Mind the gap

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Media captionDavid Cameron talks to Nick Servini about devolution in October 2013

It appears that the current disagreement between the Welsh and UK governments over who funds rail electrification in the south Wales valleys has stemmed from an interview I did with David Cameron in the autumn on Wales Today.

But the important bit was when he said: "Well I know we need these infrastructure investments in Wales.

"It's this Government which is putting the money into the electrification of the railway line all the way up to Swansea and of course the Valley lines."

There was a clear impression that the UK government was funding the project, and it's an impression repeated by Conservatives claiming the credit for a major infrastructure project.

I covered the announcement by the UK coalition government at the time two years ago and I have to say the general understanding was that the cash was coming from Westminster.

So what's happened?

My colleague Dan Davies has obtained copies of an exchange of letters between the First Minister and the Prime Minister which have put some of the details about the deal into the public domain for the first time.

Carwyn Jones wrote to David Cameron last week saying that he was coming under pressure from Network Rail to confirm who was paying for the work and that he wanted urgent clarification from Downing Street.

And in the answer from the PM, it emerged that the UK government is going to pay directly for the electrification from London to Cardiff, and then the stretch from Bridgend to Swansea. He says this was all part of the agreement reached in 2012.

The more observant readers among you will notice that there's a gap between Cardiff and Bridgend.

That gap between Bridgend and Cardiff and the Valleys lines are initially going to be paid for by Network Rail who will then recoup the money in the form of charges to the rail operating company which has the franchise, Arriva Trains Wales.

As there's a substantial subsidy on that franchise paid for by the Welsh government, it appears that the money will ultimately have to come from Cardiff Bay.

David Cameron's letter says: "It appears that a misunderstanding has arisen that the Valley Lines electrification will be directly funded by the UK government but that was never the case."

In his letter, David Cameron says that while the UK government provides indirect financial backing to Network Rail, he does not state that the UK government will pay for the cost in the Valleys, totalling hundreds of millions of pounds.

There are two obvious questions?

Why did David Cameron suggest in the interview with me that the UK government was paying for Valleys lines electrification if that wasn't the case?

And why didn't the Welsh government nail down the details on who exactly was going to pay for such a key infrastructure project when it was agreed two years ago?

It's difficult to know where this story goes from here. Nobody seems to be giving an inch.