A £28bn windfall from transferring Royal Mail pensions to the state will be used to pay down the deficit rather than to invest in major projects, according to the Treasury.
Officials believe the deal may be approved in time for Chancellor George Osborne to announce it in Wednesday's Budget and the cash could be available in weeks.
When the transfer takes place, the Government will be able to sell off shares, bonds and properties worth billions.
Some MPs hoped the money would be spent on infrastructure, such as building schools, roads or power stations.
But the Treasury has said it will go towards the coalition's main priority - reducing the deficit, which is annual shortfall between what the Government spends and how much it gets back.
The state is taking over the Royal Mail pension scheme - which comes with a deficit of nearly £10bn - in a bid to make the organisation more attractive to private investors when it tries to sell it.
Due to accounting rules, the move will not show up on Government books as debt as the £37.5bn liabilities will be absorbed into the rest of the state pension system.
The Communications Workers Union (CWU) has welcomed the state's decision to take over the pensions but opposes the privatisation plan.
"This (transfer) will protect the pensions of postal workers who have faithfully paid contributions for decades," a spokeswoman said.
"We've consistently argued that the Government has a moral obligation to take on the pension deficit, partly as owner of the company and for allowing Royal Mail to take a 13-year contributions holiday.
"They laughed in our face when we suggested it so it's been a long journey getting here," the spokeswoman added.
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