BUS companies are braced for further funding cuts as the Scottish Government tries to bring its troubled free travel scheme under budget, The Herald has learned.

A review of the reimbursement rate paid to firms for carrying disabled passengers and those over 60 is expected to be published by the middle of the summer, sparking fears payments to operators will be cut.

The timing of the review will prove awkward for Transport Minister Keith Brown after he was forced to hold emergency talks yesterday on funding for the industry amid record fare increases, service cuts and up to 200 job losses at First East announced earlier this week.

The meeting, which included bus industry and local authority representatives, concluded with an agreement to look at service regulations and schemes being launched in Glasgow and Renfrewshire aimed at ensuring operators and transport authorities work together to deliver service improvements.

But, aside from mentioning the £3 million Bus Investment Fund, there was no announcement about the contentious funding issues.

Mr Brown said afterwards: "Passengers want secure, efficient and affordable services and the meeting focused on how we deliver that."

The Herald revealed claims by the bus industry last week that ordinary passengers would be forced to pay for a funding shortfall of between £7 million and £9m as the concessionary travel scheme ran out of money in the 2011/12 financial year.

Operators are also dealing with a 20% cut made last Sunday to the Bus Service Operators Grant (BSOG), which typically makes up 10% of operating costs.

When the National Concessionary Travel scheme was set up in 2006, bus companies were paid 73.6% of a normal fare under a system designed to ensure they were no better or worse off for participating.

That rate was then cut to 67% in 2010 after an independent review, which is thought to have led to £18m less in Government funding for the industry a year – a fate industry sources fear is about to be repeated.

As the reimbursement rate affects how much companies are paid, any reduction would enable the Scottish Government to cut the funding required for carrying the same number of passengers.

An industry source disputed claims the review was based on independent research, claiming its terms had been set by Government agency Transport Scotland.

The Confederation of Passenger Transport (CPT) is pushing for a full review that will consider proposals aimed at limiting costs, such as increasing the entitlement age from 60 to 65.

Such a change has been backed by the Liberal Democrats and Tories.

A CPT spokesman said the budget for the scheme was not keeping pace with demand. "The Scottish Spending Review 2011 indicates plans to flatline the budget for the concessions scheme from 2012 until 2015 despite Scotland's growing elderly population and increasing bus operating costs," he said.

"It is impossible to square this with the principle of operators being 'no better or worse off' for providing the scheme."

A spokesman for Transport Scotland said it had not been decided whether to alter the reimbursement rate paid to operators and it would be "inappropriate" to pre-judge the outcome of the research, which he said was independent of Government.