Jon Rouse: an alchemist who turned property into debts

Mickey MouseCROYDON COMMENTARY: Former councillor ANDREW PELLING reviews the career of the borough CEO, who last week announced his resignation after almost six years in the job, and suggests that his promised financial wizardry was all a bit Mickey Mouse

Since 1937, Croydon Council has had just six chief executives or town clerks, as they used to be known in pounds, shillings and pence days.

These officials’ longevity of office has been a strength for Croydon.

They may not have been as high-profile as some of the council leaders such as Peter Bowness, but a strong and influential unelected town clerk/chief executive has long been more the norm rather than the exception in Croydon’s political culture.

Ernest Taberner, Alan Blakemore and David Wechsler were all in this tradition, as is the departing Jon Rouse.

It’s true that Rouse lacked Wechsler’s worldly wise diplomacy. Rouse’s notorious abrasiveness worked against good man management and it proved terminal in terms of any hopes of Nestle, for 40 years the borough’s largest private employers, opting to stay in Croydon. Nevertheless, like previous town clerks, Rouse ran the town and had some pet projects he was determined to try to deliver.

Taberner’s 26 years in office took Croydon through the war and on to commercial success driven by a determined planning regime. Alan Blakemore meshed Purley and Coulsdon together into Croydon and put the enlarged borough’s business interests first – running a council with low taxes, high prosperity and better-than-average services. Wechsler, first as deputy and then for 14 years as chief executive, got the Clocktower and Tramlink for the town.

What will we regard as Rouse’s legacy?

David Wechsler: Rouse's predecessor as Croydon CEO, he worked at the council for 37 years until 2007

David Wechsler: Rouse’s predecessor as Croydon CEO

Wechsler had spent 37 years working on the council by the time of his retirement in 2007. On the day that Wechsler began his Croydon career, Rouse was just a one-year-old.

Born in Yorkshire, the son of a social worker, Rouse’s grandfather had been awarded the OBE for his work on immigration. “It rubs off on you,” Rouse told The Guardian newspaper when, in 2001, it identified him as a “rising star” of the public sector. “I have strong views on the ethos of the public sector and not having to do something for a profit.”

When he was appointed by Croydon at the unusually youthful age for a local authority CEO of 38, “rising star” Rouse arrived with three high-flyer jobs behind him already, including being a minister’s private secretary at the environment department, as well as running the Housing Corporation – a government agency that tries to deliver affordable housing – and heading up the Commission for Architecture and Built Environment. Rouse was widely acknowledged as the principal author of Lord Rogers’s 1999 task force report on urban design and regeneration.

It is a bitter irony then that, after nearly six years at the helm at Taberner House as one of the best-paid local authority executives in England, Rouse is leaving Croydon without having made any, for want of a better word, concrete progress on the town’s regeneration.

In most respects, Rouse has in fact had quite the opposite effect, except for a monument to council self-importance on CostYouAMint Walk, while since he has been in charge, the borough has moved towards its greatest housing crisis since Blitzed London at end of the Second World War.

According to some councillors, Rouse on his arrival confided that he saw himself in the role of a London borough CEO for no longer than five years. Croydon was only ever a stepping stone to bigger and better things for him.

Indeed, the job at the Department of Health that Rouse is moving to is a senior one. He will fill a position vacated by the new chief executive of the Care Quality Commission. Rouse will be among the top six civil servants at the department.

It’s good to see Rouse’s career back on track after an unfortunate trip into local government that might have permanently off-roaded his fast track career into the quagmire of petty, brutish council politics, where he was thrown into managing cuts and working with a weak local economy which was left waiting far too long for an economic upturn to deliver Rouse’s hopes of a regeneration.

Having the Croydon experience on the CV was a useful box ticked for his new Department of Health role that includes overseeing the department’s relationship with local government across all of health and care.

In welcoming Rouse to the department, the Permanent Secretary Una O’Brien made mention of Rouse’s local government experience as a basis for his appointment. “He will bring a wealth of experience from national and local government and the world of housing to the role,” she said.

Jon Rouse: what will be remembered as the legacy of his near six years at Croydon?

Jon Rouse: what will be remembered as the legacy of his near six years at Croydon?

What was left unsaid was that as a borough CEO in a hurry, Rouse fancied himself as a financial alchemist. There was not the time, as Wechsler did as he played the long-game over more than a decade to build a library and arts complex, to squirrel away money.

Rouse came to Croydon more like an entrepreneur or an investment banker in his inventive approach in trying to solve the borough’s ever growing problems. He wanted to dash to success by capturing for the council the financial value of planning permissions it could award itself while working with a private equity player, John Laing (owned by Henderson Private Equity).

Councillors “transfixed” by financial wizardry

Rouse and Laing drew up an agreement, the full details of which have remained secret to this day. Under this near-half-billion-pound deal, it is understood that Rouse gave Laing exclusive development rights through a “special purpose vehicle”, set up as a joint venture company between the property developer and the council. Buildings owned by the council and other properties to be purchased by the council would be put into the joint venture funded by the private equity player. The council would rubber-stamp the required planning permissions, and new council facilities and huge amounts of money could be made as a result.

It seemed such a wizard idea at the time, a much better way of capturing money for a financially hard-pressed council than uncertain Section 106 agreements with private developers.

And Rouse had his past record at the Housing Corporation to call upon. The booming financial markets of the early years of this century, with their easy flow of credit, had seen the Housing Corporation bring substantial private finance into social housing. Surely, Rouse was the man to bring the benefits of financial engineering to Croydon?

So transfixed were councillors by this financial magic, they even came to believe that their new council HQ would be built for free. Croydon Council under Rouse could now turn lead into gold.

But the economics of the joint venture were flawed, especially as it was launched into the gale of the global economic downturn. The joint venture was left so ravenous for extra properties that the private equity builder was eventually given the contract to run libraries in Croydon.

Ultimately, councillors were forced to admit that it was all too good to be true and that the House that Rouse built, the new HQ, would cost the people of Croydon £140 million. At least.

What little detail about the contract with Laing that has been allowed into the public domain demonstrates that all this financial wizardry was little more than playing the property market with Council Tax-payers’ money.

Rouse had been working in Taberner House for just over a year when, as part of the joint venture CCURV scheme, in September 2008, at the top of the commercial property market, he splashed out £19 million of public money for Davis House.

On September 15, 2008, merchant bank Lehman Brothers filed for Chapter 11 bankruptcy protection in the United States.

Once the global financial crash came, Croydon’s private equity partner was unable to raise cash. Instead, the council had to take on extra debt to fund the projects.

Artists' drawings of the new council buildings - the House that Rouse built

Artists’ drawings of the new council buildings – the House that Rouse built

Let’s hope that, a bit like bankers’ bonuses these, post-crash days, there will be an understanding that Croydon can be a claw back of some of Rouse’s £248,000 a year “package” if the contracts relating to the property speculation and the associated town hall and its running costs prove to be financially punitive for Council Tax-payers.

The House that Rouse built has been given the formal name “Bernard Weatherill House”. This seems entirely inappropriate as Jack Weatherill, Croydon North East’s MP, went out of his way to avoid partisan politics as Speaker of the Commons. The building’s financing is so controversial that Labour say that they will boycott any champagne reception at its opening.

A leaden burden on Croydon Council Tax-payers

Maybe this would have all worked out differently if the cheap credit in the economy had kept flowing, but there is no way that Rouse’s career could wait for a delayed economic upturn that was needed to provide the chance for the council to play a regeneration role based on property speculation.

The financial alchemy that Rouse had tried, now turning to a leaden burden on Croydon Council Tax-payers, was called a “local asset backed vehicle”, or LABV, by Laing. In LABVs councils would commit land while the private sector side of the joint venture would provide the financing, and eventually the profits would be shared. But in Croydon, the council ended up providing both the land and much of the financing, lending on the money which it had to borrow to the joint venture. The rate charged was a naively low one.

Croydon seems to be one of the last local authorities to persist with such a wizard scheme. An LABV agreement between Laings and Royal Tunbridge Wells has been scrapped and only just last week, as reported by Inside Croydon, Laing said it would not get involved in any new LABVs, such was the flawed nature of the scheme outside any economic environment other than a property boom.

Rouse’s repairing of the relationship with Stanhope after the Council’s efforts to confiscate their land at East Croydon for an Arena development was a positive and would have been even more significant if the economy was strong enough to see Stanhope get round to putting its planned mixed use development there.

But Rouse’s determination to build a new Council HQ that Croydon would eventually own after a 25-year lease was a serious error, as the council instead could have been the anchor tenant at Ruskin Square, pump-priming Stanhope’s development at East Croydon.

Rouse believed that the Council HQ would be regenerative itself. That has turned out not to be the case.

Could council leader Mike Fisher be truste to run the borough without a CEO?

Could council leader Mike Fisher be truste to run the borough without a CEO?

And even Rouse has admitted, in what turned out to be a valedictory interview with a Redhill-based newspaper, that he will be leaving Croydon with a housing crisis on its hands. Indeed, Rouse predicts that come April, when the government imposes a benefits cap on the borough’s poor and homeless, the crisis will be made worse: “Unless there is a very rapid economic recovery, which leads to a significant fall in joblessness, then the likelihood is that homeless numbers are going to get worse before they get better,” Rouse told the Sadvertiser.

It is a sad contradiction that the council can build itself a new Council HQ but not house properly its needy, the vulnerable and even small children.

Yet the council run by Rouse has been dismissive of adverse findings on its housing policy from the Local Government Ombudsman. On Rouse’s watch, transparency – something of which he used to speak highly when a “rising star” – was traduced, as it became almost a council policy only to respond to public enquiries at the last moment, often on the 20th working day after the enquiry was made, the maximum time span allowed under the law.

While Rouse was in charge, some Croydon spending was channelled through consultants with the council stating that they would not account for spending of public money channelled in this way. Staff numbers have been slimmed but many have been made redundant and then re-employed on lower salaries, or taken off the council’s headcount as they have been transferred on reduced wages to private companies who have had services outsourced to them.

Under Rouse the council performed well in the days after the 8/8 riots but the whereabouts of the chief executive on the late afternoon ahead of the riots remains a mystery and the failure of Croydon Council to place a timely call for police protection had tragic consequences.

Rouse’s relationship with elected councillors has been an interesting one. Some Labour councillors feel that his means of operation were foreign to the need to genuflect occasionally to the democratic process in local government. It was certainly peculiar to see the chief executive rule that elected politicians could not read the paperwork to which he and his staff had access, and for him to state in public before councillors debated the proposed incinerator that they would be taken to court if they let slip any confidential information.

Maybe the power of council staff over elected politicians went too far under Rouse. Now perhaps, the departure of the CEO provides an opportunity for Rouse’s philosophy of reducing the number of highly paid senior staff to be taken to its ultimate conclusion and to abolish the role of chief executive and thus re-enfranchise the councillors.

Other councils have been abolishing the chief executive role. With a cabinet-run council, which in Croydon’s case costs £500,000 a year for the 10 Cabinet councillors’ allowances  and national insurance, the elected councillors ought to fulfil the executive role backed by a strong financial officer.

The leader of the council, Mike Fisher, might have to change his mind, though, that his £53,223 a year “salary” does not require him to put in fixed hours of work in the job.

  • Here’s an allegorical version of how alchemy and wizardry doesn’t always work. In fact, sometimes it turns out to be a bit Mickey Mouse:
  • Inside Croydon: For comment and analysis about Croydon, from inside Croydon
  • Post your comments on this article below. If you have a news story about life in or around Croydon, a residents’ or business association or local event, please email us with full details at inside.croydon@btinternet.com
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About insidecroydon

News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com
This entry was posted in Council Tax, Croydon Council, Jon Rouse, Mike Fisher, Planning, Property, Ruskin Square, URV and tagged , , , , . Bookmark the permalink.

4 Responses to Jon Rouse: an alchemist who turned property into debts

  1. Rouse acted like he was the unelected leader of a dictatorship, he was blatantly political and had no time for Councillors or their role as representatives of the public. Secrecy and absence of consultation / transparency have always been his position (He was previously CEO of CABE which was criticised by parliament on these grounds). It is absolutely essential that Councillors reassert their role and rights to represent their electorate. Now the leader of the bad-apples has gone there are some of his closest followers that need to be got rid of too. At least he did one good thing . . . he went before the next Labour Council had to pay him off to get rid of him!

    Like

  2. mraemiller says:

    I wanted to comment on this article only to say it is seldom one reads anything so magnificently comprehensive. Much of it has been sais before but Pelling does a neat job of joining so many dots together.

    Like

  3. Jim Lennon says:

    Surely it is good that Laing is not going to bid on any more schemes such as the one done with Croydon and that it can’t get out of the Croydon one.

    This suggest that Laing are not making any money out of it which is surely good news for Croydon taxpayers?!

    The article slings mud by inuendo at John Rouse without providing any evidence of wrong doing or quantifying an supposed losses. More information and analysis (free of political bias) is needed please!

    Like

    • “Surely it is good that Laing is not going to bid on any more schemes such as the one done with Croydon and that it can’t get out of the Croydon one”

      Actually, no it doesn’t. It only suggests that they have failed to find any other local authority stupid enough to be mugged for public money.

      And while we are at it… “The article slings mud by inuendo at John Rouse without providing any evidence of wrong doing or quantifying an supposed losses”.

      Isn’t that slinging mud at our journalism?

      Are you Rouse’s brother-in-law? Or some other close member of his family? Or Rouse himself?

      Imagine.

      “More information and analysis (free of political bias) is needed please!”

      That’s exactly what we’ve always been asking for. Except on Rouse’s watch at Croydon Council, all such detail on a £450 million deal of public property, has been withheld from the public and publicly elected representatives.

      The height of hypocrisy. You are Jon Rouse, right?

      Like

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