Transport for London will lose out on billions of pounds of funding after the government announced it will cut its subsidy in the Spending Review.
The Department for Transport will phase out TfL's resource grant which makes up around six per cent of its annual budget, amounting to £2.8bn by 2019.
The move comes as part of efforts by the department to find savings of 30 per cent. Government funding will fall from around £650m in the current year, to £450m in 2016/17, £250m in 2017/18, to zero by 2018/19.
It said TfL could fill the hole through "efficiency savings" and through its property sell-off.
TfL said it is fully prepared to take on the operational costs of London's transport network, with the shortfall in income coming from a range of sources such as commercial revenue and fares. Fare decisions are down to the Mayor of London and Boris Johnson has held them at rpi for the past two years. It claims it will be the only major transport network in Europe to cover its own running costs.
TfL's government funding for infrastructures spending, including upgrades to Tube lines, modernisation across the network and cycle super highways, will be maintained at £5.8bn, as will its ability to borrow a further £3.8bn for infrastructure investment.
A new £300m transport development fund may also help fund Crossrail 2.
London's transport commissioner Mike Brown said: “This settlement means we will continue to modernise and improve London’s road, rail and cycling networks, its environment, air quality and accessibility. It also recognises the tough decisions we must continue to take to deliver more efficiently for fare and tax payers’, while protecting and modernising frontline services and investment. I also the welcome the chancellor’s continued support for Crossrail 2."
He added: "We will now get on with delivering the transport improvements London needs to harness significant population growth. We need to keep this great city working, growing and we need to make life in London better for all who live, work in and visit us.”