Thomas Bebb cranes his head out of his living room window to assess how many of his neighbours are unemployed. He counts the number of flats in this three-storey, brown-and-grey pebbledash block (12) and pauses to calculate how many contain people in work. There are two: a scaffolder and a nurse. Looking across the courtyard at two other blocks opposite and to the left, he can't think of anyone with a job there either.

The high numbers of workless households on this estate help explain startling figures produced by the GMB last week revealing that nearly one in three households in Liverpool have no one in work. It is the legacy of historic industrial decline in this area, suddenly worsened by the recent round of public sector redundancies and a new, downturn-related disappearance of retail and manufacturing jobs.

For Bebb, who lost his short-term job as a parks gardener and grounds maintenance worker in November (because of cost-cutting by Liverpool city council, which is in the process of shaving 28% from its budget), the result is that he is living substantially below the poverty line. In practical terms, this means he has only the seven pound coins, plus 30 pence in smaller change, jangling in his tracksuit pocket to last him for the next 10 days, until his benefits are paid again.

He is anxious to find new work and is assiduous about searching for openings. Once a week he has been volunteering with his old employers, because he enjoys his work and wants to be the first back in if there's an opening, obligingly doing his old job for free.

But, with seven unemployed people in Liverpool for every job vacancy, looking for work is a dispiriting process. Local government cuts have led to widespread job losses throughout the city, where almost 30% of all work is public-sector funded. Inconveniently, the cuts have also led to the shrinking of resources available to fund many of the community centres and training courses that might previously have helped him and his neighbours back into work.

Years on the dole

Because unemployment is an experience shared by most of his friends, family and neighbours, Bebb, 45, finds nothing remarkable in his situation, and his description of how he gets by is not an appeal for sympathy, just a neutral account of reality.

His two eldest children, who are 21 and 23, haven't found work since they left school at 16, although they are looking. He remembers the years spent on the dole when he left school in a similarly bleak economic period in the early 80s – around the time that Margaret Thatcher was considering abandoning Liverpool to "managed decline", having been warned by her advisers that to try to save it would be like attempting to "pump water uphill".

But Bebb wonders if his children will find things harder. "It's normal for their generation. It's like that for every family around here, very few of their kids have got jobs," he says. More than a third of Liverpool council wards have youth unemployment rates twice the national average, according to council figures.

The nearest shopping parade to his flat on the Tees estate in Kirkdale, north Liverpool, reflects how little money people here have to spend. Two of the local pubs are shut, and of the first six shops on the street, four have recently closed. Along the street, it's not bright signs and awnings that make the facades distinctive, but the range of different materials used to board them up – sheets of wood, corrugated iron, metal shutters.

He sees old school friends in the jobcentre. "It's not a good way to meet them, but it's nice to see them anyway," Bebb says. By contrast with many of them, he thinks he's been lucky to have previously had steady work with the council, and then with a number private companies that were contracted to take on parks maintenance for the council, for much of his working life.

Losing his full-time grounds maintenance job two years ago was "the end of the world": for a while he found it hard to get out of bed and didn't want to talk to people. His mood lifted when he got a contract job working in the parks, but the work only lasted a few months.

He gets about £67 a week as jobseeker's allowance, but £15 is instantly deducted in child maintenance for the three of his five children who are under 16, none of whom live with him. Another £10 a week is also currently being deducted at source to repay a historic crisis loan that he was given by the jobcentre to tide the family over when he lost his job on another occasion about a decade ago, leaving him with just over £40 pounds. Out of that he is paying back a credit card debt of around £1,000, which he ran up when he first lost his full-time work 18 months ago, and he needed money to tide him over. (He went to his bank to ask for an overdraft facility to help him through that difficult time, and was told he wasn't eligible for one, but was invited to apply for a credit card instead.)

Bebb is paying this off at a rate of £33 a month, which he often finds very challenging. He spends £14 a week on recharging his gas and electricity accounts, so just under £20 is left for food, clothes, bus tickets and everything else. His rent is currently paid by housing benefit.

This is manageable, but only because he has radically changed the way he lives and eats. He goes once a fortnight to one of two local shops that offer heavily discounted food – packets of buy-one-get-one-free frozen burgers for a pound, two-for-£1 ice-cream tubs for his younger children who stay with him at the weekend, a bag of frozen chips, which, if he rations it correctly, he can get four meals out of. When that runs out he eats rice and pasta which he gets for 25p a pack at Tesco. "Sometimes you have to eat crap."

For breakfast now, he has toast rather than Weetabix. If this seems an unremarkable shift, he explains the subtle financial calculations behind the change: a loaf of bread contains, say, 30 slices, and costs around 40 pence, while a packet of Weetabix costs nearer £2 and only has enough for 12 breakfasts, so is less economical. Because he's not eating cereal, he buys less milk, and has switched to getting a litre of longlife so that he can eke it out for as long as possible without it going off. "You've got to think like that when you're shopping."

Unaffordable luxury

Bebb can't afford to smoke so he doesn't, and he says beer is an unaffordable luxury: the last time he got drunk was the day he was made redundant from his permanent job two years ago. "I was shocked, I was drowning my sorrows." He hasn't been to a football match since he was a child ("too dear") or to the cinema for years, hasn't bought new clothes since he lost his job. To relax he takes his younger children fishing on the canal, which has the advantage of being free.

The corner shops and chippy survive on the high street, but the discount store Bebb uses is further away and he hasn't bought his children a takeaway meal since he lost his permanent job two years ago (£10 is too much to blow in one go, he explains). "It's a struggle; it gets to you more mentally," he says.

Bebb looks healthy, but admits he sometimes feels wobbly when he does the 45-minute walk to the job centre (a £3.80 day bus pass is usually unaffordable), because he hasn't eaten enough. "Sometimes I've had to stop because I've had the shakes, dizzy."

He is happy to speak frankly and dissect his budget in unembarrassed detail because he thinks people have a distorted idea of how generous benefits are. He has noticed that the new government's tone has become more hostile to claimants, and thinks ignorance may be part of the problem. He doesn't expect empathy from a prime minister whom he describes as a multimillionaire. "If the prime minister can go out and spend £100 a night for his dinner and I don't get that a fortnight, where's the justice in that?"

For the moment, the doors of the Kirkdale Community Centre remain open on the high street, providing a place for local unemployed young people to spend time. At the front desk, Sheena Orton, who helps run the centre, explains that because of funding cuts, they are no longer able to offer courses in IT skills and CV building for the unemployed, the centre has lost 13 members of staff in the past year, and is struggling to stay open. She is still working full-time, but there's only enough money to pay her for 10 hours a week, so she does the rest for free. "It's the 18-24-year-olds who are angry. They want what everyone else has got – they all want a car, they want a phone, they want trainers. Some of them resort to crime and you can see that in the burglary stats," she says.

She is also worried about her own children; three of her four sons, aged between 20 and 38, have recently lost their jobs. "I don't think you could be more motivated than my sons and they can't get anything."

Nick Small, the Labour councillor responsible for employment within Liverpool city council, says the figure of one in three workless households comes as no surprise: "We realise that we have got a very tough situation in Liverpool. In some areas 40% of households are workless. This creates additional barriers to finding work. There's no culture of finding work in the community, no role models. It can be quite disempowering."

Through its Liverpool Into Work scheme, which has a centre on the Tees estate, the council is trying to assist the hardest to reach communities, but Small concedes that "if there aren't the jobs to go into", then helping with CVs and motivation was only part of the solution. "We need to do all we can to stimulate demand," he says.

Kim Griffiths, head of employment with the Liverpool in Work programme, said the combined effect of the downturn and public sector cuts meant that there were fewer jobs available in the care sector, in security, hospitality, tourism and manufacturing. "A lot of the jobs are part-time and funny shifts. There are a lot of people who really want to work. It is really soul destroying to keep getting knocked back. We are not thick scousers who want to sit on our arses all day. That is not the case. We are talented, creative people who really want to work."

Bebb is being helped by the programme: advisers are impressed by his "employability", and hopeful that new work could be found for him. In the meantime, to qualify for benefits payments, he is obliged to apply for at least two jobs a week, to phone at least two employers a week and turn up, speculatively, at the door of two potential employers every week.

Later his six- and eight-year-old sons are dropped off for him to look after for a while. They slide across the floor of his flat on their stomachs, cheerfully eating ice-cream and watching television. He is optimistic that things may be easier for them when they leave school, and hopes that they will learn a trade – electrician or gas fitter.

The children have other ideas. The younger boy wants to be a pirate, and the older one says his teacher has told him he is clever enough to go to university. He'd like to be a professor.