Gordon Brown is paying for his housing rescue package by cutting London's regeneration budget by nearly £60million.

The London Development Agency will have its income slashed by £ 5.3million this year, £4.4million next year and £48.3million in 2010/11.

The full impact of the cuts will be felt after the 2012 Olympic Games as the LDA is responsible for the long-term legacy of the site.

Sources at the Mayor's business agency said that funding for the Thames Gateway development was also likely to be affected.

Boris Johnson criticised the Home-Buy scheme - which will be paid for in part by £300million previously allocated to regional development agencies across the county.

A spokesman for the Mayor said: "Londoners are being hit twice here, not only by the measures announced yesterday, underestimating the scale of the problem faced by homeowners in the capital, but now we discover these measures are at the expense of the critical funds allocated to economic development in London."

As part of their housing package Mr Brown and Chancellor Alistair Darling yesterday announced a year-long tax break for buyers of homes worth between £125,000 and £175,000 - claiming it will save buyers £600 million.

But experts today said there would have to be a remarkable recovery in the housing market for the concession to be worth anywhere near that.

Robert Chote, director of the Institute for Fiscal Studies, said: "How plausible that figure is, is a matter for debate. It would be interesting to see why the Treasury thinks it is going to be as expensive as this."

With transaction numbers tumbling because of the freeze in mortgage lending, the figure is likely to be nearer £200 million.

Shadow housing minister Grant Shapps said the stamp duty holiday was "completely over-spun". "Within 24 hours the Government's much heralded housing rescue plan is already falling apart because their sums do not add up," he said.

Liberal Democrat T reasury spokesman Lord Oakeshott said: "I would be amazed if his so called £600 million boost to the housing market even amounted to half that."

A Treasury spokesman said: "The costing is based on a number of factors.'