Budget will reverse cuts in public investment, Reeves says as she alters debt rules

Rachel Reeves will promise to reverse huge cuts in public investment in her budget next week after she confirmed that rules limiting her spending power would be overhauled to allow the government to free up as much as £50bn for infrastructure spending.

- Phillip Inman & Richard Partington

The chancellor said she would revise how the Treasury calculated shortfalls in the government budget over the rest of the parliament to free up funds to invest in public infrastructure.

Reeves announced during a trip to the International Monetary Fund's annual meeting in Washington yesterday that she would change Britain's debt rules - as revealed by the Guardian on Wednesday. She said she was not prepared to see public investment fall further behind the levels seen in other major economies.

Experts have calculated that the new rules could free up more than £50bn over five years compared with the plans by the previous Conservative administration.

Reeves told reporters in Washington: "I can confirm today that I will be changing the way that we measure debt in the budget statement next week, but I'll set out the details of that to parliament." She did not specify which of the debt measures under consideration had been chosen, but the Guardian has been told by a senior government source that she will target public sector net financial liabilities.

That would take into account all the government's financial assets and liabilities, increasing her latitude to borrow for investment in long-term infrastructure.