The economics of social spending 2nd edition Edited by Howard Glennerster and John Hills Oxford University Press 363 pages 40

The first edition of The State of Welfare (1988) arose from work by AB Atkinson, John Hills and Julian Le Grand at the London School of Economics. The book plotted trends in policy, spending and resulting outcomes of state welfare spending between 1974 and 1988. Now, this second edition plots the same course, taking us up to 1997.

The sweep of public policy and spending covered includes some significant events; from the oil price shocks of the mid-seventies, to the bail-out loans from the International Monetary Fund, the (enforced) retreat from Keynesian demand management and the longest period of one-party rule ever enjoyed/endured.

As Glennerster and Hills note, one would have thought that the sustained rule over 18 years of a party ideologically opposed to the public sector would have spelled the end for state intervention in education, social security, social services, housing and health. The bottom-line spending figures on state welfare suggest otherwise. As a percentage of gross domestic product, total welfare spending increased (albeit at a slower rate than previously) from about 23 per cent in 1974 to 25 per cent by 1995.

Through chapters on education, the NHS, housing, personal social services and social security, the book tracks the ups and downs of policy changes and spending. Not all programmes have fared equally well. The NHS, as Julian Le Grand and Polly Vizard note - the jewel in the British welfare state's crown - though suffering a 'rhetoric of crisis' (as Rudolf Klein puts it), has not done badly. It would have taken a politician terminally out of touch with the public's feelings towards the NHS to have stuck the boot in. Even Thatcher on a Falklands high realised that.

Housing, on the other hand, has virtually slipped (or rather, been pushed) off the political agenda. Spending on housing has been re-ordered, with public capital spending now reduced to virtually nothing, and housing benefit increasing dramatically. Interestingly, homelessness appears to have peaked in 1991-92, and is now falling. Such statistics permeate the book through nearly 200 figures and tables - and you do not need to be a sad statophile to appreciate the need to back up statements with some hard evidence.

But one of the problems - as Hill acknowledges in his chapter on housing - is the often poor state of official statistics. From the notoriously fragmented and unreliable figures on unemployment to trends in the numbers awaiting admission to hospital (my lips are sealed) one must heed the authors' warnings of incompleteness and straightforward tampering with definitions by government.

Following the re-ordering of spending priorities that have occurred over the past 25 years - including shifts from public to private welfare provision (pensions, housing etc) - where, as Glennerster notes in his concluding chapter, is the welfare state to go, 'caught between rising expectations, rising demands, rising costs, and an unchanging share of the nation's resources?'

The options seem to be: spend more, spend more efficiently, scale down some programmes and redistribute savings to others, manage demand (aka reduce demand), or recognise that 'old style' welfare-statism is not the only way to achieve our welfare objectives. None of these is without cost, financially, economically or politically.

Overall, this is an excellently updated book and packed with information to keep policy wonks and the statistically obsessed happy, but written in a style to enable everyone (top marks for equity) to get to grips with fundamentally important questions about the state's caring role.

John Appleby

Senior lecturer in health economics at the School of Health Policy and Practice at the University of East Anglia.