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The Welsh government should be able to borrow up to £1bn to fund major new projects such as motorways or hospital buildings, the Liberal Democrats have said.

Under the Wales Act, passed last year, ministers can borrow up to £500m.

But the Lib Dems said this should be doubled to bring Wales and Scotland into line.

Labour claimed people would no longer believe what the Lib Dems say at elections in light of the coalition.

The plans will form part of the Lib Dems' general election manifesto, due out later this month.

Chief Secretary to the Treasury Danny Alexander said: "This increase in power would mean Wales would be able to invest in projects that could help build a fairer society, such as building schools and hospitals.

"Our record in government shows that we are the party that will deliver further powers and fairer funding to create a stronger Wales."

Roger Williams, the deputy leader of the Welsh Liberal Democrats, added: "By doubling the amount of money Wales can invest on infrastructure projects, the Welsh Liberal Democrats would be delivering a significant step in securing a stronger Welsh economy.

"Increased borrowing powers means that Wales would have greater scope to stimulate the economy with investment in significant capital expenditure projects. This is an announcement that would benefit all of Wales.

"This will allow Wales to catch up with the rest of the UK in terms of infrastructure and ensure that our nation is competitive in attracting jobs and investment."

The Welsh government is planning to use its existing borrowing powers to fund a new motorway to the south of Newport.

Labour AM Vaughan Gething said: "There are two things here - one is about having a sensible level for borrowing for the Welsh government, and sorting out fair funding overall.

"But the second and more important thing is I don't think people believe what the Lib Dems say - if you took a vox pop here I don't think many people would say you can put much credit by what the Lib Dems say at election time.

"They said at the last election they were a different sort of progressive party, and they have been very good Tories for the last five years, and that's what people here see and recognise."