A suggestion to expands the congestion charge zone to the north and south circular appears to no longer be an option as the government agreed a six-month £1.8 billion funding deal with Transport for London (TfL).

This funding was agreed after TfL asked for a £5.7 billon package to support services for the next 18 months. Both passenger numbers and revenues have fallen after the March lockdown meaning prices increased and hours of operation were extended.

The congestion charge now applies from 7am to 10pm, seven days a week, with drivers paying £15, rather than £11.50, to enter the zone.

TfL initially described it as a ‘temporary’ price increase, after an initial funding agreement of £1.6 billion from the government (TfL had warned it could have to cut services otherwise).

This latest funding agreement has negated the proposed extension to the £15 congestion charge zone, which would have gone live in October next year, when the expanded Ultra Low Emission Zone (ULEZ) is also introduced, covering the same area.

The Mayor of London, Sadiq Khan, called the plans “ill-advised and draconian”, warning it would “punish Londoners for doing the right thing to tackle Covid-19”.

Following the latest round of funding, he said: "These proposals from the Government (if given the go-ahead) would have hammered Londoners by massively expanding the congestion charge zone, scrapping free travel for older and younger Londoners and increasing TfL fares.”

As part of the deal, London will have to raise extra money in future years. Decisions about how this additional funding will be raised are yet to be made by Khan, but some options to be considered include a modest increase in council tax, pending the appropriate consultation and keeping in place the temporary changes to the central London Congestion Charge that were introduced in June 2020.

Khan said: "This is not a perfect deal, but we fought hard to get to the best possible place. The only reason TfL needs Government support is because almost all our fares income has dried up since March as Londoners have done the right thing."

A new government-chaired government oversight group will monitor the implementation of the agreement and the sustainability plan while two government representatives will continue to sit on TfL’s board.

Transport secretary Grant Shapps said:

"This deal is proof of our commitment to supporting London and the transport network on which it depends. Just as we’ve done for the national rail operators, we’ll make up the fare income which TfL is losing due to Covid-19. Londoners making essential trips will continue to be able to use tubes, buses, and other TfL services, thanks to this Government funding. At the same time, the agreement is fair to taxpayers across the country. The Mayor has pledged that national taxpayers will not pay for benefits for Londoners that they do not get themselves elsewhere in the country.

"Over the coming months, as we look to move beyond the pandemic, 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. This agreement marks the first step towards that, potentially allowing a longer-term, sustainable settlement for TfL when the course of the pandemic becomes clearer."

Logistics UK, formerly the Freight Transport Association (FTA), welcomed the decision not to go-ahead with the expansion of the congestion charge zone.

David Wells, its chief executive said: "The Government’s decision to... refrain from expanding the London Congestion Charge is a huge relief to logistics businesses, many of whom continue to struggle financially and operationally as a result of the Covid-19 crisis.

"Now, Logistics UK is urging Government to reconsider whether logistics activity should still be included in the temporary conditions added in June 2020, which saw a significant increase in the fee and longer operating hours. With little alternative to using lorries and vans to keep London stocked with all the goods the population needs, it simply amounts to an additional tax on those charged with supporting the capital during the pandemic, and beyond."