Scousers are sponging, untrustworthy scallies, are they? Only if you believe the media and comics. Linda Grant asks what her home city did to deserve its reputation. Neither the old Liverpool, nor the city now emerging, is anything of the sort.

Saturday July 10, 1999

On the wall, next to my desk, there is a very romantic picture. It is a framed illustration of a golden-funnelled liner berthed by the side of the Liver building. The sky is dark and bruised with clouds, the lights of the ship are blazing on the water. Tugs and a pilot boat are moving purposefully alongside. Soon, the liner will slip its anchor and sail off, the orchestra playing and the crowds on deck waving as it ploughs on into the cold Atlantic. The skyline of Liverpool is behind them, and ahead, another waterfront: New York.

Liverpool's heyday as a transatlantic passenger port was over by the time I was growing up there, but ships still sailed into the Mersey from places you could find on a spinning globe. I would lie in bed and listen to the sound of the foghorns on the river, and the only birdsong I recognised was that of seagulls. What could beat being a teenager in Liverpool in the 60s? We knew we belonged to a world-class city.

We were famous all over the world because our city, and everything in it, was connected with the sea. Almost everyone had come from the sea. We were multi-ethnic before the phrase was invented. Our backs were turned against the land we were part of. The football rivalry between Liverpool and Manchester was only a symptom of a deeper sense of difference. "The Liverpool gentleman and the Manchester man," was my father's motto, meaning that the inland city based its prosperity on industry and manufacture, dirt under the fingernails, while ours was derived from commerce: shipping, insurance, trade, customs and excise.

Confidence turned to arrogance. In Dublin in 1965, hearing that I was from Liverpool, a girl asked if she could touch me. She gasped when she heard that John Lennon lived around the corner from me, in a semi-detached house on a tree-lined boulevard called Menlove Avenue. He had preceded my sister at Quarrybank grammar school, one of the city's best, situated on the edge of its most suburban park. The song Working Class Hero came as a bit of a surprise to the neighbours.

I left Liverpool in the early 70s; in fact, I left the country altogether for a few years. When I returned, I felt as if part of my identity had been surgically excised: it was not that I'd stopped feeling that I was a Scouser, rather that what a Scouser now represented had shrunk to the narrowest possible seam. In Liverpool, Derek Hatton had declared the city a working-class-only zone, the enemy of everything non-proletarian. You were a docker or worked on the assembly line at Ford, or you had been made redundant in one of the calamitous factory closures at Tate & Lyle and Bryant & May. In London, meanwhile, people said that

I couldn't be from Liverpool because I didn't talk like Cilla Black or wear a shell-suit. What happened? How did what I thought of as the best place in Britain turn into what everyone else thought was the worst? How could Jack Straw say to a roomful of journalists, as recently as May this year, that "Scousers are always up to something", and expect to get a laugh? We thought we were witty and edgy and street-wise; everyone else thought we were criminals.

In Liverpool, they are sick to death of the stereotypes; hated the docu-soap about the Adelphi, and the new one about the Grafton nightclub, both of them peddling the same old line about lovable rogues. It's not that Liverpudlians deny that such people exist in their city, rather that they can't understand why everyone else is overlooked.

The key to knowing what a Scouser is lies in the sea. The sea was always there, offering an entry and an escape: if nothing else turned up, you could always walk down the dock road and sign on a ship bound for somewhere you'd never heard of but which might be the very place your neighbour had come from. And this was true even for the middle classes. My father was a Jew born in Poland, whose parents disembarked in Liverpool, thinking it was America. Sent to sea at 17, he jumped ship in New York, learned what was to become his business, and returned to Liverpool, where he employed as his secretary an Irish Catholic called Peggy Maguire, who was married to a Norwegian merchant seaman whom she saw only between voyages. It was a typical story in a city where the sea represented opportunity in the form of a career or a husband.

By the same token, the decline of the port was the critical turning point in the city's fortunes. Liverpool went bust because its economy depended on the docks, and it was on the wrong side of the country for trade with Europe. Yet the port continues to define the identity of its population. Liverpudlians meeting for the first time always ask each other the same questions: the first is which school did you go to, so establishing whether you are Catholic or Protestant; and then, if you are Catholic, the next question is which parish you lived in. These are the means by which the tribes identify themselves.

And there are other tribes: the Welsh and the Scots; the Chinese, who settled around Upper Duke Street in the 1870s, Europe's oldest Chinese community; the Jews, who came at the turn of the century and set up shops, schools and synagogues on Brownlow Hill; and the blacks of Upper Parliament Street, who have nothing to do with post-war immigration from the Caribbean, but are descended from African and American merchant seamen who married local girls. In his 1849 novel, Redburn, Herman Melville relates how it was in Liverpool that he first saw black sailors walking arm in arm with white women, and remarks how much the black Americans loved the city because they felt a freedom there that they did not have at home.

Melville also saw the first waves of immigrants escaping the Irish famine. They came in such numbers that, by the start of this century, 300,000 Catholics were crammed into the area around Scotland Road, living in appalling conditions and economically dependent on the port. It became a byword for poverty, and the city's first task after the end of the war was a monumental programme of slum clearance. The population was decanted to vast new estates at Cantrill Farm, Halewood, Speke and Kirkby, in the process creating what the city had never had before: a large-scale industrial working class based around factories such as Ford.

Scotland Road today is an urban freeway, landscaped with grass. Isolated on one side, like a ship at sea, is St Anthony's, the mother church of Liverpool's Catholics. Its priest, Father Tom Williams, is a trim, sandy-haired man, who is today wearing a sweatshirt with the crest of a local golf-club. He tells me that people in the parish have warned him off talking to me: the anger against the media's representation of the city is everywhere, and three organisations - the police, the Mersey Docks and Harbour Company and the TGWU - would not even return my calls.

Father Williams sounds just like what he is: the descendant of three generations of Scotland Road families. In 1961, he was sent to school in Chester, to prepare him for the seminary in Lisbon, another port city with which Liverpool had special links. "Going to Chester was like going to the missions," he says, "an outpost of the world. All it had was a Wimpey bar and a bowling alley. Lancashire was the body, we were the head. We had the colour, we had everything, but now the umbilical cord to the sea has gone. Liverpool has lost its purpose."

The demonisation of Liverpudlians, he says, stems from the port's decline: instead of the poor and unemployed going to sea, the city's redundant dockers and factory workers went to Jersey and the Lake District, obeying Norman Tebbitt's advice to get on their bikes. They were the least educated, the least skilled, and they fanned out over the country, representations of the perpetual image of the Scouser. "We haven't had the best ambassadors," admits Williams. "Derek Hatton wore good suits and he had a voice, but he was never typical of Liverpool. In some ways, he was Thatcher's best mate - the whipping boy, the image of what was wrong. The wrong element became kings, one-day-wonders strutting the streets.

"To the rest of the country, we became like animals in a zoo. I couldn't read the Sun now, after Hillsborough - to imply that our grief for the victims was phoney . . . The Boys from the Blackstuff was a remarkable play," he continues, "but it left behind an image of a sad, depressed city, and Bread built on that to show us as dole-scroungers. In the end, it became a lie. We were all tarred with the same brush, and Manchester prospered from it. Manchester could just say, 'We're not Liverpool.' My sister loves Liverpool, but detests the image. She's reluctant to admit that she's from here."

What identifies someone as being from Liverpool is their accent, which, in turn, creates its own stigma. You have to remind people that Cherie Blair has this accent, as does John Birt. "It's a 20th-century accent," says Andrew Hamer, lecturer in English language at Liverpool University. "If you compare Liverpool and Manchester as 19th- century cities, both started as Lancashire towns. Manchester's expansion was a result of immigration from the area round about, based in cotton milling and manufacturing. Liverpool never had an industrial base. It was docking and shipbuilding, and the immigration was of diverse origin. A lot of people in the massive immigration from Ireland would have been Celtic-speaking as a first language." The earliest reference to a separate Liverpool accent was in 1889, in AJ Ellis' Early English Pronunciation.

Hamer played me a tape of a Liverpool girl talking about how she had gone to a party in Newcastle with some friends from that city and found her hosts very hospitable until they heard her speak, at which point one of them warned that there was a Scouser in the house and that everyone should mind their coats. The girl was surprised by this because she did not consider herself to have a Liverpool accent, or not much of one. "Outsiders tend to lump all Liverpool accents together," says Hamer. So what we hear is socially contextualised: "Stereotyping is shared among speech communities. An accent that may seem unattractive to English ears is seen as attractive to American ears."

Someone who is identifiably from Liverpool on the basis of his accent is Michael Swerdlow. I first met him in 1966 because he married my cousin, and my sister and I were the bridesmaids. In the narrowing of the range of personality that Scousers are these days allowed to inhabit, he is one of those left out in the cold, yet he defines himself as nothing else but a Liverpudlian.

Michael's great-grandfather had come from Kiev around the turn of century (a lot of Kiev Jews ended up in Liverpool, my maternal grandparents and Frankie Vaughan's among them). Michael's grandfather opened a tailor's shop on Wood Street, an area of 19th-century buildings used for small-scale industrial purposes. Michael's father became a chef, serving his time in Bristol, London and Paris, then went to work on the Cunard boats out of Liverpool docks. After the war, in a corner of his father's workshop, he set up a catering suppliers, registering the name in 1945 as the Modern Kitchen Equipment Company of Liverpool Ltd (MKE). They supplied works canteens and the liners that docked at the port.

By the 60s, the firm had a gleaming showroom next to the Philharmonic Hall, the home of the city's orchestra - its windows are still remembered in Liverpool today, an image of modernity and a symbol of the city's self-confidence. The company was renowned for its cutting-edge design, which wasn't all that surprising, considering that Michael's brother Alan had gone into the business having graduated in graphics at Liverpool Art School.

MKE began to specialise in the design and fitting out of commercial kitchens. It happened to have its headquarters in Liverpool, but that never held it back and they saw no reason to move. Anyway, Michael loved the city. He had grown up in Cressington Park, a road of large Victorian houses that ran down to the river. He had gone to a secondary modern and never experienced any anti-Semitism, not even the smallest joke. Sent out with a collecting tin by his local youth club, at 12 or 13 he had travelled the length and breadth of Liverpool on the buses and the trams and the ferries, and always felt safe. As a teenager, he had sat in the coffee bars and jazz clubs, and later watched rock 'n' roll and blues enter the city via the records American sailors brought over from home.

By the 80s, MKE was a national company with an international reputation, supplying Littlewoods stores and Marks & Spencer, and designing the salad bars for the entire Berni Inn chain. The company had been winning huge contracts to fit out kitchens in stores, but the high-street slow-down of the early 90s recession put a stop to all that development. In 1990, MKE went into voluntary liquidation, and 50 people lost their jobs.

In a flat in the Albert Dock development, overlooking the Mersey, Michael is now trying to build from scratch an entirely new career, making corporate videos. Like everyone else whose livelihood was destroyed by the recession, and like Liverpool itself, Michael saw his self-image damaged: "You went from being able to go around telling people you're the best, with confidence, and it showing, to being an absolute nobody." At that point, the obvious thing for him to do was to turn his back on Liverpool.

He was a Thatcher Tory. He had nothing to do with the industrial militancy. He wasn't even a football supporter. The big house had been sold and he and his second wife were living out of her mother's spare room. So they bought walking boots, rucksacks and two Inter-rail passes, and left to travel around Europe. "The longest I'd ever been away from Liverpool was a two-week holiday. We went to some fascinating cities and in every one I said to Hilary, 'Could you live here? We've nothing to go back for, here's the moment.' But we always said no. There's something about Liverpool that always made us feel that we wanted to go back.

"It's still an enigma," continues Michael. "I'm a great defender of Liverpool. I don't think of myself as a northerner - what have I got in common with Newcastle or Yorkshire or the Lake District? What I am is a Liverpudlian. Liverpool deserves better attention, better publicity and a kinder response."

Inevitably, as a Tory, Michael Swerdlow blames the strikes of the 70s and 80s for damaging Liverpool, giving it an image of unreliability. Equally inevitably, as a Scotland Road priest, Father Tom Williams believes that the strikes were part of a just process in which the working class was fighting for its rights. Now, both are united in a shared sense of themselves as Scousers, and both are equally angry at the media's representation of the city. Angry that the Bulger case was represented as somehow indicative of Liverpool's social breakdown, that Liverpool brought Heysel and Hillsborough on itself. One Times headline asked, "

As Jamie Bulger was led to his death, what were the people of Liverpool doing?" Where was the city's fabled community conscience when it was needed, the paper asked? Liverpool had been indicted for not even living up to the values it tried to sell to the rest of the country. Yet at the trial it emerged that 37 people had witnessed Jamie Bulger's abduction, and some of them had reported it to the police. One woman stopped the two boys and, on being told that Jamie was lost, offered to go to the station with them. Others approached them, were told that he was their little brother and then ticked off the boys for not treating him more kindly.

The irony is that there is one large group of people who see Liverpool in nothing but a positive light. They have never heard of scallies or shell-suits. They identify it in a manner very similar to the way Liverpudlians do themselves. They are called Americans. Liverpool is currently involved in a sophisticated process of re-invention.

Drawing on the massive success of tourism to the renovated Albert Dock, the city is now busy marketing itself in the US. New York has approached Liverpool and asked to be named as its sister city, with the result that plans are now underway for a joint millennium night celebration, with a satellite link-up between the two. It makes sense: New York and Liverpool face each other across the Atlantic, a huge proportion of Americans are descended from those who left the old world from this port on England's north-west coast, and everybody has heard of the Beatles. Last October, the Crowne Plaza Hotel, Holiday Inn's leading brand, opened near the Albert Dock, and two other chains have followed. It's hard to find a room. All told, 20 million visitors from around the world are expected in the city this year alone.

And there is another, grander plan: to turn Liverpool into the Barcelona of the new millennium - it is already a magnet for young clubbers from all over Europe. This idea has its origins in the beginnings of a regeneration project spearheaded by a company called Urban Splash. The aim is to turn Liverpool city centre into a place for urban living and working, with the conversion of old warehouses, schools and factories into loft and office accommodation (in much the same way as central Manchester has been transformed in recent years).

You can see the evidence everywhere: in the chrome bars and restaurants now opening up on Bold Street, once Liverpool's most elite shopping area but by the 80s reduced to a row of charity shops; in the bus-loads of people coming in for the nightlife; in the graduates of the city's universities (Liverpool has a 40,000-strong student population) who are not moving to London or wherever, and are instead staying and setting up web-design companies and recording studios.

Urban Splash's two founders, Tom Bloxham and Jonathan Falkingham, began by acquiring a set of sheds on Wood Street in the early 90s and turning them into Liverpool Palace, a set of workspaces for young entrepreneurs. Bill Maynard, one of Urban Splash's directors, moved to Liverpool from the north-east 20 years ago. He worked as a planner for the council during the Hatton years, a period when cities such as Newcastle and Glasgow were regenerating. Liverpool's disastrous decline in the 80s, he says, was partly caused by a fatal collision between Militant and those aspects of the Liverpool identity that set it apart from the rest of the country.

"There's something in the Liverpool personality that's quirky and individualistic, and I love that," says Maynard. "Politically, there's always been a waywardness. Whereas in other cities there was a longstanding tradition of Labour control of the local authority, Liverpool always had huge fluctuations. But then it went into a period of economic decline that was worse than other cities, and at the nadir of its fortunes the weaknesses of the local Labour Party were exploited by Militant. In other places, there was a robust political core that could work pragmatically to use government to help renew their cities. Here, Militant manipulated the old Labour Party and embarked on a fundamental attack on the government. They said, ÔLet's draw a line in the sand, because we've got a revolutionary view of how things can change.' It was dishonest in the promises it made. There was a lot of posturing but not much substance."

It is an illusion to believe that Liverpool was an innately Labour stronghold: in the 50s, the council was Tory, while in the 60s and 70s, it was Liberal. The socialism that created the Labour Party has no history here as it does in Manchester and Sheffield, because Liverpool was not an industrial city with a stable, unionised workforce. Dock labour was casualised until the 60s, and was not regarded as a job for life, complete with a pension and rights. The socialist tradition that grew out of religious non-conformism barely existed in this city with a large Catholic population.

One of those who benefited from Urban Splash's early developments was Robert Swerdlow, Michael's son. Robert had started working at MKE just before it closed, but what he really wanted to do was to go into the music business, having been close friends with Henry Epstein, the nephew of Brian Epstein, who, in turn, had been a friend of Robert's Uncle Alan: "I was always around their house and grew up thinking there was nothing unusual about seeing gold discs on the wall with Help! printed on them." Robert heard on the grapevine that there was a new place where you could rent an office for £25 a week, set up shop, from where he discovered and managed a group called The La's, which later became Cast.

It was a bit of a coincidence that Liverpool Palace was on Wood Street, because that was also where Robert's great-grandfather had started his tailor's workshop and where his grandfather had started MKE. "It was critical as a springboard," he says. "There was a synergy because you had under the same roof a design company, a record company, a studio and the offices of the club Cream." His office is now in London, but he still lives in Liverpool. He says what he got from the city is an attitude. "It makes me feel very cocky, very confident and gives me a self-awareness of being different. When you're meeting people in London, you realise you're 100% different from those characters. The sharp wit is important, but it needs to be complemented by something, or you're just a street-wise scally. For me, it was being brought up in a good family with a good morality. Being from Liverpool gave me a sensitivity for people, an understanding for the working class and for socialism."

It is said that Tony Blair is privately pleased that Liverpool has a Liberal Democrat council, because the Labour Party doesn't have to worry about it - the Lib-Dems will implement the Blairite agenda, anyway, and can be publicly criticised if it steps out of line. The council recently appointed a new head of communications, Daniel Harris, who came from the department for international development, where he worked as special advisor to Clare Short. He says that the council's economic development unit has decided that the city's heritage has never been to make things, but to move them about, and is therefore concentrating on encouraging service industries. It is helped by market research showing that the British public is starting to like the Liverpool accent again; it sounds friendly and informal. This, perhaps, explains the arrival in the city of Capital One Bank, which has opened a new call centre in Speke, the most deprived area of the city. The council is also looking at the development of e-business.

Urban Splash's Maynard comes from a family of coal workers and shipyard workers. "I have a warm feeling about making things," he says, "but Liverpool was always a service city. Its period with an industrial base was very brief. The future for Liverpool is leisure and education - bars, restaurants, call centres, though the salaries are not very good and I find it difficult to come terms with. It doesn't seem to have the dignity of physical labour to me."

The question is: how will any of this affect the old Scousers, the descendants of those hundreds of thousands of people who once lived around Scotland Road and made their living from the docks? The new towns and council-house suburbs built around factories have turned into wastelands of deprivation, breeding a jobless underclass who can survive only in a black economy.

Ironically, it seems that the identity of Liverpool is about to go into reverse. It is on the brink of becoming what it was before the factories got built, a middle-class city of white-collar workers - the Liverpool gentlemen - ringed by satellite suburbs that will either be brought into that economy or will turn into no-go areas, controlled by drug trafficking. The parallel is New York and The Bronx.

The regeneration of Liverpool has taken place in those areas of the city most closely associated in the minds of those outside it with crime and poverty. Say Toxteth in London, and people think, "Riots". Say Toxteth in Liverpool, and they think, "Yuppie gentrification". Toxteth is now Liverpool's Islington, and the people who live there are web-site designers, one of the city's big success stories.

Twenty-five years ago, at the start of the economic collapse, Stephen Yip, brother of the actor David Yip, started a charity, Kind, that took children from Liverpool on residential courses in South Ayrshire to expose them to a structured environment and to tell them that they could succeed. Kind is now a national organisation with its headquarters in Toxteth, where Yip himself lives in a Georgian house. His neighbours are barristers. He's always lived in the city centre. He was born in Chinatown. His father was a sailor from mainland China, doing long-haul runs to Asia on the Blue Funnel line, and the age gap between the children mirrors that between voyages. "I'm not Chinese," says Yip. "I'm a Scouser. I didn't learn to speak Chinese because my dad was away. I go into a Chinese restaurant and people expect me to be able to order in Chinese, and then I say, ÔNumber 10, please.'" What made him different from the children he works with is that he passed the 11-plus and got a place at Quarrybank, Lennon's old school, and so travelled every day to the suburbs and saw that life could be different.

But most of the children Yip works with won't get jobs in the call centres because they don't have the right kind of Liverpool accent, he says. So what will happen to them? "They'll get by. There's always been a black economy. It's passed from father to son." He tells me about a 22-year-old he knows who has almost no literacy or numeracy and few social skills. "He's the sort of person Blair has got to get sorted out, because, if he doesn't, what's the solution?" Until the 60s, a young man such as that, unskilled and anti-social, could go to sea. Now he can't. He leaves Liverpool and goes to the south, where the people say, "See what Scousers are like?"

Or he stays. I took a taxi to Speke, not that far from where I grew up and what was in the 60s a solid, respectable, working-class area in which there were plenty of factory jobs. The taxi driver worked at Ford's Halewood plant until ten years ago. "Speke's the worst," he said. He showed me where the new call centres are being built. He showed me the new airport out of which Easyjet now flies, and said that if the tourism really grows, it will expand and there will be jobs for skilled manual workers and unskilled work, like baggage-handling.

Speke is not a high-rise city. It has wide, tree-lined roads and neat, well-built post-war semi-detached council houses, although some of them are derelict, with steel shutters to prevent arson. The taxi driver said that whenever he comes here now, he notices that the people look less healthy than in other parts of the city. He put this down to cheap supermarket food, dented cans of beans and bargain-basement frozen burgers. In the re-forging of the image of Liverpool as a middle-class service city - a scheme that I have no doubt will take place - what is the future of the residents of Speke, some of whom do indeed wear shell-suits, and take and sell drugs, and steal things?

The council is applying for European Capital of Culture status, so are they going to be working in the renewed urban core, serving bruschetta to visitors from Milan, Seville and San Francisco? No one whom I asked could answer that. The people of Speke are the old Scousers, and I view them with sympathy and solidarity and anger that they can be so discarded in the new economic reality of the city. But that future cannot be avoided. What's the alternative?

On the train back to London, I sat opposite a well-dressed man who ran a company in St Albans. We fell into conversation. I asked him what he did. "We sell shell-suits," he said. They should set up roadblocks outside Liverpool, preventing him from getting in.