Last week transport secretary Alistair Darling ruled that the Metro project is too expensive. He claimed that the cost to the government has almost doubled to £1.3 billion over the 40 years it would need to fund the project.
Metro chairman Karam Hussain said: "This is a disgraceful decision that reflects the government's lack of a clear policy on transport or the development of cities and regions outside London and the South East."
The government withdrew funding for the tram last year, blaming escalating costs. It asked scheme promoter Metro to investigate the possibility of a rapid bus transit system. Metro concluded that a bus service would not be as good as a tram for attracting drivers out of their cars.
But Darling said that recent research by consultancy Atkins concluded that buses would bring many of the benefits of the tram at half the cost.
The study found that a rapid bus transit could have a higher-frequency service and similar overall journey times as the tram. It would attract around 90 per cent of the forecast passenger levels as the tram, added Darling.
However, the research also highlighted possible problems in delivering the bus system, in particular the deregulated market. Atkins director of transport planning Alan Brett commented: "Exactly how it would work would have to be discussed further."
Darling maintained that it is in the interest of the city's bus companies to deliver a quality service. But he suggested that he would give Metro stronger powers over them if necessary.
Leeds City Council leader Mark Harris said: "This city has experienced unprecedented economic success in recent years and it is regrettable that the government does not appear to recognise this."