THE Cathedral Square in Peterborough is an unlikely place to find Labour’s controversial asylum and immigration policies dramatically unravelling.

Every morning groups of newly arrived immigrants from Iraq, Afghanistan and eastern Europe congregate in the square, using mobile phones in their search for work. They were moved to the city in their thousands following the government’s decision to disperse asylum seekers from London and Kent throughout Britain.

However, the influx has provoked a serious problem for the new arrivals and the indigenous population. A Home Office analysis of Peterborough, one of the more popular “cluster areas”, shows public services in danger of being overwhelmed, racial tensions flaring up and crime rates rising.

A Cabinet Office memo, leaked to The Sunday Times, warns of “a situation in danger of becoming critical”. It adds: “Service providers are no longer able to cope with demand, users of the system are becoming disenfranchised and local communities are becoming disillusioned.”

The leak will be of concern to David Blunkett, the home secretary, who has tried to dampen public fears that asylum is out of control.

The Treasury has now agreed to a multi-million-pound emergency grant to try to rectify the problems by building a new asylum support centre. But local councillors believe the money, amounting to £700,000 a year, will do little to help.

Racial problems had been restricted to inner-city areas in a few large cities. But government policies appear to have fuelled problems in market towns and smaller cities, where ethnic minorities have until now successfully integrated.

When the government’s dispersal policy was announced in 2000 refugee charities, local councils and respected think tanks raised fears that such disruption and problems with racial harmony lay ahead. In Peterborough those fears have been borne out. Cambridgeshire police record a doubling in violent crime since 2000 as the number of immigrants arriving in the town rose tenfold.

Problems are emerging between recent immigrants and other ethnic groups in the city who had previously settled harmoniously. This summer more than 200 Iraqi Kurds and Pakistanis clashed in the North Bretton area. In another case an Afghan asylum seeker vandalised 38 cars because he felt let down by the local authorities.

Daniel White, 27, an auditor who lives in the city, said: “Over the past 12 months there have been problems and it has become more visible. There have been violent clashes and violence has increased generally.”

Mohommed Sabir, a Labour member of the Conservative-led council, said: “It is obvious that there are far more than are on the record and really there are too many. Many of the people who come here need to learn how to behave and they are not being advised properly on how to do that.”

The experiences of the recently arrived immigrants are mixed. Ondrej Malata, a 20-year-old Slovakian, said money was the only reason why he wanted to stay in Britain: “The money here is good but in everything else I prefer Slovakia. I am not sure how long I will stay here. I thought I would stay for three years but I am already thinking about going home.”

Ali Hamdan, a 28-year-old from Baghdad who has been in Britain since 2001, said: “English people are very nice to me. I don’t want to go back to Iraq, there is nothing there for me. I have married here and I want to stay here.”

The problems of Peterborough mark the first official admission, albeit in internal documents, that asylum is contributing to social problems. However, throughout the country the warning signs have been increasing.

After the dispersal programme began there was a murder in Hull, a throat-slitting in Glasgow and public protests in several cities. Bradford, Oldham, Burnley and Wrexham have seen violent riots and support for the BNP has risen. Last year the government faced huge protests over plans for asylum hostels in rural market towns. Local councils have blocked proposed asylum camps.

David Davis, the shadow home secretary, said that the leaked document showed that the real impact of asylum was at a local level. “It can create huge social pressures for local communities,” he said.

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