The London Congestion Charge will increase from 8 to 10 per day from next year, London Mayor Boris Johnson said today.
Mr Johnson said: 'Nobody wants to make an announcement such as this, especially when Londoners are feeling the effects of the recession.'
He also said that while Transport for London would make savings of 5 billion pounds through efficiency measures, the Congestion Charge and fares for public transport would also need to be increased.
Mr Johnson said: 'The mistakes of the past and the current economic climate have conspired to present us with a huge financial challenge.
Account-holders charged 9
Alongside the daily increase in charges, a new account system, CC Auto Pay, will be introduced to make it easier for customers to pay the charge and avoid fines.
Those paying through this system will be charged 9 a day to enter the charging zone.
Mr Johnson said: 'Once introduced, drivers registering for CC Auto Pay can rest assured that they'll never receive a penalty charge again.'
Western extension to be scrapped
After a consultation process in 2008, Mr Johnson said he was considering the removal of the western extension of the Congestion Charging zone.
Public support was overwhelmingly in favour of scrapping the extension, although a further three-month consultation began this week, and only when this is completed can the proposal be confirmed.
• Congestion on London's roads damages business and costs about 2 billion in lost time.