Ken Livingstone has agreed to pay Capita, the company running the London congestion charge, £31 million of taxpayers' money.

London's mayor has approved the payment because profits have been lower than forecasts.

Peter Hendy, Transport for London's director of surface transport, denied that Capita had in effect been guaranteed a profit.

But he added: "It's not in our interests or theirs to have a contractor operating at a loss because we won't get the standard of service that we want."

Steve Norris, the Conservative mayoral candidate, said the congestion charge was "unravelling before our eyes".

"There is also something grotesque about Ken Livingstone having to pay out £31 million to an arch [public private partnership] contractor like Capita," he added.