The six month funding package means that a proposal to extend the capital’s congestion charging zone to the North and South circular roads is unlikely to be taken forward. However passenger fares are set to increase – although not by as much as previously proposed – and TfL will have to find £160M in savings by March.

The future of Crossrail 2 may also be in jeopardy, with the agreement requiring an ‘orderly end’ be brought to consultancy work on the project as soon as possible.

Mayor of London Sadiq Khan described the agreement as “not ideal” but said: “I am pleased that we have succeeded in killing off the very worst Government proposals.”

Consultant Arcadis’ UK cities director Peter Hogg said: “The settlement creates breathing space for TfL and helpfully avoids introducing measures such as a congestion charge extension, just at a time when London doesn't need them.

“Fare increases in the new year and question marks over how concessions will be funded are not ideal but tolerable,” he added. “What this settlement really illustrates however is the need for a new, long term funding model for TfL.”

The latest agreement follows a previous six month support package of £1.6Bn announced in May. As part of the new deal, London will also have to raise extra money in future years to maintain fare concessions above the English level, with a plan to be brought forward by the Mayor.

Watchdog London TravelWatch director Emma Gibson said: “We are relieved that TfL has agreed a new funding deal with the Government, averting the nightmare scenario of a virtual public transport shutdown in London.”

She added it will come as a “huge relief for passengers that the proposed substantial fares hikes are no longer on the cards”, but said the requirement to make cuts of £160M “could mean that there are still some nasty surprises in store for Londoners, including cuts to vital services”.

Logistics UK’s chief executive David Wells said the decision to refrain from expanding the congestion charge will come as a relief to hauliers.

Transport Secretary Grant Shapps said the new deal means “Londoners making essential trips will continue to be able to use tubes, buses, and other TfL services, thanks to this Government funding”, and added: “At the same time, the agreement is fair to taxpayers across the country.

“Over the coming months, I look forward to working with London’s representatives to achieve a long term settlement, with London given more control over key taxes so it can pay more costs of the transport network itself.”

(Photograph: Yau Ming Low - Shutterstock)