The following data show expenditure on the National Health Service (in cash terms), the GDP deflator, the NHS pay and prices index, population, and population of working age:

(In all the following answers, set your index to 1987 = 100.)

(a) Turn the expenditure cash figures into an index number series.

(b) Calculate an index of ‘real’ NHS expenditure using the GDP deflator. How does this alter the expenditure series?

(c) Calculate an index of the volume of NHS expenditure using the NHS pay and prices index. How and why does this differ from the answer arrived at in (b)?

(d) Calculate indices of real and volume expenditure per capita. What difference does this make?

(e) Suppose that those not of working age cost twice as much to treat, on average, as those of working age. Construct an index of the need for health care and examine how health care expenditures have changed relative to need.

(f) How do you think the needs index calculated in (e) could be improved?

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NHS NHS pay and price index Population of working age (000) (5) Year GDP Population (000) expenditure (£m) (1) deflator 1973 = 100 1973 = 100 (2) (3) (4) 1987 21 495 442 573 56 930 34 987 1988 23 601 473 633 57 065 35 116 1989 25 906 504 678 57 236 35 222 1990 28 534 546 728 57 411 35 300 1991 32 321 585 792 57 801 35 467