The �500m engineering project costs too much

Costs for the city tram have risen to an estimated �500 million, at least �140 million more than first proposed.

Transport secretary Alistair Darling said on Tuesday the government could not accept the scheme because of the cost escalations.

Metro chairman Mick Lyons said his team were working on a new bid and the announcement came as no surprise.

Revised plans will be taken to Whitehall in the autumn, he added.

"We remain determined to bring the scheme and all the economic, social and environmental benefits that come with it, to Leeds and West Yorkshire," he said.

Colin Challen, Labour MP for Morley and Rothwell, said he was disappointed at the news.

Largest engineering project

The supertram is the largest single project of engineering ever undertaken in the city.

Under the original plans it would have provided a 28-kilometre light rail network linking Leeds to outlying areas along three major routes with 22 million people expected to use it every year.

Mr Darling also said plans to extend the Manchester Metro and a bid to create a Supertram in South Hampshire could not go ahead because of spiralling costs.