Pensioners should be charged a oneoff fee for bus passes to help plug the hole in the transport budget, according to a national bus company boss.

Go-Ahead chief executive Keith Ludeman also suggested putting a cash limit on the value of free bus travel under a future smartcard scheme.

The government departments for transport and local government share the annual £1bn cost of concessionary fares. But the DfT’s £400m budget for Bus Service Operators’ Grant looks more vulnerable, despite a broad cross-sector campaign to stave off cuts in the spending review.

Cutting the grant, which covers some 80% of fuel duty costs, would lead inevitably to fare rises and loss of services, Mr Ludeman warned.

Any significant reduction, even if phased, would increase net operating costs by up to 10%, according to council transport officers.

ATCO chairman Tony Moreton has warned, in a letter to transport minister Norman Baker, this would hit both commercial and supported services, and reverse gains in combating social exclusion and green travel.

A DfT spokesperson said ‘smarter ways of administering subsidy’ were being considered to ensure a fair deal for the taxpayer and fare payer. ‘Any decision on the future of BSOG will be made in the wider context of the spending review, taking into account the potential impact on community and rural transport services.’