The head of Transport for London has admitted that “discussions” are under way over the future of the £695m Victoria station upgrade project

Asked if the upgrade was likely to be scrapped, Peter Hendy, commissioner of TfL, said: “Not if I have anything to do with it. I believe very strongly the upgrade is an important project for the tube. But money is tight and TfL is trying to find ways of funding the programme.”

He said a decision on how the project will proceed would be made within the next few weeks. This is thought to follow further discussions at TfL’s board. The project is under threat because of a funding crisis at TfL brought on by the collapse of the Metronet PPP consortium. In addition, revenue from fares is being hit by a fall in passenger numbers in the recession.

Kulveer Ranger, transport director of the Greater London Authority, said “We’ve looked at TfL’s finances and to say they’re not in good shape is a huge understatement.”

Hendy, speaking after a fringe event at the Labour conference in Brighton, also confirmed that Tube Lines, the consortium charged with completing the upgrade of the Jubilee line, will be fined £10m for every month the work is delayed.

We’ve looked at TfL’s finances and to say they’re not good is a huge understatement

Kulveer Ranger, GLA

The consortium, which includes Amey and Bechtel, admitted last week it would miss its Christmas deadline for completing the works.

The problem comes as the dispute between the two bodies over the forthcoming cost of the 2010-17 workload has been taken to arbitration; the two sides are more than £2bn apart in their valuation of the work.

Tube Lines is responsible for the Jubilee, Northern and Piccadilly lines. Metronet, which was led by Atkins and Balfour Beatty, was responsible for the upgrading the remainder of the underground system. It went into administration in 2007.