A Hucknall-bound tram is seen in one of the platforms at the current Station Street terminus. When phase two is completed, the new line will continue to the left and onto a new bridge over Nottingham station.

After making the announcement on Thursday, Transport Minister <name>Norman Baker</name> said: “Line One of the Nottingham tram has proved to be a great success in encouraging people on to public transport. These proposed extensions provide the opportunity to continue this success, and give people in the south of Nottingham quicker, more convenient access to the city centre, as well as helping to regenerate sections of the city.

"Following the spending review last year, we challenged Nottingham City Council to look again at the cost of the Nottingham light rail extension, to be funded through the private finance initiative, to ensure we get maximum value for every pound we spend.

"The Department has been working closely with the local authority involved to ensure this project is affordable. I am delighted that the Council has risen to the challenge and has identified savings from its original estimated costs.

"By finding savings, I can confirm that we are today allowing this project to move another step forward within our funding approval process.”

Nottingham City Council’s Chief Executive <name>Jane Todd</name> also commented: “This is a very positive development. We have worked hard with government to ensure that NET phase two is delivered as cost effectively as possible. A preferred bidder will now be appointed in the very near future who will work with the council to finalise contracts which will hopefully be signed later in the summer. NET Phase Two is crucial for the future of Nottingham's economy and to attract new jobs to the City”.

If final approval is given for the lines, construction work will begin before the end of the year, with a view to the extended system opening in 2014.