Cllr Godfrey Allanson will meet with the Department of Transport to discuss claims of unfairness within the scheme.

Mr Allanson said: "They haven't got a clue what is happening around the county. The department fails to see that their system is flawed."

The scheme allows anyone aged 60 and over to travel free on buses anywhere in England and has proved costly for towns such as Scarborough which are popular with holidaymakers.

Cllr Allanson said: "We pay the return fare. Where we might get groups of people from areas where they are well funded, we have to pay the return fare. Many areas are losing money because of this – maybe not as much as Scarborough. But some are making a profit. It is so unequal and so crazy."

The estimated cost of the scheme in the Scarborough area is £1.82 million. With government funding of £839,000, the remaining shortfall of £981,000 needed to be financed from the council.

Earlier this year, MP Robert Goodwill raised the issue in the House of Commons during his first full debate as transport shadow minister.

Bus companies have also expressed the view that the scheme is underfunded and had experienced a 12 per cent rise in usage. Operators were concerned overloaded buses could discourage paying customers.

At a cabinet meeting, members acknowledged the problems the council faced.

A report by the council's finance department's, Elaine Rhodes, said the major risk of the scheme was the unknown final cost and its consequent impact on the council's budget.

She also pointed out that despite total costs being £200,000 under what they anticipated, caution needed to be exercised as the estimate was made before the main summer season. It also did not include any additional cost claims that may be submitted by bus operators for which some provision had been made.

Cabinet members also acknowledged representations made from various groups who suggested changes to the local element of the bus pass scheme. These included the qualification of a companion pass, alternative travel concession in place of a bus pass and travel before 9am for disabled pass holders.

Since the launch of the national scheme the number of passholders in the borough has increased by more than 4,000 to 29,000. More than 91 per cent of the borough's residents over 60 now possess a bus pass and the number of journeys now made has increased by 30 per cent.

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