A £400 million extension of the Metro tram system in Birmingham and the Black Country is unlikely to get Government financial backing until councils agree a package of congestion-charging measures for the region's roads.
Whitehall planning permission for the new tram routes is due to run out in 2010, leaving local authority leaders in a race against time to convince Ministers to fund the scheme.
Centro, the passenger transport authority, intends to ask Parliament to extend Transport and Works Act powers giving legal authority for the extensions, which was granted in 2005 for a period of five years.
But the Department for Transport has decided that cash for the Metro schemes must come from the Government's Transport Innovation Fund - a pot of money set up to encourage councils to experiment with road pricing schemes.
Experts now believe it is highly unlikely that Centro will get approval for the tram extensions unless the project can be linked directly to road pricing and congestion charging experiments.
The seven West Midlands metropolitan councils have failed so far to reach agreement on road pricing pilots, but still put in a £1.7 billion bid to the Transport Innovation Fund.
The TIF money, if it were approved, would pay for the tram extensions along with improvements to West Midlands bus and rail services.
Centro submitted an outline business case for the Metro extensions - from Snow Hill through Birmingham city centre to Edgbaston, and from Brierley Hill to Wednesbury in the Black Country - in July 2006, describing the two routes as a major contribution to accessibility and regeneration.
But the Department for Transport will not consider the schemes until Centro submits a full business case which would then be considered for inclusion in the Transport Innovation Fund programme.
That is unlikely to happen until the seven councils reach an agreement on road pricing.
Centro and the West Midlands councils have been ordered by the Audit Commission to carry out more work into the potential role that road-pricing could play
in tackling congestion. According to the Department for Transport, Centro must develop a "coherent and realistic strategy that is grounded in strong evidence, represents value for money and identifies solutions which bring long term benefits".
The DfT also urged the councils to develop a "credible funding strategy" to meet the planned level of investment in public transport.
In a letter from the Audit Commission to Centro, District Auditor John Gregory said: "The slippage in submission of a full TIF business case has led to a consequent delay to Metro phase 1 extension funding. This has meant it is highly unlikely that contracts for the phase 1 extensions can be awarded prior to the expiry of the Transport and Works Act powers which are needed for the extension work to take place."
Expiry of the Transport and Works Act powers will also involve Centro in renewing a £36.5 million payment toward the Black Country Metro extension from Westfield, the owners of the Merry Hill Shopping Centre. The timetable for paying the money is extendable by "mutual agreement", a Centro spokesman said yesterday.
Plans for a comprehensive network of
tram routes across the West Midlands were first drawn up almost 25 years ago. Only one route exists at the moment, from Birmingham to Wolverhampton.
Council leaders are increasingly doubtful about whether the Government will ever sanction the two Metro extensions.
A study by Centro last year concluded that a fleet of fast buses would cost half as much as the planned Metro routes and would be used by almost as many passengers.
Len Clark, Birmingham City Council's lead member on the West Midlands Passenger Transport Authority, said he believed the Government was trying to make a political point by linking the Metro business case to the Transport Innovation Fund.
Coun Clark (Con Quinton) added: "We were trying to get this decided outside of the TIF process but the Department for Transport has insisted it must be lumped in."
