In his speech at the Conservative Party Conference in Manchester, Mr Hammond said the rail investment will be used to enable Liverpool, Manchester, Leeds, Sheffield and York to connect to HS2.
Cities in the East Midlands such as Leicester will also benefit from extra investment, Mr Hammond pledged.
“We are committed to the Northern Powerhouse project to join the great cities of the North into a single connected market with a population to rival London’s. And to the Midlands Engine to do the same in the Midlands conurbation,” Mr Hammond told Conservative party members.
Earlier this month, Mr Hammond said “boosting productivity in the North” was key to rebalancing the UK economy.
Meanwhile, transport secretary Chris Grayling yesterday also announced an extra £100m to be spent on road projects in the region.
This money will come from the £23bn National Productivity Investment Fund, which the government announced last November.
The roads investment will focus on 33 local projects designed to reduce congestion and give access to new sites for business and residential developments, with the money coming from existing budgets.
Work on 13 new road projects will go ahead in the North-west, while the East of England and Yorkshire & the Humber will see 10 road schemes each.
The Civil Engineering Contractors Association (CECA) welcomed the government’s plans, but also called on it to give greater powers for investment in the North.
“We would now urge the government to capitalise on its investment, by putting Transport for the North on a statutory footing as soon as possible… enabling the transport delivery body to have similar powers as Transport for London in the long term through the raising of its own private finance,” CECA director of external affairs Marie-Claude Hemming said.
Today’s announcement is designed to build on Mr Hammond’s previous commitments to the Northern Powerhouse initiative, which was launched by his predecessor George Osborne.
Government commitment to investment in the North has been questioned since transport secretary Chris Grayling cancelled two electrification projects in the region in July.