The Chancellor told the House of Commons in his budget speech on Wednesday that the government will reform the Construction Act to close loopholes in payment procedures
Gordon Brown also revealed that a government body will be set up in partnership with the industry to analyse how government policy affects construction.

On the issue of payment procedures, Brown said that work would focus on changing legislation on late payments. This initiative follows a survey by the SEC Group, a specialist contractors trade body, which highlighted late payment as a serious problem.

In his statement, Brown said: "Following concerns expressed by the construction industry on unreasonable delays in payment, the government will review the operation of the adjudication and payment provisions in the Construction Act to identify what improvement can be made."

SEC Group chief executive Rudi Klein said one of the key problems that had to be addressed was the "pay if paid" part of the act.

Under the current act, contractors can exploit a loophole that allows them to use the "pay when paid" excuse if the client goes bust.

Rudi Klein said: "It's ridiculous. If a client goes bust, the main contractor can say 'You're not getting paid until I get paid'. Klein said the government would also look at lengthening payment cycles from 30-60 days to 60-90 days. He said the details of the proposed changes has been studied by the Cabinet Office.

In addition, the government intends to outlaw contract clauses that stipulate that the party that refers a case to adjudication is required to cover the costs of both parties.

The government is to announce the creation of a body that will act as a forum in which the industry can discuss policy initiatives. The Construction Industry Policy and European Regulations will enable senior figures in the construction industry and Whitehall departments, such as the DTI, to discuss issues such as the PFI.

The chancellor also said he would maintain the level of investment in public sector building projects.

A RICS spokesperson said: "There was some concern that the growing deficit would result in less investment in the public sector, but that hasn't happened."