Billions of pounds of government borrowing could be spent on new infrastructure projects due to new self-imposed Treasury rules.
The “safeguards” will allow the government to borrow to invest “more effectively in the future”, Treasury chief secretary Darren Jones said.
This admission is the clearest sign, before the budget, that the government is ready to relax the budgetary rules it has imposed on public spending.
However, the move comes as the government faces a backlash from ministers following spending cuts elsewhere.
“Guardrails” for public spending on infrastructure are part of the government’s plan to encourage the private sector to invest in UK projects.
Under the plan, “expert-led checks and balances” will determine the quality of government borrowing for investment.
Currently, the amount of money the government can borrow for investment is determined by public debt.
But the Treasury did confirm it would relax its long-held debt reduction target to borrow billions more to invest in a series of major projects.
Ahead of this month's Budget and this morning's meeting of Britain's new infrastructure taskforce, Treasury Chief Secretary Darren Jones said the “safeguards” will allow the government to borrow for invest “more effectively in the future”.
Jones said the new safeguards contrast with former Prime Minister Liz Truss's “borrowing for unfunded policies”.
“We need expert, institutional and independent guardrails to ensure that everyone has confidence in how the government spends taxpayer dollars,” Jones said.
“What I am confirming today is that we have put these measures in place for capital investment and infrastructure provision.”
These involve the creation of a National Infrastructure and Services Transformation Authority which will oversee a 10-year strategy for a portfolio of major projects, aligned with a series of spending reviews, and long-term budgets for capital expenditure, for example in buildings, roads and rail.
The National Audit Office and a new Office for Value for Money will also provide ongoing assessments of “megaprojects” such as major train lines.
The government said the measures would “depoliticise” infrastructure decisions and provide “independent checks and balances” against the government, such as the Office for Budget Responsibility.
In the Government's view, this system will provide independent quality control over spending on major projects, which have been plagued by delays and overspending, and which have proven more costly in the UK than in other major economies.
It is being put in place to ensure that the expected significant increase in capital spending will be focused on projects that generate the greatest long-term returns for the UK economy.
Ministers are actively highlighting the existing fiscal rule that the national debt as a proportion of the economy must fall within five years to explain the poor quality of Britain's public services.
They say the debt rule limited some necessary investments and did not prevent shoddy investments in failed projects.
As this rule is relaxed with a change in the debt target, this system will be the brake on this type of spending.
A minister told the BBC: “When we invest in projects, we will ensure they offer real value for money, deliver a return on investment and benefit communities.
“The Conservatives wasted billions of taxpayer dollars on government projects that never came to fruition and aimed at buying votes. The budget will aim to change that.
These comments give the strongest indication yet that the government will change its own fiscal rules on borrowing.
The announcement comes as the government faces scrutiny over how it will choose to spend the money in the budget at the end of October.
Ministers wrote to the Prime Minister on Wednesday asking him to rethink the spending review at the last minute because they fear it could lead to a huge reduction in their own department's budgets.
Those affected included Deputy Prime Minister Angela Rayner, Justice Secretary Shabana Mahmood and Transport Secretary Louise Haigh.
Jones' comments come alongside the government setting up an infrastructure spending “task force” – a group of private sector bosses including HSBC, Lloyds and M&G – which will advise the government on areas in which to invest in infrastructure.
“Increasing investment in infrastructure is a critical part of delivering on our number one mission to grow the economy and create jobs,” said Chancellor Rachel Reeves.
