Motorists have been warned tough choices lie ahead between major road improvements or scrapping the Humber Bridge tolls.

New Transport Secretary Philip Hammond said East Yorkshire may benefit from upgrades to roads, such as cutting congestion on the A63, or perhaps the abolition of the controversial tolls – but not both. He told the Mail: "There is only going to be a certain amount of money and it's likely to be quite limited. If money is spent in one area it won't be able to be spent in another."

The £200 million upgrade to the A63 Castle Street in Hull was given the green light by the Labour government in the months before the election, but has been put on hold as ministers move to tackle the UK's record deficit.

The Mail has mounted a long-running campaign against the bridge toll, with critics arguing the charge – which is £2.70 for a crossing in a car – is stifling the local economy.

Mr Hammond's comments suggest the region now faces a stark choice between new roads, such as the Castle Street improvement, and an end to the controversial tolls.

The minister, who visited the area last year in his former role as Shadow Chief Secretary, said: "I spent a very interesting morning at the Hull Chamber of Commerce engaged in a debate between two separate groups of local business people trying to decide whether their priority is the A63 upgrade or removing the bridge tolls.

"They weren't very happy when I told them in my role as Shadow Chief Secretary that they might have to tell me which was their priority, rather than simply telling me that both are important – I know both are important, but these are the kind of tough decisions that communities are going to have to deal with, deciding which of the various pressing problems is most important to the area.

"In relation to bridge tolls, you've got essentially a trade-off between do we invest more in infrastructure or do we use the available money to avoid, in the case of bridge tolls, charging."

Officials at the Department for Transport are said to be in detailed discussions with the Humber Bridge Board about the level of tolls and long-term funding.

But it is thought any move to write off the bridge's historic debt and axe the tolls would make it harder to argue for big capital projects like the A63.

The chief executive of Hull and Humber Chamber of Commerce, Ian Kelly, gave a measured response to the minister's comments.

He said: "We had a very productive meeting with Mr Hammond as Shadow Chief Secretary last year and much appreciated his candour.

"We did, of course, also highlight that spending on transport in Yorkshire and particularly the Humber has been among the lowest in the UK for a long period of time."

Hull West and Hessle MP Alan Johnson said Mr Hammond was offering a "ridiculous trade-off".

He said: "Sorting out the A63 is not just important for Hull, but important for the British economy, and reducing the Humber Bridge tolls to £1 would lift the economy in our region. Both projects are about investing to save and there is a good argument that reducing the tolls will attract more traffic and therefore be cost-effective in itself."