Ambitious plans for a high speed rail line between London and Birmingham have been thrown into doubt following reports Department for Transport was facing a £30 billion funding gap.
A leaked memo claimed the proposed service could be delayed, as the Department struggles to balance its books.
But officials insisted there had been “no change” over plans for a new 200mph service.
Transport Minister Sadiq Khan has also revealed that the Government was depending on franchise payments from struggling rail operators to fund the new service. The Government is nationalising services on the East Coast Main Line after franchise holder National Express walked away, because it was making a massive loss on the route.
Although it has signed an agreement to operate trains until 2015, National Express gave up the route after losing an estimated £10 million in the first half of the year, forcing the Department for Transport to take over direct management of services between London and Newcastle.
Mr Khan told the House of Commons: “One reason why we are able to invest record sums in our railway service is the revenues that the franchises bring in and the premiums that they pay.
“One reason why we are able to do the work on High Speed 2, which will lead to a high-speed link from the south to the north, is the system that we have in place.”
Ministers announced plans for a new line with services from London to the West Midlands, reaching up to 200mph, in January.
Known as High Speed 2, it could also link to the existing High Speed 1 service from London to the Channel tunnel. It could also be extended to Manchester and eventually into Scotland.
Ministers set up an inquiry into the funding and the preferred route, which will report by the end of the year.
But both Geoff Hoon, the former Transport Secretary, and his successor Lord Adonis have insisted that the inquiry will look into how to build the line, not whether to build it, as the decision to create a new service has already been taken. Reports of a budget shortfall are based on a talk given by a senior civil servant to a transport industry conference. A memo summarising his comments, written by transport industry representatives rather than the Government, was leaked to a newspaper.
A spokesman for the Department for Transport said: “There’s no timetable for High Speed 2 so it doesn’t make sense to talk about delays. The review currently taking place will make suggestions about how exactly it can be built and the timetable, as we have always said it would.
“It was always going to be a project that would take some time to deliver. Just the legal aspects will take a couple of years. This has always been clear. Nothing has changed.”