The town is pushing hard for regeneration, hoping to become one of the new enterprise zones
George Osborne does not know it, but Wednesday's "budget for growth" could change much more than the lives of ponies now grazing quietly on a grassed-over industrial site in the heart of Middlesbrough. It seems all but certain that the chancellor will designate the Tees valley one of 10 new low-tax enterprise zones. If so, one of the local options will be to set up a precision-engineering cluster on the old ironmasters site – relic of the days when "Made in Middlesbrough" was stamped on countless bridges, including Sydney harbour's.
In September 1987, Margaret Thatcher famously took her "walk in the wilderness" across a similar derelict site five miles upstream in Stockton, where as local MP in the 30s Harold Macmillan once preached the economic "middle way" she rejected. Stockton's enterprise zone eventually became a business park, supporting 4,500 jobs at its peak. But this is a region that has long struggled to diversify its coal-and-ships, chemicals-and-steel economy, its hard-won gains always at risk – from global conditions as well as government policy and the region's own mistakes.
So a zone (one for Tyne and Wear, too, would be nice), like the ones the area had in the 80s but better-designed, is a familiar, much-sought budget prize. It is not all Middlesbrough wants from the chancellor. Much of its wish-list is like the rest of Britain's: a freeze or cut in fuel duty; a variable rate of aircraft taxes which disadvantage regional airports; less red tape and lower business taxes.
Among the more far-sighted businessmen and civic leaders (still mostly Labour) the focus is on support Osborne might provide for renewable technologies, notably wind power, which needs the kind of skills that once built ships. "We want anything that makes doing business with UK plc easier, and around here that means boosting the manufacturing environment – it's in our DNA," says Paul Barker, development director of PD Ports, which runs Teesport and Hartlepool. Both are doing well.
While the UK economy shrank by 0.6% in the fourth quarter, the north-east's manufacturing grew by 1.1%. Much is exported. The region could become as famous for renewables as it still is for (polluting) heavy industry, says Barker, who boasts that the Teesside accent can be heard wherever welding is being done around the world. "They'd love to come home and pass on their skills," he says.
In an area where business startups are well below average, the council runs "boot camps" for entrepreneurs. But private enterprise is still the smaller half of the Middlesbrough story. Bustling past the town hall, Jeff Grace urges "a pay rise for local government workers". Grace turns out to be a Unite union official and knows it won't happen. Maggie Hammond, who works in forensic mental health and knows her clients will suffer from cuts in services, is more direct. "Money," she says. But pay rises and social services are coalition targets, not priorities. Cuts enforce the coalition's belief that doing so will stimulate private-sector, export-led recovery.
In this year's local government settlement, Eric Pickles lopped 8.8% off Middlesbrough's Whitehall grant, with £50m to go over four years from a £160m annual budget, not to mention £8.9m from the working neighbourhoods fund. That means that council plans to demolish 1,500 narrow Victorian terraced homes in Gresham have had to be halved – more regeneration on hold in a town that has reinvented itself with parks, galleries, public sculpture by Anish Kapoor, and shopping malls, all currently looking empty as the cuts bite.
So an enterprise zone will generate good headlines in the Middlesbrough Gazette and Northern Echo. But in deciding exactly how to proceed, disrupting ponies will be the least of it. The five unitary authorities that make up the sub-region of Tees Valley – Hartlepool, Redcar, Stockton, Darlington and Middlesbrough – must agree which of their local plans will make most long-term impact for all of them in terms of inward investment, skills upgrades and job creation along the supply chain. Spread the opportunity too thinly and it may be wasted. It has happened here before.
As Teesside University's professor Tony Chapman puts it, the north-east has endured so many changes in Whitehall's regional policies that someone could make a career in "the archaeology of regeneration". Likewise, countless local government reorganisations have seen Anglo-Saxon "Mydilsburgh" change from a hamlet to an industrialised borough, become part of unloved Cleveland (1974-96), return as a borough, and now boast an elected mayor in ex-superintendent Ray "Robocop" Mallon.
Everyone agrees Middlesbrough has had its problems, some worse than its neighbours. Steel and chemicals have shrunk, as has the population of the town (bidding to become a Jubilee city) by 20,000 since the 60s to 140,000. "We have 200 teenage pregnancies a year," says Mallon, who thinks a hardcore of families let the town down. But 16 wards out of 23 have high indices of deprivation, which cuts seem likely to intensify.
Between them, the council, the NHS and the university employ approximately 17,000 of the 80,000-plus workforce. Another 17,000 are on benefits. It is the kind of public sector over-dependence David Cameron has deplored. This week the New York Times rashly likened Middlesbrough to Detroit. "We're not Godalming, but we're not Detroit either," says one town hall official. Bitterness is widespread that coalition rhetoric about "rebalancing the economy" away from financial services is undone by coalition actions that will favour bigger cities and the south.
Locals calls themselves "Smoggies" – a legacy of the sulphurous days of bulk steel at Redcar and chemicals, when nearby ICI was a great industrial power – and tend to self-deprecation. But for every world-weary pessimist who fears Saturday's 2-1 win over Watford may not save their beloved Boro from relegation, there is a stubborn optimist, although the town's Victorian motto, "Erimus" ("We Will Be") is now a more tentative "Moving Forward".
But to what? When the coalition abolished regional development agencies, the loss of One North East caused more dismay in Newcastle – 45 minutes up the A1(M) – than on Teesside, which had long nursed a sense of neglect. In Tees Valley Unlimited – led by the respected ICI industrial manager, Sandy Anderson – it also had a public-private partnership ready and waiting to become one of Vince Cable's first local enterprise partnerships (LEPs), there to resolve local problems locally – albeit without much in the way of cash or powers. Sorting out the enterprise zone will be a test for the LEP model and for Anderson. "We've given you what you want, you sort it out" is Whitehall's attitude.
Teesside University, reeling from its own problems, Cable's 80% cut in teaching grants and how best to market itself in a £9,000-a-year fees market, stresses the importance of working closely with local industry in tough times. Walking her Grade 2 childcare students past Kapoor's monumental Temonos sculpture back to brand new Middlesbrough College, Kelly Parsons says the loss of educational maintenance grants will hurt students, but the college is creating a package of incentives to keep them learning.
Social policy expert Chapman talks of dangerous "cultural inertia", whereby too many people look to past glories and traditional industries to save them, as well as something he calls "categorical fate", which explains why things are as they are and can't be changed. Yet Middlesbrough has much to cheer it up without George Osborne's help.
It still has high-end steel and 50 post-ICI chemical firms, and Teesside University is helping boost its emerging digital economy, clustered around BoHo, another of the town's enterprise zone options. Every day the Gazette carries upbeat stories about new plans for renewables with biomass and anaerobic energy already powerful. In Redcar the Thai firm SSI has just signed an agreement to buy and revive the near-dead Corus steel plant – 2,000 potential jobs there in the making. Outside Darlington, Hitachi has just agreed to a £4.5bn deal to build railway stock, also generating job potential for Middlesbrough.
The community's weight is placed behind such projects, unions and councils as well as business and campuses. Even the coalition played its part. Middlesbrough is fighting back – as usual. "We are punching above our weight," says Mallon.
• This article was amended on 23 March 2011. In the caption and standfirst of this article we misplaced Middlesbrough in Tyne and Wear. It is in fact on Teesside. This has been corrected.