LONDON Chancellor George Osborne will invest 5 billion pounds in schools, science and transport projects, the government said on Tuesday.
The investment will be funded in part by departmental savings over the next 2-1/2 years. Full details will be announced on Wednesday, when Osborne makes his half-yearly budget statement to parliament.
He will also update official economic growth and government borrowing forecasts on Wednesday, which are expected to show a deterioration on both fronts.
Osborne, who is struggling to complete a tough austerity programme to bring down British government borrowing, is under pressure to do more to boost the flagging economy.
A spokesman said Osborne would announce savings at government ministries of 1 percent in 2013-14 and 2 percent in 2014-15, and that the new investment would be delivered within his fiscal plan, aimed at slashing a record budget deficit.
"We are committed to solving today's problems, but also preparing for tomorrow's challenges by investing in our future and equipping Britain for the global race," a Treasury spokesman said.
Osborne has pledged to stick to his deficit reduction programme and ruled out big giveaways to boost growth, meaning investment must be paid for largely by savings elsewhere.
Lacklustre growth has threatened to further derail the Conservative-Liberal Democrat coalition's economic plan and force Osborne to either further extend the period of austerity or to cut deeper to try to keep it on track.
Osborne initially pledged to virtually eliminate Britain's huge budget deficit by 2015 but is now targeting 2016/17.
"Many departments are actually over-achieving on savings. Underspends are averaging about 3 billion pounds a year and it is certainly possible to drive further efficiencies through departments," a spokesman for Prime Minister David Cameron said.
(Reporting by Matt Falloon and Mohammed Abbas; Editing by Catherine Evans)