Performance measurement and the introduction of inflation accounting in the nationalised industries, with particular reference to the gas industry: with particular reference to the gas industry

Abstract

This thesis presents a real rate of return on capital which it is believed provides a better indicator of performance in the nationalised industries than methods used hitherto. British Gas is used as an example of how this indicator may be used in practice. In part one, alternative performance measures are discussed. The conclusion reached is that a real rate of return on capital provides the most suitable measure. Income is defined as gains arising during the year which may be distributed whilst maintaining the purchasing power of balance sheet assets. Capital is regarded as the equivalent in terms of purchasing power at the end of the year of the balance sheet assets at the beginning. The question of accounting for inflation and how this affects performance yardsticks is also considered. In part two, inflation accounting in the nationalised industries and certain private industries is surveyed and appraised. Part three presents estimates of the real rates of return on capital obtained by British Gas for the period 1960/61 to 1977/78, using the definition developed in part one.