Small cities, towns and rural areas in northern England and the Midlands will be given £4.7 billion that was earmarked for HS2, the prime minister will announce on Monday.
The money will go into a local transport fund with councils left to decide how to spend it.
Areas in the north of England will be allocated £2.5 billion while the Midlands will receive £2.2 billion after the northern leg of the high-speed railway was axed last year. At the time, Rishi Sunak pledged to “reinvest every penny” of the £36 billion saved into local transport schemes.
Sunak will hold a cabinet meeting in Yorkshire and the Humber on Monday. Downing Street said he is expected to say that ministers and MPs should “hold local authorities to account” to ensure the fund is “used appropriately”.
Mark Harper, the transport secretary, is also expected to update colleagues on the delivery of Network North, the government’s transport plan announced after the HS2 decision.
The latest money will be made available to local authorities from next April and will be delivered in instalments over seven years.
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Labour ridiculed what it described as a “back of a fag packet plan” and said communities were “sick and tired” of empty promises.
Sunak confirmed he was scrapping the northern leg of HS2 at the Conservative conference in Manchester in October after weeks of speculation over the soaring costs of the scheme.
The decision was criticised by northern leaders including Andy Burnham, the mayor of Greater Manchester, and Andy Street, the mayor of the West Midlands.
The government said the new funding will give local authorities long-term certainty over how much they have to spend on transport.
It can be used for building new roads, improving junctions, expanding or building public transport systems and refurbishing bus and railway stations.
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Councils will be expected to publish plans for the projects they wish to invest in.
The money will be awarded to communities that are outside the city regions, which get funding through sustainable transport settlements.
Sunak said: “We have a clear plan to level-up our country with greater transport links that people need and deliver the right long-term change for a brighter future.
“Through reallocating HS2 funding, we’re not only investing billions of pounds directly back into our smaller cities, towns and rural areas across the north and Midlands, but we are also empowering their local leaders to invest in the transport projects that matter most in their communities.”
He said the “unprecedented investment will benefit more people, in more places, more quickly than HS2 ever would have done”.
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Lord McLoughlin, chairman of Transport for the North, said: “We welcome this funding for our local transport areas as a sign of progress towards transforming the north to a more inclusive, sustainable and better-connected region. By having greater clarity on the funding that’s available, and consolidating funding streams, it helps remove inertia and accelerates delivery on the ground.”
Louise Haigh, the Labour shadow transport secretary, said: “The Tories have failed and local people are sick and tired of this government taking them for fools. Only the Conservatives could have the brass neck to promise yet another ‘transformation’ of transport infrastructure in the Midlands and north after 14 years of countless broken promises to do just that.
“The Conservative record speaks for itself — record delays and cancellations on the rail network, 22 million more potholes and a record-breaking collapse in bus routes.”
The announcement forms part of the overall Network North plan. The government has already pledged an £8.3 billion fund to resurface roads across the country in the next 11 years, using money that would have been borrowed to spend on HS2.
It has also earmarked £1 billion to improve bus services in the north and Midlands and extend the £2 bus fare cap across England.
