TfL commits £100m to extending tram network from Wimbledon to Sutton

But the extension will only go ahead if further funding can be found for the long-awaited project, estimated to cost about £240m.

TfL's draft 2016/17 budget and business plan said it had earmarked £100m to extend the network from South Wimbledon to Sutton town centre.

It said Sutton and Merton councils had offered to pay a further £50m. 

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But the report added: "However, there remains a shortfall to be addressed by looking at the scheme’s scope, value engineering and increasing the local contribution from development.

"We are working closely with the boroughs to develop an understanding of the case for extending the tram to Sutton, how this could be funded and delivered, and in what timescale."

Steve O’Connell, London Assembly member for Sutton and Croydon, welcomed the funding commitment.

He said: “This is a really important stage of the process because it shows that nobody can back out now.

“We know that the business plan is not enough, but it is a sign that this plan is being taken seriously in that TfL have committed to it.

“Of course, a deal has to be struck first. Everyone else involved have really got to up their game.”

The Greater London Authority has previously demanded the two authorities commit to building 10,000 homes in return for the tram extension, a requirement described by Sutton Council as "impossible".

Council leader Ruth Dombey said in February: “We are discussing about how we are going to pay for it and how many homes we need to build along the route in order to make in viable.

"The GLA started with numbers that were just impossible but as a result of negotiations it is improving but we are still not there yet.

"They are expecting a far higher capital contribution from the council than they normally expect in other projects so we are challenging them on that."