Your problem is the lack of entity-decoding in line 17 of your program.

This works:

use strictures;
use HTML::Entities qw(decode_entities);
use XML::LibXML qw();

my $xml = XML::LibXML->load_xml(string => <<'XML');
<root>
<NODE id="431" text="&lt;P align=&amp;quot;left&amp;quot;&gt;Non-mortg
+age&amp;amp;nbsp;debts is yes&lt;/P&gt;" type="DataInput" contextstri
+ng="OtherPriorityDebts" group    next="True" branchValue="Yes" dataDe
+faultV="Yes" dataVisible="False" />
</root>
XML

for my $node ($xml->findnodes('//NODE')) {
    my $text = $node->getAttribute('text');
    # <P align=&quot;left&quot;>Non-mortgage&amp;nbsp;debts is yes</P>
    my $html = decode_entities $text;
    # <P align="left">Non-mortgage&nbsp;debts is yes</P>
}
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