CHANCELLOR GORDON Brown hopes to launch a boom in new infrastructure construction on the back of changes in the allocation of taxpayer's money to government departments and local authorities.
Brown outlined his plans to reform the public spending system last week following a comprehensive review of fiscal policy. Details of the new regime are not expected to be published until next month, when Brown announces departmental spending priorities.
Under the new regime, Brown plans to guarantee that infrastructure projects are built by separating capital spending budgets from current expenditure (NCE last week).
In the past, local and national government has tended to raid capital spending budgets - money for new infrastructure - to pay for current expenditure on repairs and maintenance. This was especially true during public spending squeezes.
Brown also said he planned to increase total public spending to £29bn a year over the next three years, boosting budgets with revenue from public asset sales. The money is expected to go straight into infrastructure projects.
'Britain has an accumulation of unused and under-used properties and holdings. The realisation of assets will enable us to invest more in our transport infrastructure,' said Brown.
He told Parliament that the current annual public spending review had produced a 'year to year bidding culture, with all the problems of hurried end of year corrections instead of strategic planning of resources'.
He added that governments had paid 'too much attention to current spending and muddling through (and) too little attention to long term investment and reform.'
The new arrangements enable government departments and local authorities to think more strategically about how they spend money. They will be allowed to set budgets for three years at a time instead of just one.
Industry leaders welcomed the changes. 'It is the most significant statement we've seen in a very long time in terms of what it will do to our profession,' said ICE Director General & Secretary Roger Dobson.
'It signals a major shift in Treasury thinking, away from the present system of only looking at current expenditure. It offers more stability and means that departments will look at capital projects as strategic investments of national resources.'
County Surveyors Society outgoing president John Ekins was more cautious. 'Any move away from annualisation must be welcome but we have to wait for the second part of the review next month before we can quantify what we have.'
ICE economist Owen Simon added: 'Capital spending has traditionally been the easiest area of spending to cut. This statement addresses the features which discriminate against capital spending. The stability afforded by knowing your budget plans for the next three years allows for a more rational use of resources. It can enable you to strike advantageous deals, for example, with equipment suppliers.'