Transport Secretary Ruth Kelly said 30,000 future jobs in the area were believed to be at risk if traffic problems there were not resolved and pledged £1.5 billion in central support to it.

The peak-hour charge, based on a city centre and an outer ring road band, would go alongside 22 miles of new Metrolink routes as well as improved bus rail and cycling facilities, she told MPs.

In a Commons statement, she said there would be a public consultation, with a final bid expected to be submitted for ministerial approval in the autumn.

"Greater Manchester's proposals demonstrate their determination to develop innovative approaches to tackling congestion for the benefit of the economy and the mobility of people living in the city region," she said.

But shadow transport secretary Theresa Villers said three out of ten local authorities affected were opposed to the package - with one demanding a referendum.

She said people were being told that unless they accepted the congestion charge, they would not get any of the extra money for improving public transport. "This is bullying, pure and simple," she said.

Businesses opposed to the £5 charge to enter the city centre have joined calls for a wide-scale public vote on the scheme - which is backed by Manchester City Council and a number of other local councils in the Association of Greater Manchester Authorities.

Opponents, including many major local employers, say it would be the world's biggest congestion charging zone and hit business and local people.

Friends of the Earth's transport campaigner Tony Bosworth said: "Charging drivers to enter Manchester city centre at peak times will help cut congestion and tackle climate change. But if we want motorists in Manchester to drive less, there must be an improvement in alternatives to the car such as better public transport and cycling facilities."