The investment will go towards more maintenance and a huge uplift in renewals to increase reliability and punctuality for passengers.
The financial backing follows the record rail funding over the past five years as the government delivered the biggest rail modernisation programme for over a century.
The transport secretary also confirmed that there would be a new funding process for major upgrades and enhancements, which would provide more rigour in investment decisions to ensure public spending meets the needs of passengers and freight.
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Mr Grayling said: “This government is continuing its record funding in Britain’s rail network.
“As a commuter, I know how frustrating it is to be delayed by problems on the line.
“Passengers want a railway they can rely on and that’s where this huge investment will make a real difference to their everyday lives – by renewing more tracks earlier and increasing maintenance to deliver far better services.
“This investment is about boosting reliability and punctuality for millions of journeys, and we will do this alongside building major upgrades around the country and delivering new, faster, more comfortable trains.”