The Autumn Statement 2012 will be made by the Chancellor of the Exchequer, George Osborne today.
The Statement provides an update on the Government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility.
It has become traditional for strategic leaks to emerge regarding the statement, including from the Prime Minister himself.
David Cameron has hailed plans to squeeze spending in most Whitehall departments and use the money to build new schools and transport schemes. All but four departments will be asked to save an extra 1% next year and a further 2% the following year.
The PM said the £5bn saved would be spent on capital projects to kick start growth and make the UK "work better".
Treasury sources say that Wednesday's Autumn Statement will spell out how £1bn will go towards building 100 new free schools and academies, creating an additional 50,000 new school places.
Health, education, international development, HM Revenue and Customs and nuclear decommissioning will be protected from this latest squeeze.
Frontline services in all other departments will also be shielded with a bulk of the savings coming from administration and back office staff, government sources say. But Whitehall departments will be expected to cut day-to-day spending by 1% (£950m) in 2013/14 and 2% (£2.5bn) in 2014/15.
CBI Director-General John Cridland said: “Ministers are absolutely right to squeeze every last penny to boost growth when public finances are so tight. Targeting money at schools, transport and science will not just create construction jobs today but invests in our competitiveness tomorrow.
“Capital investment has the biggest impact on growth and getting our economy moving, so it’s right to shift the focus from current spending, without borrowing more and deviating from the critical path of debt reduction.
“The CBI has been calling for immediate investment at targeted high-impact projects - such as the A14, the A303 and the M4 relief road – projects that can provide a growth injection to the regions.
“We want to harness the same spirit which delivered the Olympics, to get the wheels turning on these vital infrastructure upgrades.”
It is also expected that the government will change the way it raises money for public projects such as schools and hospitals to ensure a better deal for taxpayers. Under the plans for PFI, the taxpayer will take a share of up to 49% in new projects.
The current PFI regime has been criticised as being too generous to private contractors. As well as allowing the taxpayer to take a share in profits from public infrastructure projects, the coalition says the new scheme, expected to be called PFI 2, will be quicker and more transparent.
It will allow the public sector to appoint directors to the boards of individual projects, as well as requiring the projects to publish financial performance figures every year. The government has also renegotiated existing PFI deals to save £2.5bn.
