Government spending: £3bn to be lavished on schools and transport

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A £3bn capital spending programme will aim to improve Britain's road network, refurbish schools, build thousands of new social homes and bettering domestic energy efficiency.

The infrastructure projects, brought forward by two years, are also intended to provide a lifeline to Britain's beleaguered construction industry.

The Chancellor Alistair Darling announced that a £700m pot would be handed to the Department for Transport (DfT) as part of the £3bn infrastructure spending plan.

The bulk of the money will be spent on improvements to the nation's road network, including motorways and local traffic management schemes. The DfT was still drawing up details last night. It promised details "very soon".

The rest of the transport money will be spent on adding more carriages to the rail network. The procurement of 200 extra carriages has been brought forward to this financial year. The Treasury said British companies were being used to build the carriages to provide a boost to the country's engineering sector. It is an acceleration of an existing Government commitment to add 1,300 carriages to the rail network by 2014.

In education, roughly £800m of the £3bn increase in capital spending will go on an early facelift for hundreds of state schools. All 150 local authorities in England are to be asked to draw up lists, before Christmas, of modernisation projects which could be brought forward by at least a year.

In addition to increasing the number of primary and secondary schools in line for refurbishment, part of the cash will also be used to provide new pupil places in schools – helping popular and oversubscribed schools to expand.

Some of the money could also be used to build facilities for delivering the Government's flagship diploma programme or adapting schools so they can take in disabled students.

Thousands more social homes will be modernised or renovated in a drive to cut waiting lists for council houses and provide building jobs. Mr Darling announced an extra £775m earmarked over the next two years to boost Britain's stock of affordable houses and regenerate run-down areas.

It comes as doubt grows over the credibility of a government target to construct three million more houses by the year 2020. The cash injection comes on top of a £700m programme announced two months ago to build social rented homes.

But the National Housing Federation warned that government rules that require housing associations to raise 60 per cent of a property's cost privately had to be reformed.

Its chief executive, David Orr, said: "The situation is so serious that associations won't be able to build new social homes next year. It would be a catastrophe for the millions of people on waiting lists for affordable housing – and would compound the housing crisis."

An extra £100m of funding was promised for Warm Front, the Government initiative to improve insulation and heating for vulnerable and low-income households, with a further £50m to be spent a year sooner than planned. The Warm Front grant provides a package of insulation and heating improvements up to the value of £2,700. The scheme has helped 1.8 million households, saving them an average of £300 a year on energy bills.

The Chancellor also announced the extension of the Renewables Obligation, the main financial support scheme for large-scale generators of renewable electricity, from its end date of 2027 to at least 2037.

Brown on Brown

I'm not happy about having to pay more NI

Andy Brown, 39, and his wife Susan, 37, are both teachers in Northern Ireland. They have a 10-year-old daughter, Leah, and a six-year-old son, Timothy. Their joint income is roughly £60,000.

"As teachers, I guess Susan and I have the luxury of set salaries and relative job security compared to many of our friends. But we see the consequences of the current economic situation in our own social circle and in the schools where we teach. In the past couple of weeks, there have been two children in my daughter's class who were suddenly taken out because their parents had lost their jobs and were moving to look for work.

"But while we might have slightly more job security, like everyone else the rising cost of living is more than noticeable. The weekly food shop has become more and more expensive whilst petrol has been exorbitant all year – although thankfully it's coming down a bit in recent weeks.

"I doubt the VAT reduction will make a huge amount of difference to our everyday spending but it's certainly one of the most concerted gestures I've seen in a budget in a long time. Ultimately anything that makes a little difference to people's lives is welcome. I'm not very happy about having to pay more National Insurance contributions in a few years' time – Ialready feel like we get rather bad value for money with NICs.

"Obviously tax credits for our children will be welcome and I'm pleased to hear that the Government wants to make sure fuel companies pass on price reductions quickly."