Blackpool alone may have to find up to another £1.2m if the Government refuses to hand over extra cash and if a pooling arrangement between all 14 local authorities in Lancashire unravels.

The three Fylde coast authorities have borne the brunt of the free scheme because they have to pay for the return journeys of the large number of visitors they attract.

And town hall leaders are now warning of large council tax rises or painful cuts to vital services if the Government does not step in and help.

Blackpool Council leader Coun Peter Callow said: "We can't afford to make up a shortfall of £1.2m.

"And this isn't just going to be this year, it will be next year as well. The burden can't be expected to fall on the council tax payers of this town.

"I'm not blaming pensioners for getting on buses, that's their right, but if the Government is going to provide concessionary travel, they should pay for it.

"There are obviously going to be budgetary pressures in the future.
"Unless the government gives us the money, we can either cut services or put council tax up.

"It torpedoes our sound financial position."

Lancashire's local authorities pooled almost £25m given to them by central government to pay for free bus fares.

But figures from the first four months of the scheme predict there will be a shortfall of £2.7m.

East Lancashire towns such as Blackburn, Hyndburn and Pendle are winners and are forecast to make a surplus out of the funding process.

Under the pooling arrangement, those surpluses would be used to bail out destinations like Blackpool which have proved more popular for free travel.

The extra cost to the resort would fall from £1.2m to around £781,000 under the share-out.

But a Fylde Council report says the future of the pooling arrangement "is uncertain" because of financial pressures on all local councils.

Opposition councillors in Blackburn and Hyndburn have questioned the validity of the scheme.

"There are winners and losers in Lancashire which obviously puts a strain on the pooling arrangement," added Coun Callow, "but at the moment we are all committed and we will be uniting to lobby Government about this and ask for more money."

A £1.2m deficit could represent a 2.1 per cent increase in council tax.

Meanwhile, Fylde faces a deficit of £243,000 with the pooling arrangement, or £362,000 without it, while the figures for Wyre are £179,00 and £266,000.

Fylde Council leader Coun John Coombes said: "If other towns withdraw from the pooling arrangement, it will leave Blackpool, Fylde and Wyre high and dry.

"To clear our deficit we would be looking at an eight per cent council tax increase but we can't do that because we are limited to a five per cent cap.

"We have nowhere to go other than to reduce services."

Wyre Council leader Coun Russell Forsyth said: "We hope people honour what they said in the first place and stay in the pool, otherwise the financial impact certainly on the west of the county is going to be quite severe."

Blackburn with Darwen Labour group leader Kate Hollern said: "I certainly don't think we should just hand over money without any debate."

Council leaders are planning to meet government ministers in coming weeks to discuss the shortfall.

The government introduced free travel for over 60s after 9.30am in April.