The decision to back the project with public money raises hopes that the logjam in other UK infrastructure schemes will now be broken. The deal will allow Transport for London, the mayor's transport authority, to press ahead with a private finance scheme for the PFI upgrade.
The treasury refused to say whether the note will be counted as part of the government's borrowings. There has been controversy over the way the treasury has guaranteed£9bn of borrowings for Network Rail, the successor body to Railtrack, but kept the debts off its own balance sheet.
Under normal local government spending rules the whole£180m would have to be set aside from TfL's budget in the first year. That effectively blocked the project until the treasury agreed to provide the note.