Transport for London has been given a bailout to help it fill a coronavirus-related black hole in its budget after its income slumped by 90%.

The Government bailout, reported to be worth £1.6 billion, will come with caveats, including a rise in tube and bus fares, a source has confirmed to PA news agency.

A mayoral source said: “The Government has belatedly agreed financial support for TfL (Transport for London) to deal with Covid-19 – as they have for every other train and bus operator in the country.

“But they have forced ordinary Londoners to pay a very heavy price for doing the right thing on Covid-19 by hiking TfL fares, temporarily suspending the Freedom Pass (free travel for over 60s) at busy times and loading TfL with debt that Londoners will pay for in the long run.”

According to the Mirror, the deal breaks down as £1.1 billion in cash and a £505 million loan for the capital’s transport provider.

City Hall and the Department for Transport have been approached for comment.

TfL has been in talks with ministers for several weeks over a grant, as it requires £3.2 billion to balance its proposed emergency budget for 2020/21.

On Thursday, Mayor of London Sadiq Khan warned that TfL would need to reduce services unless an agreement was reached by the end of the day.

Tube and bus use fell dramatically after the Prime Minister put in place strict lockdown controls on March 23, forcing people to stay home in a bid to stem the spread of coronavirus – a move that badly hit TfL and other transport operators’ income streams.

Transport Secretary Grant Shapps, at the daily coronavirus Downing Street briefing, indicated that fare rises would be coming as part of a resolution to the issue.

Mr Khan has frozen single fares on the London Underground, buses, DLR and trams since he became mayor in May 2016.

But Mr Shapps said it was “very important” that as part of a rescue package “we don’t end up in a situation where people from outside the capital are unfairly carrying the burden”.

He warned that consistent fare freezes mean “more money isn’t going into the system”, stating: “You can’t then have an unfair settlement, where other British taxpayers are effectively bailing out the system.”

Mr Shapps said at the time that he was “optimistic” a “solution” would be reached for TfL.

Earlier, Mr Khan told LBC radio that TfL was legally treated like a local authority, which meant “we have to” balance the books.

“We’d have to reduce the bus services we provide, we’d have to reduce the Tube services we provide, to save money,” he said.

Mr Khan continued: “At a time when the Government is wanting us to increase services to get into the recovery phase, we might be required to cut services because the Government is failing to give us the grant support we need.”

TfL has been using its cash reserves to meet the £600 million monthly bill of operating services.

A decline in passenger numbers of 95% on the London Underground and 85% on buses due to the coronavirus lockdown has caused a 90% fall in income.

Mr Khan said TfL had been negotiating with the Government for around six weeks.

“I’m unclear about why the Government are waiting until the 11th hour to agree a deal,” he said.

“It is really bad form.”