Reeves in £2bn pledge on social housing

Rachel Reeves will plough £2bn into affordable housing in an attempt to "sweeten the pill" of the spending cuts being announced at this week's spring statement.

- Jessica Elgot Richard Partington

The chancellor made the surprise announcement of the new cash - a down payment on the June spending review - as the Treasury tried to demonstrate that it remained focused on investment, rather than cuts.

The money will fund 18,000 affordable and social homes, part of the target to build 1.5m homes over the course of the parliament.

Meanwhile, the governor of the Bank of England, Andrew Bailey, warned yesterday that Britain faced "strong headwinds" as the chancellor sought to reboot economic growth.

One Whitehall source said Reeves's speech tomorrow would help remind MPs and voters of the significant spending and borrowing that the government had already undertaken, including spending on the NHS, free breakfast clubs, defence and housing.

Reeves will announce one of the tightest budget buffers on record, with the Office for Budget Responsibility expected to put the government £5bn in the red.

The chancellor has told ministers she intends to restore headroom - the emergency spending fund available - as a way to demonstrate fiscal credibility, but the margin will be tight.