Greater Manchester councils welcomed the Government's approval of the bid for £3bn of transport improvements.
The announcement was made jointly this afternoon by Rosie Winterton, transport minister, at Rochdale Town Hall, and Ruth Kelly, transport secretary, in the House of Commons.
The package includes plans for up to 22 miles of extension to the Metrolink tram, transformed bus services across Manchester, including new, direct buses running from the north to the south of the city and 120 extra yellow school buses. There will also be major improvements to rail, including more carriages and seats, the upgrade of 41 train stations, and the doubling of park and ride provision on the rail and Metrolink networks.
The improvements are planned to be delivered before the introduction of the local congestion charge in 2013. The charging scheme will operate only at peak times, when congestion is at its worst.
Kelly said: "This is about creating a world class transport system for a world class city. Thriving cities are those where people have access to education and jobs, and where businesses can flourish.
"Manchester's economic renaissance is a major British success story. It is one of the fastest growing economies in the UK, but congestion has become an increasing brake on its future prosperity, with the potential to cost the city as many as one in seven of future jobs.
"Today I applaud the ambition and vision of Greater Manchester's councils. Their proposals will sustain the region's growth, bring benefits to all those who live in the area and enable Greater Manchester to compete with the best cities across the world."
The investment is the single biggest injection in public transport outside London in decades, the council said.
Sir Richard Leese, leader of Manchester City Council, added: "The proposals will be supported by £1.5bn of government expenditure. Only when the transport improvements are in place in 2013 would a limited, peak time only congestion charge – impacting on less than 20% of motorists – be introduced.
"This isn't yet another tax on motorists. Congestion costs individuals and businesses time and money and our proposals would save far more through faster, more efficient journeys. Tackling congestion is a pre-requisite for future success.
"I am delighted that Government agrees with our case. We have made it clear that to get more Greater Manchester people into work we need a transport system which enables them to access jobs and allows businesses to move their goods around quickly and efficiently. Everybody will gain from these proposals. This is a good deal for Greater Manchester."
Cllr Alan Taylor, leader of Rochdale council, said: "It's brilliant news to at last know what funding central government are going to provide so that the proposals for better public transport networks can be developed in further detail. I'm very excited at the prospect of Metrolink coming into Rochdale town centre – which by then will have undergone a major redevelopment – and arriving at a brand new transport interchange.
Sir Howard Bernstein, chief executive of Manchester City Council, added: "We are extremely pleased that Greater Manchester has been selected as the pilot for this initiative. We have an excellent track record for successfully delivering large scale, innovative projects and welcome the opportunity to take this programme forward. We will now, with the other local authorities, embark on an extensive consultation on the proposals."