The capital spending announced by Boris Johnson will be largely funded by cash reserves already held by NHS providers, a letter to the service confirms.

In a letter to trusts, seen by HSJ, NHS England and NHS Improvement said the government has agreed to raise the Department of Health and Social Care’s capital spending limit by £1bn. This means trusts can revert to their original spending plans in 2019-20, having previously being told to cut them by a fifth.

It comes after prime minister Boris Johnson announced £1.8bn of additional capital for the service earlier this month. He later insisted this was “new money” following criticism of its presentation by the Nuffield Trust think tank.

The letter, from NHSE/I chief financial officer Julian Kelly, confirmed that £1bn of the additional spending in 2019-20 would be met through “trust’s own income and reserves or where [the Department of Health and Social Care] has already approved the business case or funding for programmes”. Many trusts have significant cash reserves which they had previously been told not to spend, and the new limit loosens the constraints.

The 20 per cent cut had been estimated to have shaved £950m from trust’s original 2019-20 capital plans.

The remaining £850m of the total £1.8bn announced by Mr Johnson has been allocated to 20 capital schemes phased over five years.

Mr Kelly had written to trusts twice since the start of the year to ask, then demand, they reduce their planned capital spending, In his latest letter he said: “You can now revert to your original capital plans where these are funded by your trust’s own income and reserves or where [the Department of Health and Social Care] has already approved the business case or funding for programmes.”

Mr Kelly added: “Trusts with existing emergency capital financing requirements that were included within the prioritised July plans should work with their regional team to progress an application for funding that can be submitted to DHSC.

“Subject to due process we do not anticipate additional delays in releasing these funds, so that we can proceed quickly to address critical maintenance issues….

“My request is that we collectively improve our capital forecasts and provide a taut and realistic view of the forecast outturn for your organisations in September.

“We will then be able to judge whether there is headroom to go further on tackling critical maintenance backlogs this year. In agreeing the level of funding that is available for emergency loans we have already assumed that there is around 10 per cent slippage against original plans based on past behaviour.”

He said the increased spending would be a “significant start to addressing the critical infrastructure and maintenance issues across the NHS”, and thanked trusts for how they engaged with the previous requests to set “prioritised and constrained” capital plans.