A £1billion funding dispute could put plans for a new rail operator in Wales next year in jeopardy.
That's according to the Welsh Government who reacted to a threat by the Department for Transport to put bids for the Wales and Borders franchise on hold.
The Wales and Borders franchise is one of the UK's most heavily subsidised, receiving between £110m-£160m a year. It runs most of the passenger rail services in Wales, including the south Wales valleys network, the North Wales coast line, rural services, and mainline services between Wales and major English cities, except for inter-city services.
In a leaked letter to Wales Online, the UK Transport Secretary Chris Grayling blamed the administrative process in Cardiff for failing to address major issues needed to move forward with the new franchise.
The Welsh Government has called the letter disappointing saying it jeopardises their ability to award a replacement for the current Wales & Borders franchise. They say is if unresolved it will be a major issue for rail users across Wales and the Borders.
The £1 billion arises as a result of a rebate that DfT currently receives from Arriva Trains Wales. The rebate has now reached £67m per annum. Over a 15 year period the total amount payable would be around £1Bn.
At the end of the current Arriva Train Wales franchise in October 2018 the contractual mechanism for collecting the rebate will disappear as the Welsh Government becomes the franchising authority.
In a statement, the Department for Transport said they would continue to support the Welsh Government to devolve rail powers.