In the perennial quest for the elusive ‘levelling up’ agenda, Whitehall mandarins might do well to cast a north-easterly glance toward the Netherlands. The Dutch have cracked a puzzle that has left British policymakers scratching their heads for decades: youth unemployment. At 7.6 percent, the Dutch rate for under-25s is a fraction of the UK’s 11.8 percent. The question is whether the City’s obsession with market efficiency can be reconciled with the Dutch model’s heavy reliance on state intervention and employer subsidies.
The Dutch approach is not a free-market purist’s dream. It is a structured, almost clinical system of vocational education (MBO) that functions as a conveyor belt from classroom to workplace. Apprenticeships are not a second-class option; they are mainstream. The government pays firms to take on young workers, covering a significant chunk of their wages for the first year. This is a direct cost. Critics, and I count myself among the fiscally sceptical, will baulk at the price tag. But the Dutch have done the maths: a temporary subsidy that generates a lifetime of tax revenue and reduces welfare dependency is a sound investment, not a handout.
The Great British aversion to vocational training is deeply cultural. We still believe that a university degree is the golden ticket, despite mountains of evidence that a degree in Media Studies does not guarantee a job in media. Meanwhile, German and Dutch plumbers earn more than some British graduates. Fixing this requires a fundamental shift in mindset. The UK’s apprenticeship levy, introduced in 2017, is a well-intentioned botch. It raised a pot of money but tied it up in bureaucracy. Employers complain that they cannot use the funds for the training they actually need. The Dutch system, by contrast, is agile. Companies design the courses, and the state facilitates.
One glaring omission in the Dutch blueprint is the role of inflation. With core inflation still stubbornly above target, the Bank of England is loath to stimulate demand. But youth unemployment is a structural issue, not a cyclical one. Pumping money into training does not ignite price spikes; it reduces the natural rate of unemployment. The Treasury should be leaning on the Bank to look through this temporary fiscal expansion, but Governor Andrew Bailey is not known for his accommodating stance. Gilt yields have been volatile, and any whiff of fiscal profligacy sends the bond market into a tailspin. The Dutch model avoids this because it is seen as an investment, not a spending spree.
Capital flight is another risk the Treasury must consider. If the UK is seen as a high-tax, high-regulation environment, money will flow to more efficient shores. The Netherlands, despite its generous subsidies, maintains a business-friendly tax regime. Its corporate tax rate is competitive, and its R&D credits are generous. The UK, post-Brexit, is trying to position itself as a low-tax haven, but the rhetoric does not match the reality. National Insurance contributions are rising, and the dividend tax allowance is being slashed. If we are to adopt Dutch-style employment subsidies, we must offset them with cuts elsewhere. Otherwise, the Exchequer will be left with a gaping hole, and sterling will suffer the consequences.
There is also the matter of labour market flexibility. The Dutch model relies on a partnership between government, business, and unions. The UK’s industrial relations are more adversarial. The recent strikes in the rail and health sectors show that trust is in short supply. Can we replicate the Dutch ‘polder model’ without the polders? It is a stretch. But perhaps the current crisis is an opportunity. With unemployment expected to rise as the economy slows, the government has a chance to forge a new consensus. The cost of inaction is higher than the cost of reform. Youth unemployment is a debt we pass on to the next generation, in human capital terms. That is a liability no balance sheet can ignore.
In summary, the Dutch model offers a template, but not a straight transplant. It requires a shift in culture, a reform of the apprenticeship levy, and a fiscal framework that rewards investment over consumption. The City will be watching. If the Treasury can present a credible, costed plan that does not bloat the deficit, the bond market might just give it a pass. If not, we will be left with more broken promises and a generation of young Britons underemployed and disillusioned. The choice is stark. But then, it always is when the bottom line is at stake.
