ABSTRACT
The basic assumption underlying the analysis is that the consumer is entitled to expect that the price bears a close relationship to the costs incurred in the supply of the output. These may be termed ‘related costs’, signifying the costs related or attributable to the output which he takes by paying a price. The minimal implication of tax and subsidy elements in public enterprise prices is that the government has to create a system whereby such elements are identified and quantified, taking into account the several qualifications to the concept of related cost. A detailed analysis of the finances of the British Airports Authority, a monolithic organisation prior to privatisation, illustrates several points of interest concerning the imputation of tax and subsidy elements in prices. While the tax and subsidy elements in public enterprise prices are deducible from the price relationships with related costs, it would be wise to overlook minor differences between prices and costs.
