The Government offered Manchester £1.5 billion worth of funding for improved public transport today it if agrees to become the first provincial city to follow London in introducing a congestion charge.

Ruth Kelly, the Transport Secretary, wielded the carrot as she delivered a statement to Parliament giving the green light to a scheme under which commuters entering and leaving the city at rush hour could pay up to £5 a day.

Unlike the London scheme, shoppers or other road users entering central Manchester outside peak hours would not have to pay.

The charge will not be introduced until 2013 and will be accompanied by £2.8 billion investment in public transport services including up to 22 miles of extensions to the Metrolink tram, extra buses and 120 American-style yellow school buses.

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The deal has been cleverly designed by Government to ensure that local politicians of all parties must risk their political necks by approving it

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"This is about creating a world class transport system for a world class city. Thriving cities are those where people have access to education and jobs, and where businesses can flourish," Ms Kelly said.

"Manchester’s economic renaissance is a major British success story. It is one of the fastest growing economies in the UK, but congestion has become an increasing brake on its future prosperity, with the potential to cost the city as many as one in seven of future jobs."

But her Conservative shadow, Teresa Villiers, accused Ms Kelly of "bullying" local people into accepting the scheme by threatening to withhold investment funds if it is not accepted.

There remains significant public opposition to the scheme, which could cost many motorists in Greater Manchester more than £1,000 a year, and Manchester Tories say that the most likely victim of any backlash is likely to be Ms Kelly herself, who has a slim majority of just over 2,000 in her Bolton West constituency.

Graham Stringer, the Labour MP for Blackley, predicted just such a backlash from disgruntled motorists in marginal seats.

He told BBC1’s The Politics Show: "To have a Labour Government, you have to have an alliance not only of core Labour voters but of people who before 1997 in constituencies like Bury North and Bolton West didn’t vote Labour.

"The congestion tax is another pressure on that coalition. It is another wedge that will break that coalition up and make it much more difficult to deliver a Labour Government."

Susan Williams, the Conservative leader of Trafford Council, predicted that the scheme would be disastrous for Labour. "To bring in the congestion charge at a time when the roads of Greater Manchester and the country have been blockaded by truck drivers and motorcyclists protesting about taxes on the motorist seems to be an act of political suicide," said Cllr Williams, who is hoping to win the Bolton West seat at the next election.

But Sir Richard Leese, the leader of Manchester City Council, said: "My belief is that if the politicians of Greater Manchester have the strength and confidence to do what is very clearly in the long-term interests of this conurbation and all its people, we won’t be punished at the ballot box, we will be rewarded for that strength of purpose."

Under the Manchester congestion charge plan, 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. 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 scheme needs to be endorsed by at least seven of the ten councils in Greater Manchester for it to go ahead.

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