The funding is aimed at improving local infrastructure to support economic growth and boost the delivery of housing, said Communities Secretary Eric Pickles and Transport Secretary Justine Greening.
An additional £270m will be made available through the Government's Growing Places Fund, which provides local areas with funding to "boost economic growth" by getting the "required infrastructure built to build new homes". This is in addition to the £500m already allocated under the fund.
"We know that new infrastructure is one of the most important ways to get the economy going again, support new homes and create long term jobs and growth," said Pickles.
The remaining £150m funding is aimed at large scale infrastructure projects in core cities and will be financed through Tax Increment Financing Type 2, which lets local authorities borrow against future growth in business rates for 25 years.
The announcement of the new funding follows a speech on infrastructure by Prime Minister David Cameron last week in which he set out a vision for the UK's infrastructure in the 21st century, describing new infrastructure as 'the magic ingredient' to long term economic success.
"Transport infrastructure projects are often the key to unlocking jobs and growth potential, where new link roads or junction improvements can be a catalyst for investment in new regeneration sites of homes and businesses that otherwise might not happen," said Greening. "Feedback from the first round of our funding is that lots of projects are transport focused which is why I am delighted to provide £150 million from my Department towards the additional £270 million for the Growing Places Fund."
The Lancashire Local Enterprise Partnership has approved its first three schemes to receive £7m of Growing Places funding. The schemes are ready to start work immediately and it is estimated they could provide 1,550 new jobs, encourage up to £95m private sector investment and create 577 new homes, the Government said.
The Local Government Finance Bill included proposals to boost growth, reduce deficit and drive decentralisation of control over local government finance, the Government said. It allows authorities to retain their business rates growth in designated TIF and Enterprise Zone areas.
The Growing Places funding has come from central Government underspending, the Government said. Details of the competition to allocate the funding is expected in the spring.
