The government will change its self-imposed debt rules to free up billions for infrastructure spending, the chancellor told the BBC.
Chancellor Rachel Reeves said there would be a technical change to the way debt is measured, which would allow it to fund additional investment.
She said this was being done “so we can grow our economy and create jobs and growth in Britain”.
However, Reeves' first budget next week is still expected to result in cuts to public services.
The government has committed to reducing the share of debt in the economy within five years.
The wider debt measure is expected to allow up to £50 billion more to be borrowed for investment, although not all of this is expected to be allocated to the budget.
The chancellor has indicated she intends to reverse what she calls “the path of decline” that she says she inherited from the Conservatives.
She suggested that this would have resulted in a fall in public investment from 2.6% of the economy last year to 1.7% by 2028-29, or £20 billion a year in terms of liquidity.
“If we continue on this path, we will miss other opportunities and other countries will seize them,” she said.
The Treasury had already signaled that a rule change was likely ahead of the October 30 budget.
The chancellor cited leading economists who support the move, including Mark Carney and Andrew Haldane, as well as former Conservative Treasury minister Jim O'Neill.
She also referenced comments made by a senior International Monetary Fund (IMF) official overnight.
The organisation's first deputy chief executive, Gita Gopinath, backed greater investment, speaking to the BBC: “I just want to emphasize once again that public investment is needed in the UK.
“If you compare the UK to the G7 countries, there has been insufficient investment and so that spending will need to be accompanied by some type of rules to stabilize the debt over the next five years.”
It is understood that the additional leeway cannot be used for additional day-to-day spending or to reduce tax increases planned in the budget.
