Construction firms are set to benefit from an £8bn spending bonanza to rebuild or refurbish crumbling schools.

The spending programme, unveiled by education secretary David Blunkett at the Labour Party conference, will see cash handed directly to 650 schools to “transform or rebuild” them. Thousands more will get cash to repair and rebuild classrooms, playgrounds and sports facilities.

Work is expected to start next year and continue until 2004. The government, in consultation with local authorities, schoolteachers and governors, will draw up a list of schools for demolition, which is likely to result in a series of private finance initiative schemes to build replacements.

About £6bn of the programme is additional funding to that announced in last month’s Comprehensive Spending Review.

It is also thought that design is expected to become a more important part of the programme. Bad design has been linked to poor results and disruptive behaviour among pupils.

The programme follows the £4bn New Deal for Schools programme announced in the 1997 budget, which has resulted in millions being spent on PFI school schemes.