The spiralling cost of housing is leading to serious recruitment problems for both public and private sector employers, according to an official report.

It suggests there are now serious shortages of key workers like teachers, nurses and social workers throughout the country.

And it warns that the problem has spread to other sectors, with a shortage of bus drivers, skilled construction workers, shop assistants and hotel workers in many areas.

The Local Government Association (LGA) report says councils should be given new powers to tackle the situation, including the right to say that certain areas can only be used for affordable housing.

First time buyers

Among the problems highlighted was a 167% increase in teacher vacancies in Surrey between January 2000 and January 2001.

Councils need more funds and more freedom to tackle their problems

Paul Bettison - LGA

Key workers in the county could expect an average salary of �20,000 - which entitled them to a �70,000 mortgage in an area where the average house price was over �220,000.

In Cambridge average house prices were six times the annual wage and more than half of the city's workforce could not expect to buy a home.

Macclesfield Borough Council said high property prices were driving out first time buyers, leading to fears about the survival of the community as young people left.

And in Crawley 50% of businesses said recruitment was being hampered by the cost of housing, while a third said it made keeping staff more difficult.

'More funds

LGA housing executive chairman, Paul Bettison, told the new Housing and Planning Minister, Lord Rooker, that action was needed.

Mr Bettison said: "Local councils need more funds and more freedom to tackle their problems locally, many have good ideas for doing this, often working imaginatively with local employers to invest in affordable housing schemes."

The report set out some of the key changes demanded by councils, including:

• Increased public funding for the Starter Home Initiative
• Local discretion for the definition of "key worker"
• Planning rule changes to encourage more innovative housing developments.