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 will run until the end of 2025.

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.

Around 3.4 million people in England use buses. The Confederation of Passenger Transport said 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.”

Greenpeace said it 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.