Under plans outlined by the coalition Government newly formed Local Enterprise Partnerships (LEPs), will be encouraged to bid for a share of the fund in order to provide support and encourage growth for businesses.
LEPs are replacing Labour's failed Regional Development Agencies.
Lord Heseltine will chair the Independent Advisory Panel, made up of academics, business and civic leaders, and will consider all bids submitted to the fund by LEPs and will make recommendations to Ministers.
Lord Heseltine, who acted as Deputy Prime Minister under Sir John Major, said: "The object of the exercise is to stimulate people to create jobs in the private sector."
Local Communities Secretary Eric Pickles said: "Over the last decade, the country's economy became skewed by artificial boundaries and top-down prescription that did not work".
"We want to create a fairer and more balanced economy driven by private sector strength, and our plan for local growth will create local enterprise partnerships, reform the planning system and introduce development incentives for local authorities, like allowing them to keep their business rates, so all parts of the country benefit."