A £2 cap on bus fares for millions in England will be extended until the end of June.
In a huge win for passengers, cheaper tickets will be available for an extra three months after being meant to finish at the end of March.
Labour accused ministers of taking it “down to the wire” after threatening to withdraw the £2 cap as families struggle with soaring bills.
Campaigners are calling for the policy to be made permanent to prevent the benefits being lost when prices are hiked back up.
The average single bus fare for a 3-mile journey outside London is £2.80 – meaning passengers will save almost a third of the single ticket price.
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Passengers in rural areas, where tickets can cost more than £5, will see even greater savings.
Rishi Sunak has agreed to a £75million investment to help make travelling more affordable until the end of March.
Up to £80million has also been confirmed for supporting critical bus services that people rely on for work, education, medical appointments and shopping.
Bus companies have struggled to stay afloat after usage dropped during lockdowns to as low as 10% of pre-pandemic levels.
The cap on single bus fares has already shown early signs of improvements with 7% of people saying they have used the bus more, according to a survey of 1,000 people from passenger watchdog Transport Focus.
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Shadow Transport Secretary Louise Haigh said: “Once again, ministers take the future of vital bus services down to the wire.
“Last year, over 1,000 services – the second highest on record – were lost thanks to this chronic uncertainty.
“Labour will reform our broken bus system, and hand power and control back to communities.”
Cllr David Renard, Transport spokesperson for the Local Government Association, said: “The LGA has been calling on the Government to urgently step in to ensure thousands of vital bus routes in April are not lost and so we are pleased that both the £2 scheme and the operator grant has been extended.
“Buses act as a lifeline for so many people in our local communities. They are one of the keys to getting people out of their cars to save money, tackle congestion, and improve poor air quality.
“However, our bus services cannot survive on a hand to mouth existence.
“The Government should use the time this funding buys to work with councils and operators to develop a long-term, reformed bus funding model with significant new money.
“Only this will help the delivery of the Government’s ambitious National Bus Strategy that councils are fully committed to.”
Prime Minister Rishi Sunak said: “Getting more people onto reliable and affordable buses will strengthen communities and help grow the economy – connecting people to jobs, driving pensioners to see friends and family, and helping people attend medical appointments or access education.
“I’m determined to ensure that no matter where you live, you have the same opportunities to get around easily and can feel pride in your local area – which is why protecting our local bus services is so important.”
Transport Secretary Mark Harper said: “Travelling by bus remains the most popular option for commuters and families across the country, but the sector is still trying to recover after the end of the pandemic.
“We’re providing £155 million to help passengers save money on fares, get more people on the bus and protect vital bus routes – helping with the cost of living and enabling people to get where they need to in an affordable and convenient way.”
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