The money comes after the primary care White Paper earlier this year outlined plans for 50 new community hospitals and clinics. The money will be spent between 2007 and 2012. PCTs should submit proposals to their SHA by 1 September.
Health Secretary Patricia Hewitt said that the DoH was also encouraging 'private companies or public-private partnerships to invest capital in these services'.
Ms Hewitt reiterated a commitment to existing hospitals as well and issued guidance advising the NHS to involve patients and the public when planning changes to services.
She is advising the NHS 'to abandon poorly attended town hall meetings in favour of consumer surveys and face-to-face events, with local people randomly invited to attend from the electoral register'.
Ms Hewitt said it was a move to 'prevent the NHS rushing through unnecessary closures'.
'We expect the NHS to consult local communities when developing their plans for care outside large hospitals,' she added. 'Options for change must be developed with people and not for them.'
Dr Laurence Buckman, the GPC deputy chairman welcomed the investment.
'It will not solve all the problems of the NHS but it is on the list as one that needs sorting and this is a good thing,' he said.
Andrew Lansley, Conservative shadow health secretary, commented: 'This announcement will be too late for the dozens of community hospitals that have already closed across the country.