Manchester faces a stark choice when it holds a referendum next month – vote “yes” to a congestion charge or miss out on £1.5 billion in public transport funding.

The Department for Transport said that pay-as-you-drive tolls are “integral” to the city receiving additional Government cash.

And if a majority of residents choose not to support the proposals, funding for new tram lines, extra buses and more trains will be cancelled.

“If the vote is ‘no’, there will be no central government funding,” said Transport Secretary Geoff Hoon.

However, the insistence of a road pricing element in Manchester’s proposals has resulted in the government being accused of “blackmail” by the Association of British Drivers (ABD).

“The government is desperate to bring in road pricing and by tying the two together in Manchester they are trying to introduce it by the back door,” said ABD spokesman Hugh Bladon.

The package of improvements for Manchester will cost £2.8 billion, with the Government funding £1.5 billion through its Transport Innovation Fund (TIF), providing the remaining £1.3 billion is financed through the introduction of a congestion charge in 2013.

“We have been clear all the way through the process that the application to the TIF is reliant on the inclusion of some form of congestion charging,” said a spokesman for Greater Manchester Passenger Transport Executive (GMPTE).

Under the scheme, drivers will have electronic tags fitted to their vehicles with a prepaid account where up to £5 a day would be automatically deducted as they passed roadside beacons on an inner and outer ring around the city.

Drivers would only pay at peak times in the busiest direction of travel and those on minimum wages would get a 20% discount for at least the first two years.

The GMPTE spokesman said: “Without the congestion charging element no money will be forthcoming from the DfT over and above what we would normally receive.

“That means gradual change and investment rather than the step change in public transport provision TIF will enable.”

A spokesman for the Yes Campaign added: “There is a simple choice facing people in Manchester.

“A ‘yes’ vote for increased public transport alongside a limited, peak time only congestion charge, or a no vote, which will mean no investment in transport above current allocations, no attempt to deal with rising car numbers, no attempt to deal with increasing congestion on the roads and serious overcrowding on public transport in the region.”

The question posed in the postal referendum, which needs to be returned by December 11, does not mention road pricing.

Instead, it asks: “Do you agree with the Transportation Innovation Fund proposal?”

• For more information on the Manchester congestion charge click here.