Fears were raised over the financial state of operators Nexus after a briefing by director-general Mike Parker to a pensioners' meeting when he explained why fares were going up.

The transport group, which also runs the Shields Ferry and subsidises a number of bus routes and the Newcastle to Sunderland rail line, legally cannot be made bankrupt.

But Mr Parker said he is convinced he can put forward a balanced budget to the passenger transport authority in January.

'Public body'

In the autumn it was announced children and the elderly would have to pay higher fares - partly because the £100m Metro extension to Wearside was failing to attract passengers.

Mr Parker said: "We draw up a budget every year on the basis of things we need to do over the coming year and on the basis of the income we have received.

"We are a public body and are funded broadly from council tax, but we also receive government money as well.

Mike Parker: Can produce a balanced budget

"Every year we have to assess what we can do with the money, I am obliged legally to produce a budget every January and produce it to the politicians.

"I have no problems with providing balanced budgets."

Mr Parker said a drop in Metro users over the past three years, along with increased fare dodging, meant that income had dropped.

There had also been less use of the service on the new Sunderland extension, which opened earlier this year, than expected.

Fares rising

He said: "We do not know if we can produce the same level of service next year.

"We are now facing a number of pressures we did not expect one or two years ago."

From January pensioners will have to pay 20p more per journey on Metro, bus or the cross-Tyne Shields ferry. Children will pay an extra 5p during school times.

The current scheme to allow under-11s to travel free on all forms of public transport is also to be scrapped.

However, Nexus will bring forward the time of morning concessionary travel from 0930 to 0900 GMT.