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The chancellor has announced more than 拢100bn in capital spending over the next five years after confirming changes in the definition of debt to allow greater government investment.

Delivering her first budget this morning, Rachel Reeves said the only way to drive economic growth was to 鈥渋nvest, invest, invest鈥�, describing Wednesday as an opportunity to 鈥渢urn the page on the last 14 years鈥�.

鈥淭oday鈥檚 budget marks an end to short-termism,鈥� she added.

The Office for Budget Responsibility (OBR) has forecast that her plans will boost growth for the UK, but only in the short term.

Departmental capital spending limits are set to incease by an average of 3% each year to 2030, including a 9.9% real terms increase of 拢13bn next year.

Reeves noted that the government鈥檚 efforts to restore economic stability had 鈥渂egun to create the conditions that businesses need to invest鈥�, but that there was 鈥渁lso a need for public investment鈥�.

She said that the result of successive Tory chancellors cutting investment was 鈥渉ospitals without the equipment they need, school buildings not fit for our children, a dissipate lack of affordable housing鈥�.

Reeves announced 拢6.7bn of capital investment for the Department for Education next year, a 19% real-terms increase on this year. 

That includes 拢1.4bn to rebuild over 500 schools, including those affected by reinforced autoclaved aerated concrete (RAAC). This represents a 拢550m boost to the School Rebuilding Programme.

A further 拢950m has been committed for skills, 拢300m for improving colleges鈥� estates and 拢15m to begin delivery of Labour鈥檚 pledge to create 3,000 new or expanded nurseries.

She also promised a 拢3.1bn increase in the NHS capital budget.

Money for the NHS incudes 拢1.5bn for new surgical hubs and diagnostic scanners to build capacity for more than 30,000 additional procedures and more than 1.25 million diagnostic tests. 

Around 拢70m to invest in new radiotherapy machines to improve cancer treatment and more than 拢1bn will be spent to tackle RAAC in the NHS estate.

The Budget also included 拢5bn to deliver the government鈥檚 housing plans, 拢1bn to remove dangerous cladding, money to begin tunnelling to deliver HS2 to Euston, 拢3.4bn to 鈥渒ickstart鈥� the warm homes plan.

鈥淭he choices I have made today are the right choices to rebuild Britain,鈥� she said.

The new spending will be underpinned by Reeves鈥� plan, announced at the weekend, to use a new definition of debt, known as 鈥減ublic sector net financial liabilities鈥�.

She explained that this meant the government would 鈥渃ount the benefits of that investment not just the costs鈥�.

The government will establish four guardrails to ensure investments are value for money.

Firstly, financial investments will be delivered by expert bodies like the National Wealth Fund and will be expected to earn a rate of return at least as large as that on gilts.

The role of institutions to improve infrastructure delivery will be strengthened, while capital budgets will be set for five years and expended at every spending review.

Finally, Reeves said she would ensure there was greater transparency for capital spending with robust annual reporting of financial investments based on accounts audited by the National Audit Office and made available to the office for Budget Responsibility at every forecast.

She also announced the appointment of David Goldstone as the new chair of the Office of Value.

The Office for Budget Responsibility has forecast a slight bump in its growth forecast for 2025 as a result of Reeves鈥� budget - from its March estimate of 1.9% to 2% today.

However, growth rates are expected to fall to around 1.5% towards the end of the forecast.

鈥淏udget policies temporarily boost output in the near term, but leave GDP largely unchanged in five years,鈥� it said. 

鈥淚f the increased level of public investment were sustained, it would permanently raise supply in the long term and by significantly more than it does in the forecast period.

It estimates that Budget policies will increase spending by almost 拢70bn (a little over 2% of GDP) a year over the next five years, with a third of this going on capital spending.