The government has announced an extra £1.95bn will be injected into the NHS in 2015-16 - but details of how the money will be allocated, obtained exclusively by HSJ, reveal that only a quarter of the total will be spent on transformation, with the rest set aside to maintain existing services.

HSJ has also learned that £700m of the £1.95bn will be funded from the existing Department of Health budget, from underspends and non-NHS budgets. It means more than a quarter of the money announced today has previously been allocated to health - although it has not formed part of the NHS commissioning allocations.

The £1.95bn will be recurrent, becoming part of the baseline for NHS funding beyond 2015-16.

HSJ understands that of the £1.95bn total:

    •    £1.5bn will be routed conventionally into clinical commissioning groups’ and specialised commissioning allocations, becoming part of general spending.

    •    Around £200m will be spent on health economies, such as Staffordshire, which are under extreme pressure financially and clinically - and therefore in need of reform. However some of the sum could also be used to pump prime investment in more financially healthy areas already beginning to adopt the new care models detailed in last month’s NHS Five Year Forward View.

    •    The remainder will pay for expanded and enhanced primary and out of hospital care. This ring-fenced investment will be repeated in each of the five years of the next Parliament – producing a total budget of £1.1bn. It will be funded by fines levied on banks for misconduct in the foreign exchange markets.

Exactly how the £1.5bn revenue spending will be allocated will be decided by NHS England at its 17 December board meeting.

How the £200m reserved for the most challenged health economies will be allocated will be decided jointly by NHS England, the NHS Trust Development Authority, Monitor and the Care Quality Commission.

NHS England will have some discretion over whether the primary care funding should be used to support capital or revenue projects. The central body is likely to prioritise schemes to enhance primary care already drawn up by GPs. It is likely that some will be spent on improving GP facilities, but the overarching goal for this element of the funding will be to enable primary care to move towards the multispecialty community provider model set out in the NHS Five Year Forward View.

Speaking on the BBC’s Andrew Marr show this morning, chancellor George Osborne said the new money was a “down payment” on the NHS Five Year Forward View, adding that he had met NHS England chief executive Simon Stevens yesterday to discuss the plan.

He said the country could afford to spend more on the NHS because the economy was growing.

Last week the King’s Fund and NHS Providers jointly called for £2bn to be invested in the NHS in 2015-16 to avert a cash crisis.

Responding to the chancellor’s announcement, Mr Stevens said: “Our NHS Forward View unleashed an amazingly wide consensus – amongst patient groups, local communities, frontline staff and NHS leaders. People now get the fact that a growing and ageing population means we’re going to have to supercharge our work on prevention, on care integration, and on treatment innovation.

“But we also told it as it is: Services are under pressure. We know times are tight, but the economy is now growing. Sustaining a high quality health service in the years ahead will therefore require both challenging new efficiencies and genuine new investment.

“That’s the case I’ve been making on behalf of the NHS to government, and today they’ve listened and responded with the funding we need for next year to sustain frontline NHS services and kick-start transformation. Of course there will still be pressures and difficult choices, but the government has played its part and the NHS will step up and play our part too. Today represents an extremely welcome vote-of-confidence in the NHS’s own five year plan.”

It is understood that the announced additional NHS funding in 2015-16 will total £2.2bn. Of this, £1.2bn will be additional Treasury funding, £700m will come from non-NHS funding in the existing DH budget (including £550m from DH “underspends”), and a further £300m from the bank fines.

This story was updated at 2.40pm on 30 November to reflect updated information about the sources of the funding.