Liverpool to bear brunt of cuts as Merseyside councils slash services

The brutal reality of austerity Britain will begin to be felt in earnest in England's most deprived city this week, as Merseyside's five local authorities collectively deliver the harshest public spending cuts the region has seen for generations.

The five councils – Liverpool, Knowsley, Wirral, Sefton and St Helens – will formally ratify plans that will see their budgets slashed by a fifth – £200m – shrinking or axing hundreds of services and shedding thousands of jobs.

"This is the most difficult budget the city has ever faced, unprecedented in the scale of its reduction of our finances," said Liverpool city council's leader, Joe Anderson. "Liverpool is the most disadvantaged community in the country and yet it has been hit hardest by the cuts. That tells us we are not all in this together."

The new budgets will herald the closure – within weeks in some cases – of libraries, children's centres, welfare charities, youth clubs and swimming pools. Care for thousands of older or disabled people will be reduced and services for mentally ill and homeless people depleted.

These cuts represent only the start of a massive disinvestment process under way in a region hugely dependent on public spending. Its NHS trusts and universities are tightening their belts, while the region's housing renewal programme has ground to a halt. All this will be exacerbated by cuts to welfare benefit payments that underpin the local economies of the region's poorest neighbourhoods.

"The outlook is pretty bleak. The impact of the cuts, especially on benefits, is going to be vast and incredibly significant. It's going to be a very difficult few years," said Alexandra Jones, chief executive of the Centre for Cities thinktank.

Liverpool council has estimated it will shed up to 1,500 jobs over the next three years, on top of 600 that have disappeared over the past few months through early retirement and voluntary redundancy. Another 3,500 have gone or are at risk at the other four councils in the region.

The city's voluntary sector estimates that 500 charity workers will lose their jobs this year. More than 600 NHS jobs are under threat in Liverpool alone, say trade unions, while Merseyside's fire and police services are scrapping 1,700 posts.

Merseyside is not alone in its drastic response to the coalition-imposed town hall cuts. Budget-setting season is in full swing and every UK local authority has passed, or is about to sign off, its own painful 2011-12 financial plan.

But Anderson says that Liverpool, in common with many other deprived areas in the north of England, will feel the pain more than most. Its relatively low council tax take, coupled with its reliance on deprivation-related government grants that have been either reduced or axed, make it hugely more vulnerable to cuts than some of the leafier Tory-controlled councils in the south-east of England.

The communities secretary, Eric Pickles, announced in December that Liverpool would face cuts in its "spending power" in 2011-12 of no more than 8.9%. Anderson said that was spin: the level of cuts "front-loaded" amount to a "real-terms" cut of 22%, leaving a cash shortfall of £141m over the next two years.

The unfairness is not lost on Alan Lewis, the chief executive of Liverpool Charity and Voluntary Services, who said many local community organisations – the city's "big society" – will go to the wall as a result. "We are not saying, 'We are poor, give us a job, give us a handout'; we are saying, 'We are in a hole and you [the government] have just pulled the ladder up.'"

The city council's budget – with the unprecedented support of its Liberal Democrat and Green party opposition – has tried to shield child protection (a 1% cut) and adult social care services from the worst. It has raided its reserves, and has vowed to keep open most of its 26 Early Years children's centres.

But protecting these has meant dramatic cuts to areas which the council does not consider core services: spending on libraries is down by 28%; housing support for homeless people, care leavers, refugees and teenage parents by 30%; and youth services has lost 21% of its budget.

Among all this stalks the ghost of the 1980s. David Cameron recently accused Liverpool of exaggerating its cuts for political effect, in the same manner as Derek Hatton, the city's Militant Tendency leader, who in the 1980s defied the Tory government's public spending cuts and set an illegal budget. Anderson retorts that his council is a model of efficiency. He says he has ordered tougher cutbacks in the past year than any Tory local authority, cutting "back office" services by 32%, sacking senior managers, and reducing the council chief executive's pay by £40,000.

Today's Labour leadership is more likely to talk up Liverpool's economic potential. The city markets itself as a "vibrant international city in which to invest, live and work". Anderson described it as "a community on the up and going places".

The city has been doing well in recent years, says the Centre for Cities. There have been dramatic physical changes: the regenerated waterfront, the five-star hotels, the Liverpool One city centre shopping development, and the tourism boom on the back of Liverpool's Capital of Culture success. It has created nearly 15,000 private sector jobs in recent years, a notable achievement when Birmingham, for example, has lost 60,0000.

Jack Stopforth, chief executive of Liverpool Chamber of Commerce, said the cuts will be tough for the city but "it does not mean that we are heading back to the bad old days. It is unrecognisable to how it was then."

Jones was less optimistic. She pointed out that the region has huge underlying problems. Its private sector, boosted in recent years by public spending in construction and IT, is fragile. Joblessness is high, and roughly a quarter of people who work do so in the public sector (up to 40% in some neighbourhoods). A fifth of residents possess no qualifications – the second-worst record in the UK's 63 cities.

This will be exacerbated by cuts to welfare benefits, said Jones. Over 20% of working-age residents in Liverpool and Knowsley are claiming out of work benefits, the highest level in England. She calculated that cuts to the payments of £197 a head by 2015 will damage local small business, from taxi firms to hairdressers.

This may also derail the fragile progress made in recent years in tackling the city's deep-rooted social and health problems. Liverpool has the third-lowest life expectancy in England, as well as high levels of mental illness, smoking, alcohol abuse, obesity and teenage pregnancy. Housing conditions there are among the poorest in the country.

"One of my fears is that the cuts will rebound on the most vulnerable," said Peter Kinderman, a professor of clinical psychology at the University of Liverpool. "We have made progress in tackling health inequalities in recent years, and put in place the foundations for improvement. The danger is the cuts will reverse this."