Fresh doubts have been cast over the construction of Crossrail after the Department for Transport raised renewed concerns about the funding of the scheme.

In a response to the House of Commons’ Transport Select Committee, the department conceded that funding for the scheme “remains a challenge”.

The department reinforced the need for “London” – or those that would benefit from Crossrail – to “contribute accordingly” to the scheme.

“The Government remains committed to Crossrail,” the department said. “It is true that funding remains a challenge. That was always going to be the case for a scheme that could cost as much as £16 billion to construct.”

The total cost of Crossrail was put at between £15 billion and £16 billion in 2005. The scheme’s promoters have tried to reduce that, although the cost of raw materials is rising fast and the Government has already committed £460 million to developing the plans.

A decision on how much the Government will contribute is expected in the autumn, with the publication of the Comprehensive Spending Review, which will earmark funding for different departments.

The rail scheme, a 50-50 joint venture between the Department for Transport and Transport for London, would involve the construction of a tunnel through Central London, linking the West End with the City and Canary Wharf. The line will connect with existing lines to extend to Maidenhead and Heathrow in the west and Shenfield and Abbey Wood in the east.

One of the key benefits of Crossrail will be alleviating congestion on other parts of the capital’s transport network, including the Central Line, which links East and West London. The line should reduce the amount of time that people waste travelling in business hours, while also improving productivity by reducing delays due to overcrowding.

Most parties seem to agree that the cost of Crossrail should be borne by those that would benefit, including big business. “Crossrail eventually will pay for itself. The difficulty is how you fund it during construction,” a spokesman for London First, the business lobby group, said.

While infrastructure assets are in strong demand from investors seeking low-risk, steady returns, City financiers point out that investors want to invest only in real assets. “It’s too cumbersome,” one banker said. “Crossrail will have to stay [in public hands] until people have more confidence.”

The Lyons report on local government, published in March, suggested allowing London to raise supplementary business rates to help to fund big infrastructure projects.

The promise of revenues from an extra 1.5 to 3 per cent supplement on business rates could secure a ten-year commercial loan worth about £3 billion. The promise of future revenues from the rail line could underpin another loan of about £3 billion and it is proposed that the Government put forward a further £3 billion.

That might still leave a gap. Ed Balls, the Economic Secretary to the Treasury, said last month that funding for the scheme remained a “significant challenge” against the back-drop of other spending priorities and pressures.

An independent report commissioned by Crossrail and the Greater London Authority concluded in March that the cost of constructing Crossrail will rise by £300 million for every year that construction is stalled. Delays in construction would rob users of £800 million of benefits every year.

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