The government’s latest white paper on youth employment, grandly titled ‘No Dead Ends,’ has been met with the usual fanfare. But as someone who has watched the City’s reaction to every fiscal fad for two decades, I find myself reaching for the smelling salts. The model they claim to emulate, the Dutch approach, is not a cost-free panacea. It is a system built on hard-nosed fiscal realities that Whitehall seems determined to ignore.
Let’s start with the Dutch ‘werkmap’ system. It offers personalised coaching, wage subsidies, and a guarantee of work or training for young people. On the surface, it sounds like a socialist dream. But look closer. The Netherlands achieved this by slashing bureaucracy, not expanding it. Their active labour market policies are funded through a reallocation of existing welfare spending, not a blank cheque from the Treasury. The UK, by contrast, is infamous for creating new tiers of administration. We have a history of ‘pilot programmes’ that become permanent cash drains.
The City is watching the gilt market nervously. Any hint of additional borrowing for untested schemes will send yields upward. We’ve seen this script before with ‘levelling up’ and ‘net zero.’ Each well-meaning policy adds to the national debt. The OBR’s latest fiscal forecasts already show debt interest payments consuming a growing share of tax revenue. Adding a new youth employment entitlement, however noble, risks pushing gilt yields towards crisis levels.
Critics will say I’m being cynical. But let’s examine the Dutch outcomes. Their youth unemployment rate is around 7%, significantly lower than the UK’s 12.5%. However, this success is not due to generosity. It comes from strict conditionality. In the Netherlands, young people must accept the offered training or work, or lose benefits. The UK’s proposed ‘youth guarantee’ lacks such teeth. Without sanctions, we will simply be funding a new class of young benefit claimants while employers complain they cannot find skilled workers.
The inflation picture complicates matters further. With core CPI stubbornly above 5% for services, the Bank of England is walking a tightrope. A looser fiscal policy, which this programme implies, would force monetary policy to tighten further. That means higher interest rates for longer, crushing the very business investment needed to create jobs.
What is the alternative? The Dutch also reformed their vocational education system. They stripped out dead-end courses and aligned curricula with employer needs. The UK’s apprenticeship levy, by contrast, has been a bureaucratic mess. Instead of creating a new bureaucracy, Why not simply cut employer National Insurance for hiring young people? That would be a market-based solution, not a government-run job scheme.
But I suspect the political calculus is different. ‘No Dead Ends’ sounds compassionate. It allows ministers to pose as problem-solvers. The reality is that the UK’s youth unemployment problem is not about a lack of programmes. It is about a skills mismatch, housing costs that make mobility impossible, and a benefits system that often pays more than entry-level wages. No amount of coaching will fix that without addressing the underlying fiscal distortions.
So I will watch this policy unfold with a weary eye. The City is already pricing in risk. If the government borrows to fund this, expect gilt yields to rise. If they tax more, expect capital flight. The Dutch lesson is clear: you can have a safety net, but only if you couple it with fiscal discipline and ruthless efficiency. The UK has rarely shown either in recent years. And that is the real dead end.
