City bosses say curbs on pay are impossible

The Chancellor appealed for wage restraint in his 'Green Budget' but the shortage of skilled workers means some salaries are rocketing. Barry Clement, Labour Editor, warns that the market is king.

Incomes would continue to be driven upwards despite Gordon Brown's pleas for pay restraint, the private sector warned yesterday. Shortages of skilled people from electricians to senior City information technology specialists would force employers to increase pay rates.

One computer trouble-shooter recently changed jobs in the City and saw his salary rise from pounds 65,000 to pounds 90,000. In the London area the pay of self-employed electricians has risen from pounds 6 to pounds 13 an hour over the last year.

While in the past unions and professional associations may have been able to exercise a moderating influence on wages, these days the market is king. During the recession the laws of supply and demand depressed levels of pay, but an increasing clamour for skilled workers has meant rocketing salaries.

National statistics for the whole of the private sector - which show wage settlements of between 3 and 5 per cent edging up slowly - mask burgeoning inflationary pressures.

Bank of England officials who try to look beyond official data, remarked in their recent quarterly report that many of their contacts expected higher pay increases in the new year. In particular the bank discovered shortages in service sector occupations such as accountancy, information technology (IT) and law. The report said that some computer specialists - recruited to deal with technical difficulties associated with the millennium and the introduction of the euro - were being awarded "golden handcuffs" of an extra year's salary to ensure they stayed put until 2,000. Rob Wirszycz, director-general of the Computer Software Services Association, estimated a shortfall of up to 50,000 IT experts. One head-hunter said salaries were rising by the week. Responding to the Chancellor's call for restraint, Mr. Wirszycz said: "There are extreme demand conditions faced with a relatively constrained supply."

Adrian Fox, director of Quarry Dougall, who specialises in recruiting lawyers, said pay restraint was "Simply not commercially viable". He said there was a marked shortage of newly qualified solicitors. Also, United States firms had been 'bidding up" salaries. A newly qualified lawyer could expect pounds 30,000 as a starting salary from a British firm, but up pounds 55,000 from a US competitor.

Lower down the income scale, members of the Amalgamated Engineering and Electrical Union are due to respond today to the offer of a 30 per cent pay rise over the next three years. Ken Jackson, general secretary of the union, was doubtful whether they would accept the increase which would give them a notional pounds 9 an hour in 2,000.