Brown's budget - government will reform PFI

Chancellor Gordon Brown has said the government was sticking with the PFI, but would fine-tune it.

The government plans to improve operational performance and flexibility of PFI projects and reinforce the assessment of value for money in the schemes.

It will also "bolster public sector PFI procurement professionalism", it said in a statement on the budget, adding that PFI would "continue to play a small but important role in the delivery of modernised public services".

The RICS welcomed the move but called for deeper reforms, including measures to cut the high cost of bidding in order to allow smaller firms to win work and the creation of a standard form of PFI cost report. The institution is currently looking at how the initiative could be improved with the National School for Government.

Both the RICS and EC Harris backed a number of measures in the budget statement that should create opportunities for construction consultants in the housing, education and sports sectors.

The chancellor said public investment would be £26bn for 2006-07. This would rise in the years up to 2010-11 to £29bn, £31bn, £32bn and £34bn.

Graham Kean, head of public sector for EC Harris, said the introduction of real estate investment trusts would "introduce a fresh source of investment in the sector, boosting confidence and creating a whole new stream of opportunity".

He also supported the beefing-up of investment in schools from the current £5.6bn to £8bn over the next five years. The extra funds will support building work but also further education, which is now to be free up to the age of 25.

Kean said the latter could be "excellent news for our sector making it easier for young people to develop careers within construction".

Kean said a further shot in the arm for construction will come from £200m allocated for sports training facilities throughout the UK, which will be bulked-up by £100m from private sponsors and £300m from the lottery.

The RICS backed the chancellor's confirmation of the planning gain supplement, which will aim to ensure local communities see more of the planning gains generated in their area. However, it warned that "the scheme will not enable the government to achieve its housing objectives". The RICS said a tariff based approach would be a "more workable solution". "In its current form PGS will serve to curtail development of all kinds but will particularly impact upon development that does not take place on greenfield land." The RICS argued that payment of the supplement should only be required once the value of the planning uplift has been realised through the sale of the property.

Kean leant his support to Brown's announcement of a debate on next year's Comprehensive Spending Review and said the construction industry would have a critical role to play in the initiative. "Given that 37% of the targeted £21bn of efficiency savings were to come from better procurement, there is still enormous scope for both public and private sector clients and organisations such as EC Harris to further accelerate the delivery of efficiency savings through better supply chain management and increased use of Office of Government Commerce property and construction services frameworks."

To see the full government report on PFI, click here