Under secretary of state for transport Derek Twigg told the House of Commons that he recognised "the situation regarding the tramway's future".
He said: "To do nothing in the next few years would mean that it could no longer operate in the way that it has been doing for many years."
But Mr Twigg, who was speaking in response to questions raised at Westminster by Blackpool South MP Gordon Marsden, added that the scheme had to prove it was good value for money before the Government would pump in resources.
He said: "The advice that I received from the regional bodies gives priority to the refurbishment of the tramway to help the economic regeneration of Blackpool.
"I have also had a representation from the North West regional assembly supporting the scheme.
"Any decisions on the projects prioritised by the regional bodies will be made in due course.
"We will take account of their views in our final decision on spend within the regional transport allocations.
"That will include their views on the timing of any funding provision as well as the amount.
"The debate has given me the opportunity to hear my honourable friend's views on the future of the Blackpool and Fleetwood tramway.
"As he rightly said, I have also received other representations, not least on my recent visit to Blackpool.
"I understand that there is a great deal of interest in the tramway in Blackpool.
"Obviously, I am not in a position to make and give a decision at the moment, but I listened carefully to my honourable friend, and I am grateful for the opportunity to do that."
Earlier in the debate Mr Marsden told the minister: "The Blackpool scheme should not be regarded as a blue-sky scheme.
"It must not be seen as part of the network of assorted light rail proposals that have been submitted to the Department for Transport in recent years, however worthy they may be.
"For my constituents, this bid is an essential bread-and-butter – or perhaps, as we are talking about Blackpool, I should say fish-and-chips – component of public transport."
He added: "For us in Blackpool and on the Fylde coast, the tramway – and its survival and renewal – is not tourism frippery or an end-of-the-pier show.
"The bid is a core funding proposal for something that is essential to the future functioning of public transport in Blackpool and on the Fylde coast, and that is the basis on which I ask the minister to approve the scheme urgently. "
Blackpool is asking for £72m from the Government with Blackpool Council and Lancashire County Council finding the rest.
shelagh.parkinson@blackpoolgazette.co.uk