Rail campaigners were given a boost last night after a new £560m pot of cash brought new hope of improvements to Oxford’s railway station.

The £62m Access to Oxford project to add an extra platform at the station, cut congestion on the A34, and create new slip lanes and bus lanes on the northern and southern approaches to the city were shelved in October, when it missed out on Government grants.

But visiting Oxford yesterday, Transport Minister Norman Baker announced money would be available for projects to boost growth and cut carbon emissions.

The decision over which areas get a share of the money will lie with an independent panel, but Mr Baker hinted that the station expansion was the sort of project the Department for Transport wanted to back.

He told senior county councillors that “small bids” of £5m could be made for transport projects – the same amount as the shortfall on the budget for the station project.

Mr Baker said: “You may want to think whether or not that potential project would fit with the criteria set out in the transport fund guidance issued yesterday. On the other hand, you might want to put forward something completely different.”

He added: “We can get started right away on something, and get some action on the ground for those who want to get up and running.”

The plan for the station includes adding a new platform for London trains, creating a new covered footbridge over Botley Road and altering the forecourt. Network Rail had secured much of the £12.5m cost of the station expansion, but its funding was dependent on the council getting the rest of the money needed.

The county council cabinet member for infrastructure, Ian Hudspeth, said the project was “the key element” to improving Oxford’s transport network.

He added: “The priorities haven’t really changed, but we have got to make sure they fit in with the funding available. It will be a long game, but we will be trying to make our case.”

He said he hoped that he council would make a bid for money from the £560m Local Sustainable Transport Fund by April.

Councillors will have to decide whether to bid for £5m for a one-off project like the station expansion, or to scale down the Access to Oxford masterplan and ask for up to £50m to pay for a package of projects.

Unlike earlier DfT funds, much of the money now available is revenue funding for green projects to change people’s behaviour, rather than capital grants for new infrastructure.

The council has continued to lobby Network Rail to fund the station project itself.

Public transport campaigner Hugh Jaeger said: “Oxford station has had about a 40 per cent increase in passengers in the past five years, or an extra 1.4 million passengers a year.

“That rate of increase is way ahead of the national average.

“We have got to answer that capacity shortfall before it goes from bad to critical.”