The free scheme is available to the elderly and the disabled

About 1.1 million elderly and disabled people are entitled to free off-peak and weekend local bus travel.

But Scottish Senior Citizens Unity Party MSP John Swinburne told finance committee members abuse was "rampant".

He alleged some unscrupulous firms had been claiming the cash for non-existent fares back from local authorities.

The scheme is currently run by Scotland's local council's but will soon be administered as a national scheme.

'Smart card'

Mr Swinburne urged ministers to implement a universal "smart card" system to cut the fraud and prevent companies from operating the scam

He said: "The abuse of the system is currently rampant in the country, whereby rogue bus companies are travelling empty but charging plenty to the local councils.

"This can only be eliminated by an extension of smart cards for senior citizens so that there will be no abuse of the system and no false applications for reimbursement from councils."

Labour's Wendy Alexander raised furthered concerns about the current policing of the scheme.

John Swinburne claims abuse of the fares scheme is rampant

She told Finance Minister Tom McCabe the responsibility for doing so did not rest with the executive or local authorities and the issue needed to be clarified to help combat the existing fraud.

The ex-enterprise minister said she had unsuccessfully tried to take the matter up with the UK traffic commissioner, who she believed was technically responsible.

Ms Alexander added: "Responsibility for policing the scheme rests with a UK body which doesn't have a direct interest in whether its administered effectively or not."

Mr McCabe said he shared her concerns as any money gained illegally through the scheme was lost from funding for other projects.

He said: "I wasn't aware that the issue was being bounced around the system.

"That is a matter of concern and obviously it necessitates further examination and discussion between myself and the minister for transport."

'Mystery passenger'

A spokeswoman for Transport Minister Nicol Stephen said the executive was aware of the allegations and was taking additional steps to deal with the issue.

She said, following discussions with operators, revised guidance had been issued earlier this year setting out how operators could qualify for reimbursement.

She added: "They are required to be rigorous in auditing and validating operators' claims.

"We will shortly announce our plans to replace the current local schemes with a national scheme which will use smart cards."