Page "Interest rate swap" Paragraph 31

By January 1989 the commission obtained legal opinions from two Queen's Counsel.

Although they did not agree, the commission preferred the opinion which made it ultra vires for councils to engage in interest rate swaps.

Moreover interest rates had gone up from 8 % to 15 %.

The auditor and the commission then went to court and had the contracts declared illegal ( appeals all the way up to the House of Lords failed ); the five banks involved lost millions of pounds.

Many other local authorities had been engaging in interest rate swaps in the 1980s, although Hammersmith was unusual in betting all one way.