Sir: Your editorial on Red Star (23 August) shows how misleading it can be to declare part of a business unprofitable when the results of cost- centre accounting are followed too blindly. If spare capacity was available on BR trains and if staff were under-utilised, then it may well have been financially advantageous to BR to use these for Red Star.
Internal charges for the use of "spare" capacity are a gross distortion of reality for which accountants should be ashamed. The sole economic justification for any particular activity within an organisation is whether the organisation is better off if that activity takes place than if it does not.
Every day I used to give my wife a lift to work on my way to the station. Thanks to modern cost-accounting techniques I have now realised that this should have been properly costed at the pounds 10 per day that a private taxi would charge. Clearly the arrangement was uneconomic and she now travels by bus for only pounds 3.50 per day. We are most grateful that we have been able to save the "hidden subsidy" of pounds 6.50 per day.
I sincerely hope that the Red Star Parcel workers show the same gratitude to the accountants who have revealed them to be an economic liability.
M. E. Taylor
Woodford Green, Essex
23 AugustReuse content