The man overseeing the upgrade and expansion of London Underground has resigned amid a growing row over a £5 billion shortfall in the public funding for the project.

Tim O’Toole, the Underground’s managing director, will return to his native United States at a critical time for the network, when plans to relieve overcrowding on several lines are hanging in the balance.

His decision is a blow to Boris Johnson, the Mayor of London, who was counting on Mr O’Toole’s experience and skills to ensure that as much of the upgrade as possible survived the funding squeeze.

Mr O’Toole, 54, had also made veiled attacks on Gordon Brown’s failure to fulfil promises made when, as Chancellor, he forced through part-privatisation of the Tube six years ago.

The District, Circle, Metropolitan, Bakerloo and Piccadilly lines are all due to have about 20-30 per cent more trains per hour added over the next few years. But plans to buy more trains and replace the signalling to allow for the expansion are now in doubt.

The collapse of Metronet, one of two companies appointed by the Government to maintain and upgrade the Tube, has left London Underground struggling to find the money to complete the work it was contracted to do.

LU is cutting 1,000 jobs and delaying station refurbishments. Mr Johnson insists the Tube upgrade is his top priority but his decision to fund Crossrail, a new main line railway due to be built under central London by 2017, means extra capacity on existing underground lines may be sacrificed.

The official reason given for Mr O’Toole’s resignation is that he wants to spend more time with his wife and two grown-up children back in the US. But they have always lived in the US during Mr O’Toole’s six years at LU and, until now, he was happy to return at regular intervals to visit them.

Mr O’Toole, who ran one of the biggest freight train companies in the US, was recruited by Ken Livingstone, the former mayor. He is the last of the senior Americans at Transport for London who were dubbed “Kiley’s People” after Bob Kiley, the New York subway boss whom Mr Livingston recruited as Commissioner of Transport for London.

Mr O’Toole, who was on a salary of £450,000, said last night: “I am sad to leave LU but after six years in London it is time to go home. LU’s customers and employees can look forward to the continuing transformation of the Tube with the delivery of major projects between now and the London 2012 games. I am particularly proud that LU employees have achieved record operating results and all-time high levels of customer satisfaction in this past year. I shall always be grateful for the privilege of being part of such a great institution.” Mr Johnson said: “I fully understand Tim’s desire to return home after six years serving London. During that time he has led from the front and made huge progress in delivering an improved Tube after decades of under investment. Tim has been a magnificent public servant and we will build on the fantastic legacy he leaves in the years ahead. I wish him and his family all the very best.” Peter Hendy, London’s Commissioner of Transport, said:

“Tim has led LU to its highest levels of performance while carrying record numbers of passengers - all at a time of great change as billions are invested to improve the Tube. His leadership was exemplified by getting London moving again so quickly after the terrorist attacks of July 2005. We will greatly miss him as a colleague and I will miss him as a friend.” Mr O’Toole will step down from LU at the end of April. His resignation clearly caught TfL by surprise. A spokesman said Mr O’Toole’s role “will be advertised shortly”.

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