Wales does not get its “fair share of rail funding” and the system must be “fixed”, said a former Labour minister responsible for transport.

Plans for a £6.6bn Oxford-Cambridge rail line were previously classified as an England-only project, which means Wales could have been entitled to more money.

But the Treasury announced there was a “publishing error” in a 2020 document and it should have been classified as an England and Wales project.

Lee Waters, the Labour MS for Llanelli said the “cock-up” highlights the broader issue of how “unclear” and in need of reform the funding system is.

Rail in Wales is not devolved, which means funding is determined through the UK government using the Barnett formula.

Speaking to BBC Radio Wales Breakfast on Monday, Waters said: “Is it a cock-up, is it a conspiracy? Who knows – almost always a cock-up in my experience.”

But he said “it speaks to the broader truth” that “the system needs fixing”.

He said: “We have not had our fair share of funding, the formula does not work to our advantage.

“It is not clear how the formula works and therefore we don’t trust when things like this pop up.”

Waters said only a few weeks ago the Welsh government “had to dip into our own coffers” to pay for the national insurance costs, which should be covered by the UK government as per a Treasury agreement.

“We need to reform the Barnett formula,” Waters said.

“We need to have the UK treasury acting as a UK treasury for the whole of the UK, not just for whoever happens to be in government in England at the time.”

He added that this is not “a party issue” because “this happened under the last government, it’s happening under this government”.

He said it is “the government machine” which must be “changed and fixed”.

Joel Barnett was a Labour cabinet minister in the 1970s. It was Barnett who developed the new rules, so the formula was named after him.

The aim of the formula is to maintain the relative spending levels in different parts of the UK.

So if the UK government decides to spend an extra £1,000 per person on something that only covers England, the Barnett formula should mean that the block grant to Wales also goes up by £1,000 per person.

To calculate how much the block grant needs to go up in total, the formula looks at the size of the Welsh population relative to the size of the population of England.

At the moment, Wales’ population is about 5.7% of England’s.

So for every pound of extra spending in England, Wales gets just under 6p.

The formula also applies to spending cuts in the same way.

Waters said he is “confident” his London colleagues are ensuring Wales gets more funding, but is “less confident” they are trying to reform the Barnett formula.

He said part of the issue is there “is not a Wales pot of money for rail, we have to fight our corner in the England and Wales pot”.

Waters said: “There’s a UK Labour manifesto commitment to create a Wales fund for schemes so there can be transparency.”

But he said he is “nervous” about “wholesale devolution of rail without the extra funding”, because it comes with the responsibility of repair work.

He said: “You can argue we should get the extra funding, but it’s back to ‘do we trust the UK funding arrangements to do that?'”

The UK government previously said the “error” over the Oxford-Cambridge line classification “will be amended when an update is published at the spending review”.

The HM Treasury has been approached for comment.