Independent council members, however, say the authority is wrong to act as a bank and to offer loans to private businesses.

Trevor Beckwith, Independent councillor for Moreton Hall, said: “The council shouldn’t be operating as a bank.

“We are seeing one end of the county saying they’ve got no money and are having to gid rid of all services and other councils giving out loans to businesses. It is a disaster.

“It doesn’t make sense to me.”

David Nettleton, Independent member for Risbygate, criticised the authority both for agreeing the loan and for dealing with the matter behind closed doors.

“This is public money,” he said. “It should have been dealt with in public.”

Fellow independent Derek Redhead said: “The council is not a bank. We have asked a few questions about this.”

He said he had received very few details about the nature of the loan from the council which had made it difficult to form an opinion as to whether it was a good idea.

A spokeswoman for the council said: “Picturehouse Cinema approached the borough council for a loan to support the next phase of their development in Hatter Street.

“We carried out extensive financial investigations into the company and the group it belongs to, including security available.

“As a result the council formally approved a loan, subject to confirming the security.

“The loan, if confirmed, is provided under the council’s wellbeing powers, as set out in the Local Government Act 2000 which states that a council ‘can do anything which they consider is likely to achieve the promotion or improvement of the economic, social or environmental wellbeing of their area’.

“It is also at a rate significantly higher than the council receives in interest from our savings, so council tax payers benefit both from the support of a local leisure facility and through a higher interest rate.”

Gabriel Swartland, of City Screen Limited in London, said: “We think the borough council is an incredibly enlightened council and they can understand the need to place the arts at the centre of developments.”

He declined to state how much the loan was for, but did say: “They are providing less than a fifth of the cost of the project. The council will be helping to ensure the town centre remains the town centre.”