Transport minister Derek Twigg said; 'Our position has been consistent - the £170 million was available for Merseytram as long as we could be sure that the scheme would be delivered without any further requests for Government funding.'
Merseytram Line 1 was given provisional approval in December 2002, at a cost to the public sector of £225 million. Transport operator Merseytravel advised the Department for Transport in May 2005 that the total public sector cost was £315 million - an increase of 40 per cent.
Liverpool City Council later told the Department for Transport that it would not be prudent to rely on Merseytravel's assurances about the risk of cost overruns without a proper independent due diligence exercise.
Mr Twigg said; 'If they cannot rely on Merseytravel's guarantees, how can we?'
The Merseyside Districts - led by Liverpool and Knowsley councils - offered a capped commitment and above that they asked the Government to rely on assurances from Merseytravel, Mr Twigg said.
A Merseytravel spokesman said; 'We will have to consider the text and will release a full statement later.'