A £250 million super-prison that could hold up to 2,000 inmates will be built in North Wales, Chris Grayling announced.
The Justice Secretary said the new jail is expected to bring around £23 million a year to the regional economy and create around 1,000 jobs.
Mr Grayling first discussed plans for a super-prison in January as he announced a raft of prison closures covering some 2,600 inmate places.
Chief Secretary to the Treasury Danny Alexander confirmed to the Commons that £100 million would be invested in the construction of the prison in 2015/2016 as part of a multi-billion investment programme.
The project will ultimately receive £250 million of investment from the Government.
The Government could be forced to raise £6 billion in new taxes after the 2015 General Election despite the Chancellor's latest round of spending cuts, experts have warned.
The Institute for Fiscal Studies (IFS) said that, despite the £11.5 billion worth of reductions for 2015/16 set out by George Osborne, savings of a similar magnitude had already been pencilled in for the following two years.
IFS director Paul Johnson said there would have to be a "serious debate" on whether fiscal retrenchment on such a scale could be achieved through more spending cuts alone, or whether taxes would have to rise as well.
He said: "At almost any other moment in the past 60 years, announcements of spending cuts of this scale would have created a storm.
"Returning to an 80/20 split for the consolidation as a whole would mean a £6 billion tax increase in the next Parliament. Coincidentally this is pretty close to the average tax increase seen in post-election budgets in recent decades".
An MP has warned that Tour de France riders in next year's race could "come a cropper" on British potholes.
Conservative Julian Smith, whose Skipton and Ripon constituency will host parts of the Yorkshire stages of the Tour in 2014, asked Chief Secretary to the Treasury Danny Alexander for road improvements in the region.
Mr Alexander said some of the money earmarked for road maintenance in last year's Autumn Statement could go towards making sure the roads are safe for riders.
Turning to Mr Alexander in the Commons, Mr Smith said: "We've also got the Tour de France coming next year and there's a big risk that the cyclists come a cropper on our potholes.
"Could we have a conversation soon about how North Yorkshire could get your cash quicker?"
Mr Alexander replied: "I dare say that some of that could be used to make sure that the Tour de France passes off without pothole-caused incidents."
Chief Secretary to the Treasury Danny Alexander set out the Government's plans for £100 billion-worth of capital spending today.
Here are some of the key figures:
- £10 billion to clear the "backlog" of repair and investment in schools
- £28 billion over six years for the enhancement and maintainance of roads
- £3 billion over three years for 165,000 new affordable homes
- £370 million to improve flood defences in 2015, which will increase every year to 2020
- £250 million to extend superfast broadband to 95% of the population by 2017
- £200 million to digitise HM Revenue & Customs' customer service
- £150 million for improved health research, including the study of dementia
- £100 million for a new prison in North Wales
The Chief Secretary to the Treasury said he will look to sell off £15 billion-worth of public assets by 2020.
Danny Alexander told the Commons: "£10 billion of that money will come from corporate and financial assets, like the student loan book and the other £5 billion will come from land and property.
"Government is the custodian of the taxpayer's assets. When we no longer need them, we should sell them back at a fair price, not act like a compulsive hoarder.
"Too often, local and national government sit on an area of land which could be put to good use for the economy, housing or schools.
"Today we say this to businesses and to communities - if there are any publicly-owned sites out there that you can make economic use of then tell us".
Danny Alexander said the Government would not borrow any more to afford the £100 billion-worth of capital spending announced by the Chancellor.
The Chief Secretary to the Treasury told MPs: "As we move from repair to renewal, we also need to invest in the fabric of our nation.
And I can do that because we have chosen to find savings from day-to-day budgets which allow us to recycle billions back into long-term capital spending, not the easy choice, but the right one".
Mr Alexander added the spending was "all at a price we can afford to pay without adding a single pound to our borrowing forecast".
Shadow Treasury minister Chris Leslie described the Government's infrastructure spending plans as "a lot of hot air" following the Chief Secretary to the Treasury's announcement in the Commons.
Mr Leslie said: "Haven't we heard it all before? Plenty of empty promises
"But I have to ask him - when is the Government going to pull its finger out and actually start to build some of these things?"
The Chief Secretary to the Treasury said there will be a further £250 million investment in superfast broadband to ensure it reaches 95% of the population by 2017.
The Chief Secretary to the Treasury announced the Government will invest more than £28 billion over the six years from 2014 in enhancements and maintenance of national and local roads
Danny Alexander said it was "the biggest programme of investment in our roads in 40 years".