Transport for London (TfL) is working on alternatives to the Watford Metropolitan Line extension after progress stalled when the mayor and the government could not agree on terms for taking the scheme forward.

The extension was intended to go to Watford Junction, diverting Metropolitan line trains to serve the existing Watford High Street and Watford Junction stations, with two new stations created at Cassiobridge and Watford Vicarage Road.

Instead, TfL is now looking at other options with the Department for Transport (DfT) to boost connections, that could be more affordable. This includes the prospect of a bus rapid transit scheme from Croxley to Watford Junction, or stretching further beyond Watford.

The latest final cost estimate of the proposed Metropolitan Line extension was £357.8m – £73.4m higher than the previously set funding package. The government had agreed to meet the funding gap through the housing infrastructure fund, but wanted TfL to take on the cost risk of the project in return.

In letters seen by City A.M., London mayor Sadiq Khan told transport secretary Chris Grayling he would be willing to proceed with the delivery of the extension and TfL taking on the cost risk under certain conditions.

These included TfL getting proceeds from development sites near the line, Network Rail cost risks being the responsibility of the DfT, and TfL not being liable for any further cost risk from higher tender prices, as "up-to-date tender prices" for the project would not be known until this summer.

Khan noted that the DfT had sought confirmation of the return of unspent grant money from the project, but said TfL would need to retain "the full grant payment we have received for the scheme".

"Furthermore, the government should not seek to recoup any funding reasonably expended in pursuit of the project going forward, even if we become unable to continue with the project owing to factors outside of our control," he wrote.

Grayling and communities and local government secretary Sajid Javid wrote back saying they were "surprised" the mayor had not agreed to their proposal, having made clear the additional £73.4m funding was conditional on the mayor taking the project forward with any future cost-risk.

They said:

Our position remains the same, and we therefore cannot accept your first three conditions which would push a significant proportion of the cost overruns risk onto government. If you do not agree for TfL to bear the cost of all future cost overruns, this scheme will not be able to proceed.

The letter concluded: "This is a great opportunity to support new homes by investing in infrastructure and we would urge you to reconsider your position so that this scheme can continue."

A spokesperson for the mayor said: "This scheme is outside London – so London taxpayers are being asked to pay for a scheme that will benefit people outside the capital."

They added that the previous mayor had "committed £49m of London taxpayers' money" to delivering the extension "without bothering to work out how much it would cost".

"The mayor and TfL have proposed several pragmatic solutions, including TfL having access to development proceeds to cover these additional costs. Without a pragmatic approach from the government, the scheme cannot progress with such a huge financial risk to London taxpayers," they said.