Grayling said: "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".
The Department for Transport (DfT) said the new investment comes on top of record rail funding over the past 5 years as part of the government's biggest rail modernization program for over a century.
Transport secretary Chris Grayling also announced a new funding process for major upgrades and enhancements where funds will be allocated separately.
"By developing more collaborative working practices, investing in new technologies and innovations and working more closely with Network Rail and the government, the supply chain is confident it will deliver the maintenance and upgrades to the UK's railway infrastructure required to help meet the growing demand for railways from both passengers and freight".
In July, the transport secretary pushed back the rail funding decision, saying he needed "more assurance" on costs, saying Network Rail's progress on improving efficiency in recent years had "fallen short" of his expectations.
"Given the need to spend public money wisely and to incentivise the industry to do so, I believe the funding envelope published today is stretching yet achievable. I will also continue to drive improvement across the wider industry, including the franchising system".
The investment, spanning the five year period from 2019, is aimed at boosting train reliability and punctuality, major upgrades and new faster trains. "Today's announcement shows the government's endorsement of this approach". Passengers tell us they want more reliable trains, a better chance of getting a seat or at least standing in comfort, and less delays. This local focus, combined with opening up the funding, financing and delivery of investment projects to third parties, will help to drive efficiencies and value for the taxpayer.
"The proof of the value of this spend will be when passengers start to see more reliable services and better value for money. In return they should expect the basic promises made by the industry to be kept".
Representing NR, Mark Carne, chief executive, said the increased funds would allow millions of passengers to "experience significant improvements to their services" over the next 12-18 months.
"Network Rail is transforming into devolved businesses to better respond to its local customers and communities".