The UK Government has recognised Wales has been “hard done by” and will provide new funding for rail, the Welsh First Minister said.
Eluned Morgan announced that Wales will get extra cash to fund rail projects after UK ministers admitted Welsh railways were underfunded.
Politicians in Wales have complained that the country has lost out over the HS2 project, for which Wales received no additional funding.
Baroness Morgan declined to say how much money the country will get but said she hopes it will be “significant”.
In a letter to the Welsh Government, Transport Secretary Heidi Alexander admitted Wales has had “low levels of enhancement spending in recent years”.
HS2 has caused tensions in Wales since it was first announced, with the scheme having been designated an England and Wales project despite no track being laid in the latter country.
If it had been labelled an England-only project, Wales would benefit from additional funding, which Plaid Cymru estimates to be worth around £4 billion.
Speaking on BBC Radio Wales on Wednesday, Baroness Morgan, the Labour leader of the Welsh Government, said: “For the first time, the UK Government has recognised that we have been underfunded.
“(We’ve had) a letter from Heidi Alexander saying, ‘OK, something isn’t right here’.
“Now there is a discussion about what we are going to do about it, ‘where are your projects so we can invest’.”
She said the funding was likely to come in the form of new stations and rail infrastructure, but did not specify where.
Asked how much funding Wales is going to get, Baroness Morgan said she hopes “it’s going to be significant” but did not specify an amount.
“We haven’t got to the numbers, but I can’t tell you what a massive step forward this is,” she said.
“For the first time they’re recognising ‘you’ve been hard done by.’”
However, Plaid’s Llyr Gruffydd MS, argued the First Minister had misrepresented the letter.
He said: “It doesn’t reference the unfairness of HS2 nor does it say Labour will right the wrong of the full £4 billion consequential owed to Wales.
“Eluned Morgan is conflating two very different issues.
“If Labour were serious about giving Wales fair play, then they would give us the full £4 billion we are owed, just as they said they would.”
Mr Gruffydd said Welsh railways are in “desperate need of investment” and Wales needs full power over the network, as is the case in Scotland.
Ms Alexander’s letter, which has been seen by the PA news agency, said: “We recognise that railways in Wales have seen low levels of enhancement spending in recent years, particularly in the context of major investments such as HS2.”
She said the UK Government will prioritise projects proposed by the Wales Rail Board, which will inform the Treasury’s Spring Spending Review.
However, Ms Alexander said the Chancellor has been “clear” on the position of public finances, which “must be addressed as a matter of urgency”.
She added ministers agreed with the Transport Commission that the priority should be on North and South-East Wales.