Plans to make post offices the official registration points for congestion charging have fallen through after a row over costs.

London Mayor Ken Livingstone said the deal fell through when the Post Office increased its bill from �250,000 to �1m without "justification".

From 17 February, motorists will have to pay a �5 fee to drive into central London in a bid to cut traffic by up to 15%.

It had been hoped they would be able to register and pay for the scheme at post offices as well as at a call centre, some garages and newsagents and over the internet.

The scheme aims to cut traffic by 15%

Mr Livingstone, who intends to complain to the Government, said: "This is a monopoly and a monopoly has a duty to provide a service, not simply to produce the maximum profit that it can.

"This is the worst sort of corporate greed."

But a spokesman for Post Office Ltd said they had drawn up an arrangement guaranteeing �1m a year to protect them in case the scheme was withdrawn, only to be told this was no longer acceptable.

Legal challenge

He added: "We want to, and are willing to, handle congestion charging services in Post Office branches.

"But as an organisation which is losing �3.5m a week, we can only do that on a commercial basis that fully covers our costs."

The charge could face a new High Court challenge from a group of workers at Smithfield Market who say they were not properly informed of its impact.

Their solicitors wrote to Mr Livingstone on Tuesday demanding details of the consultation process and could challenge the scheme under the Human Rights Act.