A bemused Boris Johnson surprised people in Mitcham this morning as he tried unsuccessfully to discover how a £500,000 investment in the town centre had been spent.

The Mayor of London, accompanied by two aides, did a walkabout in the town centre for an hour and residents and business owners tried to suggest evidence of how the Outer London Fund money had been spent.

But neither the mayor's team nor locals seemed to know what had been done with the money - which in fact was earmarked for community engagement and business support.

"It's a mystery", Mr Johnson said, after greeting shoppers and market stall owners in Fair Green.

The money was awarded to Merton Council as part of a £6.2m pound revamp of Mitcham town centre, focusing on the Fair Green market area.

The three-year Rediscover Mitcham project began in October.

Vesile Muroz, manager of The Don Cafe in London Road told Mr Johnson the money has helped pay for a shopfront sign but said she has "not really" seen any change in the area.

There was mixed reaction to a TfL and council proposal to draw more people into the town centre by building a bus lane through Fair Green.

"Rubbish", said furniture dealer Mrs Davis when asked by Mr Johnson what she thought about the redevelopment plans.

Mrs Davis, who has displayed furniture outside G & M House Clearance on Fair Green for the past 18 years, said she will face financial ruin when the council forces her to store all furniture inside the shop.

"That all seems very unreasonable", Mr Johnson agreed.

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But Abdirisak Hassan and Yuinas Bashir, of Galaxy Cars cab company, told Mr Johnson: "I just want to say what a fantastic job you're doing for London."

Asked what he thought about the bus lane, Mr Hassan said: "I think it is a breath of fresh air. It will bring business to the area."

Job-seeker Louise Plunkett told the Mayor: "You can't regenerate the area until you regenerate the people".

Mr Johnson nodded in agreement when she said betting shops in the town centre were attracting the wrong sort of people to Mitcham.

Miss Plunkett said: "Whose idea was it to open up Poundland over there? That used to be McDonald's. If you put an employment agency over there, I guarantee you, you would see people flock there...something to do with helping people off benefits and getting people back into work."

Mr Johnson said he would discuss residents' concerns about the bus lane at a City Hall meeting with TfL this afternoon.

He also said he would make enquiries at City Hall about housing association Circle Housing Merton Priory, after residents complained to him about the length of time it was taking the housing association to complete serious repairs.

He evaded a question about whether he thought George Osborne's cuts to local authority funding would hinder the development project.

A Merton Council spokeswoman said Mitcham can expect "exciting" town centre works to begin in January, including building a formal market pitch area with better facilities, landscaping Fair Green and relocating the renovated historic clock tower.

The £0.5m from the Outer London Fund was spent on promotional and marketing events including 20 shop front improvements, six pieces of artwork around the town centre, 12 market events, a pop-up cinema event and the Christmas lights switch-on.