The Government is threatening to withhold £1.5 billion of public funding for public transport in Manchester unless the city agrees to become a guinea pig for pay-as-you-drive road pricing.

Geoff Hoon, the Transport Secretary, said funding for new tram lines, extra buses and trains would be cancelled unless a majority of Greater Manchester's 1.8 million population voted “yes” in next month's road pricing referendum.

Mr Hoon's comments, in an interview with The Times, angered opponents of Manchester's proposed charging scheme. They accused the Government of trying to bully the city into voting for a tax on commuting by car.

Under the scheme, drivers would have electronic tags fitted to their cars and set up prepaid accounts. Up to £5 a day would be deducted automatically from their accounts as they passed roadside beacons on an inner and outer ring around the city.

Unlike in London, where motorists pay £8 a day to travel any distance inside the charging zone, drivers in Manchester would pay only at peak times in the busiest direction of travel. Ministers fear that a “no” vote in Manchester will end any hope of introducing charging across the country for at least a decade. They realise that few people want another tax, but are hoping they will vote “yes” if they believe that is the only way to secure record investment and 10,000 extra jobs.

Mr Hoon said Manchester would not get the funding without road pricing. “There is no Plan B. I would not want people to be under any illusion about that,” he said.

Asked if Manchester would get even a small proportion of what it needed if it voted “no”, Mr Hoon said: “None whatsoever. If the vote is ‘no', there will be no central government funding. The rules are very clear.”

Mr Hoon said the money earmarked for Manchester would be given to other cities. He said: “There will be plenty of other cities looking to take up the opportunity if Manchester doesn't.”

He also said that the Government would increase its budget for rewarding cities that introduced road pricing. The Department for Transport has already allocated £200 million a year for the next ten years, a total of £2 billion, for congestion charging schemes across the country.

Mr Hoon said the total amount on offer would be increased if Manchester voted “yes”. “We will find more money for other cities,” he said.

This means that an even greater proportion of government funding for transport projects would be linked to road pricing. Cities wanting a share of the money would have no choice but to introduce some form of congestion charging. Cambridge, Bristol and Leeds are considering charging schemes as a way of securing central government funding.

Graham Stringer, Labour MP for Manchester Blackley and a member of the Commons Transport Select Committee, said: “This is last-minute bullying by Mr Hoon. It shows how worried they are about losing.” Nigel Humphries, spokesman for the Association of British Drivers, said: “The Government is holding a gun to Manchester's head. They know congestion charging is unpopular, but they are trying to introduce it by the back door by picking on a city which has been trying for years to get the money to expand its tram system.”

A spokesman for the Yes Campaign said: “The Transport Secretary could not have been more clear. Unless Manchester votes ‘yes', the opportunity to transform its public transport infrastructure will be lost for a generation.”

The Conservatives oppose national road pricing, but support local charging schemes. They have said they would abide by the result of the Manchester referendum.

The Association of Greater Manchester Authorities has announced a number of exemptions and discounts from the proposed charge in order to attract more “yes” votes.

Drivers on minimum wages will get a 20 per cent discount for at least the first two years; the maximum anyone will pay has been cut from £10 to £5 a day, and employees on the Trafford Park industrial estate will be exempt for three years. The association had already pledged not to introduce the charge until 2013, by which time 80 per cent of the transport improvements would have been made.

The question posed in the postal referendum does not mention road pricing, though the preamble on the ballot paper refers to it twice. The question says: “Do you agree with the Transport Innovation Fund proposal?”

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