The final hurdle to rebuilding Birmingham's New Street Station has been cleared, the city's leader claimed last night - as new figures showed increased traffic on the region's roads.

City council leader Mike Whitby said the authority and Network Rail had come to an agreement over who would foot the bill if the New Street project ran over budget.

It followed last week's warning from Liam Byrne, the Minister for the West Midlands, that lack of clarity over who would pay if things went wrong was delaying the project.

Coun Whitby said: "This agreement now provides the Department for Transport with the final assurance they have been seeking on the Gateway Project."

The announcement came as new Government figures showed the nation's road networks were more congested than ever. Road traffic in England has grown by 12 per cent over the past 10 years, the Department for Transport revealed.

In the West Midlands, the number of cars on the roads has risen by eight per cent in the same period.

However, according to DfT figures obtained by The Birmingham Post, the increase in traffic flow in the region over the decade is 12.5 per cent. The DfT national road traffic survey for estimated traffic flows for all motor vehicles by local authority shows the West Midlands figure in 1996 as 43,385 and 49,606 in 2006.

Ministers have hinted they are close to making a final announcement about New Street, with Transport Minister Rosie Winterton revealing a statement would be made "shortly".

The latest Minister to express support for the project is Local Government Minister Parmjit Dhanda, MP for Gloucester, who told the Commons the renewal of the station was "a project of regional and national importance, and one that is important to all of us".

Concern about potential cost overuns has dogged the ambitious New Street Gateway project for months.

The Gateway plan will see the 1960s-built station undergo a dramatic redevelopment, transforming the dark, crowded underground station into a bright, modern 21st century transport hub for the entire region.

Coun Whitby said a joint letter had been sent to officials at the Department for Transport outlining the agreement made between Network Rail and Birmingham City Council.

The two partners had agreed a methodology for sharing the risk, allowing a ratio for sharing all costs to be determined once the detailed design is finalised, he said. He added: "It ensures that Network Rail and Birmingham City Council are incentivised to continue to work together to minimise costs and allocate funds flexibly to deliver Gateway on time and within budget.

"I firmly believe that this new agreement will enable Department for Transport and HM Treasury to rapidly agree to release funding to enable the project to move ahead in early 2008."

The Government announced £128 million of funding for New Street Gateway last July, but Transport Minister Tom Harris revealed last week that there were "a few final important issues" to resolve before the long-awaited rebuild could be approved. The city council and Advantage West Midlands, the regional development agency, are asking for £260 million from the Government to pay for the scheme, on top of the £128 million which had already been promised.

Conservatives and the Liberal Democrats last night focused on the road traffic figures, claiming Labour had failed to live up to its pledge to improve the nation's public transport network.

Shadow Transport Secretary Theresa Villiers said: "These figures are a damning indictment of the Government's failure to tackle road congestion."