The bus fare cap in England will be raised to £3 in the upcoming Budget, Prime Minister Sir Keir Starmer has announced.
It is an increase on the current limit of £2 which was introduced under the previous Conservative government to help with the cost of living.
The existing cap was due to expire at the end of December.
Sir Keir said: “I do know how much this matters, particularly in rural communities where there is heavy reliance on buses.”
The new £3 cap, covering most bus journeys in England, will run until the end of 2025.
About 3.4 million people in England use buses. There had been speculation in recent days that the chancellor would announce in the Budget on Wednesday that the current cap would be scrapped.
This would have meant that some passengers faced a steep hike in fares following two years of help.
Bus fares in London with Transport for London will, however, remain at £1.75 and those in Greater Manchester at £2.
They are excluded from the broader fare cap as their funding is structured differently.
The Confederation of Passenger Transport said that raising the cap from £2 has avoided travellers facing a “cliff edge” at the end of this year.
But it said: “An increase to £3 will still present challenges for many passengers, particularly those who rely on buses as their primary means of affordable travel.”
Prior to Monday’s announcement Bill Hiron, chair of Eastern Transport Holdings, which runs bus services in Essex, had warned that suddenly ending the £2 cap could cause problems.
Reverting to previous fares of £5 or £7 for example, would represent “such a big jump that not only will it cause hardship for some people but of course it will result in some people saying I’m not going to take the bus anymore,” he told the BBC’s Today Programme.
Meanwhile Greenpeace suggested lifting the cap was a “‘tough decision’ the government didn’t need to make”.
“It makes no political, economical or environmental sense whatsoever,” said Paul Morozzo, Greenpeace’s UK’s senior transport campaigner.
He said buses are a “critical lifeline to millions of people, particularly those on lower incomes”.
“A government that was truly prioritising the needs of the poorest in society would rethink this decision at the first opportunity,” he said.