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Weaning places off the state

Mark Easton | 06:00 UK time, Thursday, 9 September 2010

Today's research for the BBC's English regions on the vulnerability of local areas to cuts in public spending reveals a clear north-south divide. It is a divide which is a legacy of government policy over decades.

Landmark in Middlesbrough

When one looks at the bottom 10 places in terms of resilience one finds three places in one small area in the north-east of England - the Tees Valley. Hartlepool, Redcar and Cleveland and, right at the bottom, Middlesbrough.

I travelled to the area this week to find out why they are apparently so at risk and take the temperature.

The Tees Valley in general and Middlesbrough in particular are places which became rich on heavy industry. William Gladstone famously went to the original town hall in Middlesbrough and proclaimed it an "infant Hercules".

Go to the same spot now, as I did, and you find a sad, boarded up building surrounded by wasteland and a few abandoned, crumbling houses.

What happened was that the area found it increasingly hard to compete in global markets and, over time, government felt obliged to pump in state support to prop up and regenerate the declining economy.

The result is that a town like Middlesbrough has become state dependent.

Today's Experian data finds that 42% of workers are employed in the public sector. In the decade to 2008, it's estimated that while private sector employment created only 168 jobs, 13,000 public sector jobs were created in Middlesbrough, Redcar and nearby Stockton. No wonder today's survey finds this area so vulnerable to a shrinking state.

Over the past few years Middlesbrough has tried to reinvent itself for the 21st Century. Teesside University has expanded and nurtured talent in the high-tech, high-skilled digital economy. I visited Boho One, a nest of young, vibrant companies working largely in the IT sector.

The town has opened an impressive gallery - the Middlesbrough Institute of Modern Art (MIMA) - and a few weeks ago a huge Anish Kapoor sculpture was unveiled on the waterfront.

It is as though Middlesbrough is trying to emerge, Phoenix-like, from the red-hot furnaces of the old industry, reborn as an exciting and competitive international player. But a lot of the regeneration money has come from the state - a tap that looks certain to be tightened over the next few years.

The town's elected mayor, Ray Mallon, is very bullish about Middlesbrough's prospects but he does accept that there are challenging times ahead.

"We will lose something like £6m this year from the budgets and something like £12-18m next year and over the next three years it will be over £30m" he told me. "Clearly we will get job cuts (but) we will survive this because we have the get up and go and the will to deal with what we have got."

It is estimated that 11,000 public sector jobs could be lost following the cuts in the Tees Valley and the big question is whether the private sector can replace those workers as fast or faster than they disappear.

In the past, Middlesbrough might have looked to the Regional Development Agency, One North East, for help. But, separate to the cuts, the government has decided to abolish RDAs. Local Enterprise Partnerships (LEP) made up of area councils and businesses will replace them.

Whether they can hope to have the same clout when competing for bit international investment is a moot point, but I encountered realism and determination in equal measure on my visit. This is the future and Middlesbrough is going to make it work.

Earlier this week, five councils in the Tees Valley along with business backers put in their bid to central government to be one of the first LEPs in England. Leading the group is Les Southerton who sounded very positive about their prospects.

When I pressed him on the risk that Teesside is going to find it difficult to throw away its crutches of state support, he sounded a note of caution.

"The government has to recognise that there has to be a period of transition. We faced up to 100,000 job losses since the 1970s. We are still here and still heading in the right direction. But we need the government to come aboard and say we recognise that you are making progress, you do have a strategy in place, but it will take some time to wean yourself off some of that public sector employment."

What is interesting talking to people on Teesside is the recognition that the weather has changed. They know that there is no point just arguing for more state-aid, more public sector investment to dig it out of its economic hole.

But the anxiety is around how fast the coalition decides to pull the plug. After decades of dependency, they fear that they are not in a position to go cold turkey on their addiction to the state.

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