Congestion charging should be introduced for all car journeys throughout London and the home counties as part of a strategy to tackle overcrowding on the M25 ring road, according to a government-funded study published yesterday.

Fees should be levied on all motorists which would fund the construction of extra lanes on the M25, the report commissioned by the Department of Transport recommends. The money would also pay for luxury airline-style bus services circling London.

In a recommendation which astonished many transport experts, the orbit transport study advocated a road-charging zone stretching up to 30 miles outside the M25, which could reach as far as Southend, Reading and Brighton.

All traffic in the area, whether on motorways or local roads, would have to pay a few pence per mile, measured by meters installed in every vehicle.

One of the report's authors, Rob Thompson of the transport consultancy Halliburton, said: "We feel charging should be introduced as soon as it's economically justified and practical. Road widening should not happen before charging begins."

In the "personal opinion" of another consultant on the project, Denvil Coombe, the charge could be pitched at between 5p and 10p per kilometre, raising billions of pounds a year for the government.

Ministers have acknowledged the need for action to tackle congestion on the M25, where traffic is forecast to grow by a third by 2016.

Contrary to expectations, the report came down against largescale widening to create a 14-lane superhighway. Mr Thompson said: "Past experience shows that any new capacity that's provided quickly fills up with what we call in duced traffic." He said one extra lane could be added but only alongside measures to dampen demand. If charging proves politically unacceptable, the authors suggest creating high-priority lanes for buses, coaches and cars carrying more than one person.

The AA described the findings as "desperate". The motoring organisation's head of policy, John Dawson, said he was "deeply uncomfortable" with congestion charging, pointing out that the government's annual revenue from fuel tax amounted to £6m per mile of the M25. Mr Dawson said: "If you don't increase supply, there are four things you can do - ban, ration, queue or increase the price. Motorists have had to queue. Now they're going to be banned, rationed and pay twice."

Proposals to improve public transport included creating high-speed bus routes round the M25 and a wider ring, up to 15 miles outside the motorway. The high-frequency buses would have an airline-style service allowing commuters to work on board.

Friends of the Earth said there were many "welcome suggestions" in the study but cautioned against more motorway lanes. Its transport campaigner, Tony Bosworth, said: "We cannot build our way out of this mess. The government must dramatically improve public transport and develop alternative strategies including road-user charging."

The government has said congestion charging for cars will require legislation and is impractical before 2010. But road tolls for lorries, using satellite tracking technology, is due to be introduced in 2006.

The Freight Transport Association said it was delighted at the suggestion of extending charging to all traffic. A spokesman said: "It is cars that are the primary cause of congestion and it is logical that the technology applied to tax or 'road toll' goods vehicles, should be extended to cars as soon as possible."

The authors of yesterday's report will invite comments from the public, employers and transport organisations before submitting final recommendations to the mayor of London in the autumn. The mayor will then pass his views to the transport secretary, Alistair Darling, in the new year.