Thousands of people who rely on rural bus services could be left stranded if a multimillion-pound grant is cut.

Councils, bus operators, transport campaigners and unions have written to the Government warning of dire consequences if the £400 million Bus Service Operators Grant (BSOG) is axed in a bid to cut the deficit.

The Department for Transport has been asked to find cuts of between 25% and 40% to its £15.9bn budget before the autumn spending review.

The BSOG rebates bus companies for the fuel duty the pay to operate routes which are not profitable but are socially important, such as those in rural areas or that service certain schools.

Responding to a question raised in Parliament, Transport Minister and Lewes MP Norman Baker said withdrawing the grant would result in fares rising by 6.7% and services cut by 7.1%.

Campaign for Better Transport executive director Stephen Joseph, a co-signatory to the letter, said: "Scrapping BSOG could do for Britain's buses today what Beeching did for the UK rail network in the 1960s. In many areas, it could tip buses into a spiral of decline with fares rises, falling patronage and service cuts, all with impacts on some of the poorest in society.”

Brighton and Hove Buses receives up to £3.5 million through the BSOG.

Chief executive Roger French said he would “fight” any rise in fares, adding: “It will impact on our ability to run certain routes, particularly those at marginal times of the day.”

East and West Sussex are likely to be worse hit than Brighton and Hove because they are largely rural.

East Sussex Count Council said that, out of the 128 rural routes operating within the county, it partly or fully supports 85.

Not all of this money comes from the BSOG however.

A council spokesman said: “We have had no indication from central Government that this grant will be cut. However, we currently support more than a hundred bus services in East Sussex, three quarters of which are in rural areas, and therefore any cut in the grant could have an impact on the bus services we are able to offer.”

West Sussex wholly or partly funds 97 out of the county's 226 bus routes, of which 79 are in rural areas.

A council spokeswoman said: “If the BSOG was removed altogether there could be a dramatic impact across West Sussex with fares being increased, patronage falls and services being lost leading to social exclusion and potential increases in congestion and environmental impact.”

Mr Baker said that no decision had been taken on the grant yet and that people should wait for the Government's proposals before “causing unnecessary speculation”.