Transport for London is facing a £500 million funding ‘black hole’ over the next three years.

The Government has announced plans to reduce its grant to TfL over the next few years, and this has been compounded by the success of the congestion charging scheme, which has meant TfL is making less money from the scheme than it budgeted for.

Mayor Ken Livingstone today admitted congestion charging had raised 30 per cent less than expected, and warned of the ‘consequences’ of Government cutting its spending.

“If there was a reduction, we would have to move into painful and dangerous decisions for London.” The Mayor said he would continue to demand increased spending from the Government.

The reduction in Government spending will result in a shortfall of £35 million for the 2004-05 financial year, with the deficit forecast to jump to £563 million in 2005-06.

About two thirds of TfL’s current budget of about £2 billion is financed by the government, with the rest coming from fares and the London council precept.

A spokesperson for TfL said the cuts in 2005-06 would leave TfL ‘facing difficulties’, with a quarter of its budget affected.

The spokesperson also questioned what message the Government would be sending to the International Olympic Committee if it was cutting spending on public transport.

London is bidding for the rights to host the 2012 Olympics.