Over £600 million in hospital debt is set to be written off across Cambridgeshire as part of a national initiative, the Government has said.

The Department of Health said £13.4 billion of hospital debt will be “scrapped” in England, £1.7 billion of which will be from 12 NHS trusts in the east of England.

The health secretary, Matt Hancock, said: “As we tackle this crisis, nobody in our health service should be distracted by their hospital’s past finances.

“I’m pleased to confirm the value of this package for the east of England. This £1.7 billion debt write off will wipe the slate clean and allow NHS hospitals to plan for the future and invest in vital services.”

Two Cambridgeshire NHS trusts were included on a list of those affected – Cambridge University Hospitals NHS Foundation Trust and North West Anglia NHS Foundation Trust.

The Department for Health said that “the debt will be effectively written off” by converting loans to equity and it will “not create additional borrowing or fiscal cost for the exchequer”.

In a letter to MPs, the health secretary described the write-off, saying: “In essence, this announcement means that we are writing off any historic finance that NHS providers have drawn down to cover day-to-day financial gaps or to fund urgent infrastructure investment.”

More than £340 million in debt will be written off for Cambridge University Hospitals NHS Foundation Trust, which runs Addenbrooke’s Hospital, the Rosie and Saffron Walden Community Hospital.

The Government said £296 million in revenue debt and £44 million in capital debt would be written off for the trust.

More than £268 million will be written off for the North West Anglia NHS Foundation Trust, which operates Peterborough City Hospital, Stamford and Rutland Hospital and Hinchingbrooke Hospital.

The Government said £212 million in revenue debt and £56 million in capital debt would be written off.

The Queen Elizabeth Hospital King’s Lynn NHS Foundation Trust, which also serves part of Cambridgeshire, will have £134 million written off. The Government said £120 million in revenue debt and £14 million in capital debt would be written off.

NHS chief executive, Sir Simon Stevens, said: “We’ve advocated for and support this pragmatic move which will put NHS hospitals, mental health and community services in a stronger position – not just to respond to the immediate challenges of the global coronavirus pandemic, but also in the years ahead to deliver widespread improvements set out in our NHS long term plan.”

The Department of Health added: “The changes will provide much needed financial support during this unprecedented viral pandemic, as well as laying secure foundations for the longer-term commitments set out last year to support the NHS to become more financially sustainable.”