The link would have provided a vital commuter route into Bristol and eased congestion on traffic-clogged roads in the area.

But Transport Secretary Philip Hammond has told North Somerset MP Liam Fox there is no money to pay for the scheme.

In a letter to Dr Fox, Mr Hammond says: "Whilst we support improvements to regional and local rail services, the Government's key priority at present is to tackle budget deficit.

"Firm departmental budgets and budgets for local authorities from 2011/12 onwards will only be known after the Government has carried out a comprehensive spending review later this year.

"This means that, at this stage, we are not in a position to give any commitments to local authorities on the level of funding for projects such as the re-opening of the line between Portishead and Bristol."

Dr Fox, as Defence Secretary a Cabinet colleague of Mr Hammond, has previously lent his support to the campaign for a rail link and has raised the issue in Parliament.

He said: "I am disappointed, but not surprised, that there is no money immediately available for this rail link.

"As we all know, the public finances are in an even worse state than expected and the reduction in the deficit has to be the Government's top priority.

"I will continue to give my full personal support for the project, so that when the financial position eases, we may get some positive traction on this issue."

Alan Matthews, chairman of the Portishead Rail Group, said he was disappointed but not surprised.

He said they would be pressing for the paperwork to be completed so that when money became available, a start could be made without delay.

Mr Matthews said the paperwork alone could take two years to complete.

"If we get everything ready, then at least we could start straightaway," he said.

A rail link between Portishead and Bristol already exists – but only for freight traffic travelling at speeds of up to 30mph.

The six-mile stretch of track between Portbury Dock and Parson Street, Bedminster, would have to be upgraded in order to take passenger trains at speeds of up to 60mph.

The existing track could be used, but major realignment work would be needed and some new lines would have to be laid.

The cost of an upgrade has already soared from £15 million to more than £30 million and it had originally been hoped to win funding from the Government in 2014.