Tightening labour markets and constraints on public-sector pay are starting to create problems for local authorities trying to recruit staff.

The Local Government Association - in a late bid for funds from the Comprehensive Spending Review now in its final stages - warned the Treasury this week of “increasing disparity’’ between public and private-sector earnings. This came within days of the admission by the Governor of the Bank of England, Eddie George - a professional pessimist - that he saw no evidence for the economy going into recession.

If demand for labour remains high next year, local authority unions may seize the chance to press for pay increases above inflation.

Local recruitment pressure points this spring are information technology and occupational therapy. Educational psychologists and accountants, who can demand higher salaries in the private sector, are also in short supply.

A survey by the Local Government Management Board, the umbrella group for council employers, reported that 16 per cent of local education authorities in England and Wales ``had difficulties’’ in recruiting teachers.

This compares with 38 per cent of authorities responsible for social services which had difficulties with social worker recruitment and 13 per cent of councils finding it hard to acquire home helps.

But many councils are still shedding jobs. Jim Chrystie of the LGMB said:

“If we look back over the past two decades some 10,000 people a year have been leaving local government employ, but in the past couple of years it has been 20,000.’’ Teacher numbers have been falling lately, though “other services’’ in education have been one of the few areas of local authority employment to have expended between last Easter and this.

Partly as a result of budget cuts, employment in social services fell by 1.5 per cent overall in the year to March 1998. The continuing slump in local authority building and repairs showed up in drops of 6 per cent and 5 per cent in construction and engineering jobs.

In July the Government is due to publish a three-year plan for public spending based on its “comprehensive’’ review of departments. In a submission to the Treasury the Local Government Association asked for pound;7.4 billion (in addition to existing revenue support grant plus inflation) over the next three financial years, in order to protect existing services and help councils combat the year 2000 computer problem.

Neil Kinghan, the LGA finance director, said extra was also needed for pay. Figures show private-sector earnings increasing by 5.6 per cent as opposed to 2.6 per cent in the public sector.

Promises by Education Secretary David Blunkett that money was being earmarked for schools were welcome, Mr Kinghan said, “but other local services are under pressure and these pressures have got to be recognised.’’ He predicted that when councils came to make their budgets for 1999-2000 social services would be most at threat.

Analysis, page 23