Tesco hit with interest bill after losing £400k schools cost appeal

Supermarket giant Tesco has lost a bid to avoid paying interest on a £400,000 overdue payment towards new schools in East Lothian.

The retail chain had repeatedly argued it should not pay the developer fee, which was agreed 13 years ago, because it relates to a Musselburgh housing plan it is no longer involved in.

But after an appeal to Scottish Ministers failed to release the company from the education contribution, it asked instead that the due date for payment was moved forward to avoid backdated interest.

Now the Scottish Government reporter has thrown out their request, ruling that the council’s demand for interest to date back to when the money was due in August 2019 was not unreasonable.

And in his ruling, the reporter dismissed Tesco’s claim that having handed over the right to build houses on the site to a third party it was no longer part of the original 13-year-old plans for the land at Inveresk.

He told the firm: “Whatever the reasoning at the time for the appellants to agree to make the education contribution, it was made as part of the collective basis on which the consent was considered and granted.

“The appellants secured benefit from that 2008 consent. They built out and currently operate a retail store on part of the planning permission site.”

Tesco had argued the plans for the land were not the same as the one it signed up to originally and since it had no control over whether the number of houses the education contribution was based on would ever be built, it should not pay until the work was complete.

However the original agreement called for payment when construction began which was on August 26, 2019.

The chain told the reporter: “Tesco does not consider that the council or the developer have acted in a fair and reasonable manner throughout this process in consistently making sure that Tesco remains the party due to make the education payment.”

The contested site at Tesco’s former Olivebank store, in the town, was originally given planning permission for housing 15 years ago along with a new supermarket and care home.

Tesco handed over the housing development rights to a third party and went on to build the new store on adjoining land.

Despite this the council said it was still liable for the education contribution, refusing to pass it on to the new housing developer.

East Lothian Council argued Tesco was getting off lightly after the deal over the land at its former store site at Olivebank, Musselburgh, was signed 15 years ago.

It said if a similar deal was struck today the contribution request would be closer to £700,000.

Rejecting Tesco’s call for a delay to the payment due date, the reporter pointed out there was a clause in the agreement that meant if the houses built fell short of the amount they had been charged for, East Lothian Council would refund additional money paid.

And he said early payment of developer contributions was important in allowing infrastructure to be built alongside housing.

He said that paying the contribution on completion could mean “the advantages of forward planning may be lost”.

Ruling against the request to delay payment, the reporter said: “I consider that the current planning obligation is reasonable.”

East Lothian Council is expected to apply interest to the overdue payment at 4% above the Bank of Scotland rate.

A spokesperson for Tesco said: “We are reviewing the decision.”

By local democracy reporter Marie Sharp