Chancellor George Osborne will confirm plans to invest an extra £5 billion in new schools and other "shovel-ready" capital projects over the next two years as part of an effort to deliver a swift boost to sluggish growth.
The investment in schools, transport, science and skills - to be officially announced on Wednesday as part of Mr Osborne's Autumn Statement - will be partially funded by cuts in day-to-day spending by other Whitehall departments.
It will include £1 billion to build or expand up to 100 new academies and free schools over the next two years, with the cash directed at areas experiencing a shortage in classroom places.
Mr Osborne and Chief Secretary Danny Alexander briefed Cabinet on the plans, which Prime Minister David Cameron said would "make a difference in our country and in our economy". They said that the cuts in departmental spending amounted to less than the total of £3 billion by which Whitehall departments have underspent their budgets over the past two years.
Speaking on a visit to a south London school, Mr Cameron said: "Government departments aren't actually spending up to their budgets so I think we can say to them 'You've got to cut back some spending, including some unnecessary spending', and let's put that money into things that will make a difference in our country and in our economy - more roads, more school buildings, more infrastructure to make our economy work better, to make our country work better."
But Labour said the announcement was an effective admission that the coalition Government's cuts in infrastructure spending since the 2010 election have been "a catastrophic mistake" which have weakened the economy.
And concerns were raised over the impact on services like the police and social care of cuts to current spending amounting to 1% (£950 million) in 2013/14 and 2% (£2.5 billion) in 2014/15.
The chairman of the Police Federation of England and Wales, Paul McKeever, said forces were already having to cope with "crippling" 20% budget cuts before Tuesday's "flabbergasting" announcement.
"We all accept these are austere times and savings need to be made but the police are already stretched to capacity," said Mr McKeever.
Meanwhile TUC general secretary Brendan Barber said the cuts would "put our stretched public services under even greater strain", while the £5 billion additional investment was "nowhere near enough to undo the damage caused by £22 billion of infrastructure cuts of the last two years".