Bus companies warn services are in the firing line

The bus services operating grant is being reduced by 20 per cent from 2012, saving the Government £300m by 2014/15.

The grant helps companies with the cost of fuel by reducing the amount of duty they pay for their diesel.

In a double whammy for those who use or make a living out of buses, local councils have also warned of a scaling back of subsidised services as a result of their budgets being cut.

Graeme Torrance, a director of independent firm Scarlet Band, whose company also runs a number of services on behalf of Darlington and Durham County Council, said: "This grant reduction is not going to help, it is money that we will have to find from elsewhere.

"Expectations were that more could be cut, so in that sense it could have worse.

"But everything is being squeezed at the moment, fuel prices are horrendous and there is always upward pressure on wage costs.

"We are also waiting to see how councils will react and what they will have in their budgets."

Francis King, a spokesman for Arriva, said: "(The grant reduction) will increase the cost of fuel, but it is too early to say what the impact will be on local services or fares.

"We will have at least have 12 months in which to work this into our business plans.

"The fact that local authority transport budgets are being reduced will inevitably mean less money to subsidise unprofitable services particularly in rural areas which are put up for tender to private operators by local authorities in order to fulfil a social need."

Adrian White, head of transport at Durham County Council, said: "We are expecting a further announcement from the Department of Transport next week about funding.

"We will then need to sit down with the bus operators to consider this information along with the findings of our recent consultation before we are able to make any decisions."

The council has been asking local residents for their views on which bus services they value and which they can live without.