Transport Secretary Philip Hammond has warned funding for the "lifeline" link between the Isles of Scilly and the mainland is at risk until the Battle of Battery Rocks is resolved, the Western Morning News can reveal.

Mr Hammond acknowledged that there is a "special case" to be made for protecting around £24 million of Department for Transport (DfT) cash earmarked for providing a ferry link between the Scillies and Cornwall.

But as plans to build a terminal in Penzance harbour for a new boat to the Isles of Scilly have yet to be approved, he stressed a decision cannot be made until a "clear scheme proposal" lands on his desk.

Speaking to the WMN, Mr Hammond indicated that the department would look favourably upon a scheme to accommodate a large ferry ship serving the islands once the present boats retire.

This is in stark contrast to almost all of scores of transport schemes suspended pending the Government's major spending review in October. Mr Hammond is refusing to give guarantees on the future of the Kingskerswell bypass in South Devon among many others.

Of the Scilly link, he said: "We recognise that it is a lifeline scheme. But it's a special case for another reason.

"It's one of only three schemes in the country that have conditional approval, which is the most advanced status other than full approval. It's right up there at the top of the list."

But he stressed the fact that the Government Office for the West Midlands, which handles approvals for the Secretary of State for Communities and Local Government, had yet to endorse the scheme is a "problem".

The plan to build a £40 million passenger and freight terminal at Battery Rocks, which would also unlock European cash, was finally sanctioned by Cornwall Council's strategic planning committee in March.

Delays stemmed from local protesters claiming the terminal would destroy a beach and a historic pier.

Fearing the worst, there have been suggestions that the terminal be spilt over two sites in Penzance or, controversially, the plan is transferred to Falmouth.

"The community hasn't actually decided what it wants to do yet," said Mr Hammond. "Which harbour it wants to enhance and where it wants to build the facilities, and whether it can get planning permission and listed building consent to do it.

"Frankly, until Cornwall Council and the local community can decide the way they are going, and get the approvals in place, there is no decision for us to take.

"We wouldn't take a decision before the spending review is concluded anyway. But even if the spending review were concluded tomorrow, there is no decision for the Secretary of State.

"I am confidently expecting that Cornwall Council will be able to resolve the outstanding issues and that by the time the spending review has been completed, there will be a clear scheme proposal put to my department."

On the South Devon bypass, a scheme in the offing for decades that has yet to achieve the first of three levels of DfT consent, Mr Hammond said he would wait for the conclusion of the spending review.