Bus operators must be ordered to cut their fares in return for taxpayer-funded new vehicles, according to the leader of Newcastle City Council.
Councillor Nick Forbes warned that the high cost of public transport encouraged travellers to stick to high-pollution private cars, as he spoke at a conference in Manchester.
The Government has announced it will spend £5bn to improve bus services and cycle links nationwide.
Coun Forbes pointed out that privately-owned bus companies stood to benefit from the money.
He said: "It would be astonishing if the Government just handed over £5bn of taxpayers' money to pay for a new fleet of buses for private bus companies.
"I'm calling on the Government to make it a condition that bus companies benefiting from the new vehicles agree to reduce fares.
"That would help get more people on to public transport, as well as helping with the climate crisis and the growing problems we have around air quality."
He was in Manchester to take part in a Northern Powerhouse Conference event organised by the New Statesman magazine.
Speakers included Newcastle Central MP Chi Onwurah, a Shadow Business Minister, who delivered a speech which also criticised high bus fares.
She said: "Bus journeys are down by 17% in the North East whilst the 2.2 billion bus journeys in London last year, were more than the rest of the country put together.
"And that is not surprising, for £1.50 I can get across the whole of London - 30 miles - but only four stops up the West Road in Newcastle.
"If the North had received the same amount of transport funding per person as London over the past decade we would be £66bn better off. And it might take me less than three hours to get back to Newcastle."
Rail Minister Andrew Stephenson spoke about the Government's decision to press ahead with the HS2 high speed rail line, which will include new rail services between London, Birmingham, Leeds and Newcastle, and to integrate it with the proposed Northern Powerhouse Rail project, which includes a new line between Leeds and Manchester.
He is set to tour the North and Midlands to consult regional leaders and businesses about the Government's rail plans.
Mr Stephenson told the conference: "We’re going to be presenting one Integrated Rail Plan for the North and Midlands.
"The plan will examine how HS2 and Northern Powerhouse Rail can best work together, alongside wider investment in Transport for the North and the Midlands.
"To make sure people see the benefits of better services as quickly as possible.
"I am personally committed to ensuring the North and Midlands are fully engaged and consulted throughout the Integrated Rail Plan process."
