5(1)Before 1st February in any financial year (referred to in this paragraph as the “current financial year”) immediately preceding a financial year during which the free travel scheme will have effect, Transport for London shall notify each London authority of the charge to be paid by the authority to Transport for London—
(a)for each quarter of the financial year during which the free travel scheme will have effect;
(b)in respect of each travel concession permit issued under paragraph 4(2) above and valid on the first day of that quarter.
(2)The charges payable by London authorities under this paragraph—
(a)shall be fixed by Transport for London with a view to securing that the costs of the operation of the free travel scheme are met from the proceeds of those charges (taking one financial year during which the scheme has effect with another, where the scheme has effect during two or more consecutive financial years); and
(b)may differ for different quarters of a financial year.
(3)The reference in sub-paragraph (2)(a) above to the costs of the operation of the free travel scheme is a reference, in relation to any financial year taken into account in fixing any charges under that sub-paragraph, to the aggregate of the amounts specified in sub-paragraph (4) below.
(4)Those amounts are—
(a)the revenue by way of fares which Transport for London estimates that it and any of its subsidiaries have lost or will lose in that year in consequence of the provision of free travel under the scheme; and
(b)any other costs which Transport for London has incurred or estimates that it will incur in that year in connection with providing, or for the purpose of securing the provision of, free travel under the scheme (including any payments Transport for London has made or proposes to make for that purpose to any person with whom they have entered into an agreement by virtue of section 156(2) or (3) of this Act or who has entered into a transport subsidiary’s agreement).
(5)In fixing the charges payable by London authorities under this paragraph Transport for London shall take into account—
(a)the sum applicable by virtue of sub-paragraph (6) below; and
(b)the matters specified in sub-paragraph (7) below.
(6)The sum applicable by virtue of this sub-paragraph is—
(a)where the free travel scheme does not have effect during the current financial year, a sum equivalent to the total of the costs agreed to be reimbursed by local authorities during the current financial year under arrangements made by virtue of section 240(1) of this Act; or
(b)where the free travel scheme has effect during the current financial year, a sum equivalent to the charges payable by London authorities under this paragraph in respect of the current financial year.
(7)The matters specified in this sub-paragraph are—
(a)the coming into operation of a service falling within section 242(3) of this Act, or the variation or discontinuance of such a service,
(b)changes in the fares payable in respect of any such service, and
(c)changes in the methods or information available to Transport for London for calculating the amounts specified in sub-paragraph (4) above,
since costs were last agreed to be reimbursed by local authorities under arrangements made by virtue of section 240(1) of this Act or, if more recent, since charges payable under this paragraph were last fixed.