Austerity

An English Town Struggles with Cameron's Cuts


Run-down housing in Middlesbrough

Photograph by Matthew Lloyd/Bloomberg

Run-down housing in Middlesbrough

In northeast England, where shuttered factories and long-dead coal mines evoke an industrial past, Ray Mallon is on the front line of Prime Minister David Cameron’s austerity drive.

Mallon is mayor of Middlesbrough, a town of 140,000. Its jobless rate, at more than 15 percent, is Britain’s highest. With funding from the central government shrinking, Mallon has to cut more than £52 million ($82 million) over four years. That means chopping 8 percent of the town budget every year by lowering the cost of everything from mobile libraries to public-building maintenance. About 500 of 5,000 town workers, including teachers, will be let go.

Mallon, a police detective before entering politics, says it may be too much, as the U.K. faces a second recession in three years. “The government is doing the right thing in focusing on the deficit, but it’s a little bit too intense,” he said in early February, the day after giving the town’s council more than 90 budget revisions. “They’d be better off just taking their foot off the gas a little bit.”

Britain has the largest budget-reduction package in absolute terms of any of the European Union’s 27 members, based on figures from finance ministries compiled by Bloomberg. The plan calls for cutting £107 billion from the central budget by April 2015. That means canceling road projects, capping welfare payments and pensions, and shedding as many as 700,000 government jobs. The bond market approves: Yields on 10-year bonds are at 2.24 percent, lower than those of oil-rich Norway.

The Middlesbrough town council’s proposed economies range from spending less on analysis of closed-circuit TV footage of the town square to eliminating funds for addressing mental health issues in schools. Also anticipated are savings on arts funding, environmental programs, and drivers for the elderly. Mallon compares selling the cuts to his police work: “I was brought up with politics in influencing criminals to tell me how many burglaries they’d committed and then selling them jail.”

At the publicly funded Joe Walton Community & Youth Club in the Berwick Hills area of deprived east Middlesbrough, the talk over 50 pence cups of tea is all about spending reductions. The center, whose origins date to 1906, offers everything from Zumba fitness dancing and boxing to classes on cardiac rehabilitation. The cafe is under threat, along with its five jobs, and the whole center’s future is under review. “If it was to go, then my biggest concern is what happens to young people,” says Sven McLean, 59, who is a member of the center’s management committee.

Helen Usher, 37, has been the receptionist for 13 years. She reckons everyone employed by the community center will be gone by the end of March. While Usher is employed by the Joe Walton board, the center gets money from Mallon, who wants to look at how the center can generate more money of its own.

The northeast region is the most dependent on public-sector employment in the U.K., so it’s especially hard hit by the cuts. The private sector gets hurt too. Earlier this year, Mallon visited 11 Middlesbrough companies, including car dealers and clothing stores. “They were all saying the same thing: People have got the money, but they won’t part with the money because they haven’t got the confidence,” Mallon says. Rachel Anderson, head of member relations at the North East Chamber of Commerce in Middlesbrough, agrees about the lack of confidence. “Up until now, we very much supported the government’s efforts to cut the deficit,” she says. “Where it becomes a little bit too deep is where it starts to damage the ability of the economy to recover.”

While the austerity has won praise from the International Monetary Fund, the National Institute of Economic and Social Research, a private think tank in London, said in a Feb. 3 report that the government should consider some stimulus, possibly by spending at least £15 billion on infrastructure. Instead the government is scrapping such projects. One example: the cancellation of an upgrade to a part of the A1 highway linking with the A66 that runs into town.

Before the election of Cameron’s Conservative-led coalition, the town had managed some improvements. The regenerated central square features the £14.2 million Middlesbrough Institute of Modern Art, opposite the neogothic town hall and its clock tower. The spruced-up square recalls the town’s past, when Middlesbrough grew rich on iron and steel. That was a long time ago.

The bottom line: As part of a national austerity plan to cut £107 billion in spending, Britain’s towns must curtail services and winnow workforces.

Jefferson is a reporter for Bloomberg News in Edinburgh.

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