| MIDDLESBROUGH, England
MIDDLESBROUGH, England Nov 22 In the
former British industrial powerhouse of Middlesbrough, a skyline
once dominated by smoke-belching chimneys and steel mill
furnaces now features a monumental piece of public art and an
elegant new state college clad in silver and bronze.
The town's harsh industrial landscape inspired film director
Ridley Scott, a son of north-east England, in his vision for the
science fiction film "Blade Runner".
But many of its factories closed long ago and nearly half of
the workforce now relies on the public sector.
Like so many places in Britain that came to depend on public
jobs after the decline of their old industries, Middlesbrough
faces an uncertain future as Prime Minister David Cameron tries
to cut spending and avoid the sort of debt crisis that has
toppled governments across Europe.
The town of 139,000 people, close to where the River Tees
meets the windswept northeast coast, has been described as the
place most vulnerable to Britain's cuts.
Its university expanded rapidly under the last Labour
government, the hospital was rebuilt and a public art gallery
sprang up in an elegant new town square as politicians poured
money into Middlesbrough and other deprived areas.
Now the tap has been turned off and the Conservative-led
coalition is trying to wipe out a budget deficit that peaked at
around 11 percent of GDP -- a move that is expected to lead to
the loss of 400,000 public sector jobs.
"Yes, we did have a policy as a Labour government, with all
of these heavy industries going: We pushed people into the
public sector where they were working, getting a salary, paying
taxes and were part of the consumer society," said Stuart Bell,
the town's Labour member of parliament since 1983.
It is the north of Britain which was ravaged by Conservative
prime minister Margaret Thatcher's policy of running down
uncompetitive industries in the 1980s -- creating Britain's
notorious north-south divide. It now faces the brunt again given
the drive to revive the region with public money.
While Britain may be on track to meet its deficit-cutting
targets this year, the weak outlook means
finance minister George Osborne is expected to have to accept
lower growth forecasts when he sets out his latest fiscal plans
in parliament on Nov. 29.
His deficit plan is based on forecasts for 1.7 percent
growth this year. Lower growth, or even a return to recession,
would leave a stark choice of having to cut deeper or let the
austerity drive falter, which would threaten Britain's 'AAA'
credit rating and raise its borrowing costs.
The Labour party says Osborne must think again and find a
growth strategy. He insists that record low borrowing costs for
Britain shows his path is the right one and blames the euro zone
debt crisis for the economy's downturn.
Walk through the old docks of a town once described by 19th
century prime minister William Gladstone as the "infant
Hercules" of the Industrial Revolution and the public sector's
importance is clear.
Under grey skies, rows of houses are boarded up, warehouses
lie empty and barbed wire fences surround derelict plots waiting
for a state-backed development that suffered a setback last week
when the government's main private partner pulled out.
The only boat moored near the town's landmark blue steel
Transporter Bridge is a rusting hulk called the Tuxedo Royale, a
former nightclub that is slowly sinking into the chilly water.
Nearby, public money largely paid for a 100-metre (328 ft)
long sculpture by artist Anish Kapoor that has gone up by the
river, close to a futuristic, metal-clad college building.
The town's enlarged university won an award in 2009, the
hospital boasts that it is one of Europe's most modern medical
centres and an art gallery has opened next to the gothic town
A similar picture of redevelopment can be seen across
Britain, in cities like Manchester, Liverpool and Newcastle.
However, such public largesse will be rarer in the coming years.
Total public spending rose to around 47 percent of national
income by the time Labour lost power in 2010, up from 40 percent
at the end of the last Conservative administration in 1997. It
is forecast to fall back to 40 percent by 2015-16, according to
finance ministry figures.
Union leaders say the cuts threaten to reverse a lot of the
progress and scoff at the government's much-vaunted hope that
the private sector will drive growth after a year of stagnation,
creating more jobs and boosting exports.
"The private sector just isn't creating jobs at the minute
on any kind of scale," said Kevin Rowan, regional secretary for
the Trades Union Congress, an umbrella group for 58 unions.
Investment from Thailand's Sahaviriya Steel Industries will
restart the nearby Redcar blast furnace next month, nearly a
year after it was mothballed. Plans to build new high-speed
trains down the road in County Durham are expected to create
hundreds of jobs. Local business groups have high hopes for
green industries and hi-tech firms.
But the town's MP says more must be done to encourage
companies to keep hiring, including giving them tax breaks.
"The more money you suck out of the economy, the less growth
you'll get," Bell said. About 18,000 of Middlesbrough's 88,000
working population are already on some sort of state benefits.
"People are going to have to get used to a totally different
standard of living. There is going to be a lot more unrest
within society," Bell said.
Cameron says the country must stick to its austerity plans
to keep the markets' confidence and blames Labour, which ruled
Britain from 1997 to 2010 under Tony Blair and Gordon Brown, for
borrowing and spending too much.
Nationally, the unemployment rate has not climbed as steeply
as in previous downturns. But most economists say government
cuts are only at an early stage and many more job losses are
likely with the young hit hardest.
Official data showed the number of young people soared to a
record of more than one million last month.
"There will be more of the same because the economy is not
growing fast enough to push unemployment down," said Alan
Clarke, economist at Scotia Capital.
The Conservative leader has scrapped nine regional
development agencies that spent government and European Union
money to try to boost growth. They are being replaced by 38
bodies that will aim to make local authorities work more closely
with private companies.
The impact of the cuts is bound to be painful for many
families, particularly in northeast England, and it is hard to
see what the government can do to encourage the private sector
to expand in places like Middlesbrough, analysts said.
Professor Jim Tomlinson, an economic policy expert at the
University of Dundee in Scotland, said the state "had picked up
the pieces" in former industrial cities and will struggle to
"The state has never played such a big role in employment in
Britain," he said, adding that the cuts will only take public
spending as a percentage of GDP back to 2004 levels. "Frankly, I
can't see how it can change that much.
"There is a lot of rhetoric about rebalancing and how the
public sector has got to play a smaller role. But it's not as if
nobody wanted the private sector to flourish in these places
before -- it's just that it didn't."
Professor Henry Overman, director of the Spatial Economics
Research Centre at the London School of Economics, said there
was "remarkably little evidence" to support opposing political
arguments about what happens if the state cuts jobs in an area.
Many Conservatives say a powerful public sector often
stifles job creation, while Labour argues that public investment
is vital and has a ripple effect, generating extra posts.
"In reality, both sides are exaggerating," Overman said.
The debate about the size of the state and what role, if any,
it should play in the economy stretches back centuries. But in
Middlesbrough's shopping district, most people were worried
about day-to-day concerns.
Inflation is running at 5 percent while wage growth is
non-existent and unemployment is at a 15-year high.
"It feels like every month you're working longer hours,
getting less money and paying bigger bills," said builder Ali
Hussain, 46, summing up the popular mood.