Fares on the London Underground network are to rise by a quarter, Ken Livingstone has announced.

It follows the admission of a £64 million transport budget shortfall caused by congestion charge revenues falling short of expectations.

A single ticket in the centre of the Capital will increase from £1.60 to £2, while bus fares in outer London will rise by 30 pence to £1.

The changes will come into effect from January 4 next year for cash-paying customers, while those using the new "Oyster" smartcard, which allows prepayment, will still pay 2003 prices.

"The new four-year fare package will encourage people to switch to pre-paid tickets like the Oyster smartcard and bus saver tickets," said the mayor.

"London's transport network continues to improve, the most obvious example being the massive improvement of our bus network, but this comes at a cost that has to be met so we can keep the improvements coming."

The mayor hopes that the Tube will move to a cashless system within the next three years.