Manchester is to be the testing ground for a new form of congestion charging that will be aimed at people who commute by car but spare shoppers driving into the city outside peak hours.

The Government will announce on Monday that Manchester is to be the first of several cities granted extra funding for public transport in return for introducing a charge of up to £5 a day. Drivers will have to install electronic tags in their cars that will be detected by roadside beacons positioned in two rings around the city. Charges will be deducted automatically from prepaid accounts.

An anticharging campaign has accused ministers of trying to bribe the city with £1.2 billion of public money to introduce a charging scheme that will add more than £1,000 a year to the motoring costs of tens of thousands of drivers.

Cambridge and Bristol are also planning to introduce some form of congestion charging in return for a grant from the Government’s Transport Innovation Fund.

The Manchester scheme differs from the London congestion charge by only charging drivers travelling with the main flow of traffic into the city between 7am and 9.30am and those travelling out between 4pm and 6.30pm. London’s £8 charge applies to any vehicle that moves inside the zone between 7am and 6pm, regardless of the direction of travel.

The Greater Manchester Passenger Transport Authority (GMPTA) claims that its scheme will be much fairer because it will target roads only when they are busiest. People driving out of Manchester in the morning or into the city after 9.30am will pay nothing.

The charge will be introduced in 2013 and will be preceded by £3 billion-worth of improvements to public transport, including extensions to the city’s tram network, extra trains and buses and more bus lanes.

But despite the promised investment, the scheme has divided the city and has already cut short the political career of its leading proponent.

Roger Jones was Labour chairman of the GMPTA until last month, when he lost his seat on Salford Council to an anticharging candidate.

Manchester Against Road Tolls has said it will try to unseat Ruth Kelly, the Transport Secretary and MP for Bolton West, if the scheme is approved.

She had a majority of only 2,000 in the 2005 general election, the smallest of any Cabinet member.

Under the Manchester scheme, drivers will be charged when they cross two rings around the city, the precise locations of which have yet to be announced.

Crossing the outer ring at or near the M60 will cost £2 in the morning and £1 in the evening. Crossing the inner ring, between the M60 and the city centre, will cost £1.

Those who drive inside the rings but do not cross the boundaries will not have to pay, which may result in the creation of new rat-runs to avoid charges.

Drivers who do not have tags will be able to pay by phone or internet but may be liable for a surcharge. Those who fail to pay will be caught by automatic numberplate-recognition cameras and fined.

Parents driving their children to school across the charging rings will have to pay but the package includes investment in a fleet of American-style yellow school buses.

The Manchester scheme will go ahead only if seven of the ten councils in the city approve it. Opposition is strongest in Stockport, Trafford and Bury but the scheme has enough support in other councils to proceed.

The Greater Manchester Momentum Group, which represents businesses mainly on the outskirts of the city, is opposing the scheme because most of the public transport investment will benefit the city centre rather than out-of-town shopping centres.