A council boss fighting to keep taxes down said it was criminal that big savings could be "wiped out at a stroke" by free bus travel for pensioners.

Keith Mercer, the Conservative leader of Worthing Borough Council, said he was deeply disturbed by the way the Government was funding OAPs' concessionary fares.

The elderly will soon be able to travel free on buses all over the country, with the area where the journey started picking up the tab.

Because Worthing is a holiday resort favoured by thousands of pensioners, Coun Mercer said trying to forecast the expected cost had been devastating to the council's financial planning.

He gave the grim warning as Worthing's council tax for 2008-09 was set at £1,429.74 for the average Band D household, a rise of 4.6 per cent.

He said the borough had saved money by merging some services with neighbouring Adur District Council, reducing the number of highly-paid officers, in a bid to keep the year-on-year rise in council tax below five per cent.

Coun Mercer added: "These net savings are worth £140,000 to Worthing in the coming year. Reorganisation of the senior management structure alone will realise savings, in every future year, of nearly £600,000.

"I remain confident that, over the next three years, savings of up to £4,500,000 for both councils will accrue."

Coun Mercer said he supported the idea of free travel for pensioners, but complained it was "criminal" that Worthing's savings could "more or less all be wiped out at a stroke by an unfair Government grant allocation system" which failed to cover the cost.

He said: "Next year the council will spend a total of nearly £2 million on concessionary fares alone. Compare this with some of the quite small amounts that we have available to provide some of our key services.

"It is supposed to be a scheme that is fully funded by the Government but we end up with a massive net bill of £600,000, which is the equivalent to a staggering eight per cent increase in council tax.

"We have consequently had to defer implementing the pay review for our staff, something that I deeply regret, but I have been given no choice."

Councillor Bob Smytherman, the leader of the opposing Liberal Democrats group on the authority, said he had some sympathy with the Tories over problems with free bus travel, but deeply regretted that the council was propping up concessionary fares at the expense of staff.

He also criticised the "uninspiring vision" of the Conservatives, which he said had resulted in a "lacklustre and anaemic" budget.