The work at HM Naval Base Clyde at Faslane is expected to start in 2017 and take 10 years to complete.
New infrastructure required includes ship lifts, sea walls and jetties.
From 2020, Faslane will be home to the navy’s entire submarine fleet.
Speaking from Faslane, Mr Osborne said: “Today’s announcement of more than £500m demonstrates the UK government’s commitment to investing in the infrastructure and capability to ensure that Faslane remains the centre of UK submarine operations for the next generation.”
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