Before he lost his job, Eugene Tutty was not short of confidence. As a 19-year-old, he came across a mugger trying to steal a mobile phone from a group of girls. When the mugger turned on Tutty and his friend, they managed to restrain him despite being threatened with a knife, and called the police, earning themselves a commendation from the judge at Reading Crown Court.

When Tutty was made redundant at the age of 23, however, he found that applying for up to five jobs a day - hundreds in total as the months passed by - without ever hearing back, completely undermined his sense of self-worth. “You find a job online or in the paper and you apply, and they don’t even phone you back to say it’s filled,” he says. “When you apply for 10 jobs and you don’t get a reply from one person, you get in the mindset of ‘What’s the point?’”

With seemingly little chance of work, Tutty turned to a local college, Berkshire College of Agriculture, where he hoped to develop his interest in football coaching with a level 2 qualification in sports, something that would also make up for his lack of five good GCSEs. But when he informed Jobcentre Plus, staff told him that they would have to end his Jobseeker’s Allowance because the full-time course meant that he would not be available for work. Tutty’s mother is a full-time carer for his disabled father and money is tight at home: he simply could not afford to lose his benefits.

“It’s a choice between going to college and having no money or not going to college and having money. I didn’t understand it at all,” he says. “You’re trying to do something with your life, but you won’t be able to afford to get there or to buy your lunch. It was gutting, but there was nothing else I could do.”

If Tutty had been living in Rotterdam instead of Reading, things would have been very different. While our Department for Work and Pensions (DWP) effectively pays over-18s to stay out of college to ensure that they are available if a job vacancy comes up, the Dutch offer financial support to all young people under 27. The difference is that if they do not find work, there are no benefits - only payments to support them during education and training.

So when the economic downturn caused job vacancies to dry up, the government increased the opportunities for full-time education instead. “It is absolutely unacceptable to have our young people just sitting at home,” the Dutch employment minister Paul de Krom says. “Education is always better than doing nothing.”

The result is that the negligible unemployment for under-25s in the Netherlands has seen only a small rise since the financial crisis at the end of 2007 and remains the lowest in the European Union, at less than half the rate of the UK.

For Labour MP Barry Sheerman, such an approach presents the opportunity for radical reform that could abolish long-term youth unemployment. If jobs are not available, why not fund young people’s living expenses while they study?

“We ought to get rid of the whole notion of benefits and welfare for under-25s,” the former chair of the Commons Education Select Committee says. Sheerman is now leading a review for shadow education secretary Stephen Twigg about progression from school to work, but he spoke to TES in a personal capacity. “There shouldn’t be an unemployed category for young people. It just shouldn’t exist. Either you’re working or you’re getting a training allowance.”

The stakes are high because the damage is long-lasting. A commission on youth unemployment, led by David Miliband, found earlier this year that if a young person spends a prolonged period out of work, their chances of a steady job are reduced for years to come, at least until they reach the age of 30. The annual cost to the taxpayer in benefit payments as they fall in and out of work during future years is estimated at #163;2.9 billion, on top of the #163;4.8 billion-a-year burden of current levels of youth unemployment.

Tutty eventually found a job as a kitchen porter, after support from the Prince’s Trust to help rebuild his confidence. He is continuing to work towards gaining qualifications and his employers want to train him as a chef.

But many people are not so lucky: the most commonly quoted measure of youth unemployment hit 1.04 million in the latest figures. That masks the true extent of the problem. Some of those labelled as looking for work are university students, often on maintenance grants. But a much larger group are the “economically unactive” - including single parents and unpaid carers - who are not in work or education. Taking this into account, the total is even higher: 1.44 million.

‘Earning or learning’

The coalition government cannot be accused of ignoring the rise in youth unemployment. Deputy prime minister Nick Clegg announced a #163;1 billion “Youth Contract” last year in terms that echoed the Dutch plan: “earning or learning”. He and employment minister Chris Grayling wrote to employers last month, urging them to support the measures when they are implemented in April.

“Tackling youth unemployment is a priority for the coalition government. Today’s young people are tomorrow’s entrepreneurs, employees and leaders. We cannot afford to fail them. Our economic future depends on them,” they said. “That is why we have launched our Youth Contract, a #163;1 billion package of support to get young people earning or learning again - before the long-term damage is done.”

But in reality, programmes to tackle unemployment are almost entirely focused on finding immediate job opportunities - the Youth Contract offers no support for full-time education. Of the 410,000 people it aims to support over three years, only 5 per cent will be helped into apprenticeships through employer subsidies. The rest will rely on employers taking up subsidies to offer permanent jobs or work experience, which is far from guaranteed (a similar scheme in 1995 helped just 2,300 people). While the economy remains stagnant and jobseekers outnumber vacancies by a large margin, this may be a losing strategy.

The Youth Contract has yet to come into force, but the #163;5 billion, five-year Work Programme, which launched in June last year and offers help for people of all age groups after a prolonged period of unemployment, has run into a storm of bad publicity.

First a row over compulsory unpaid work experience embarrassed Tesco and other major companies into asking the government to make the scheme optional. Then allegations of fraud involving a small number of cases at the employment and training provider A4e prompted its founder, Emma Harrison, to resign from her role as the government’s “back to work” tsar.

Harrison was the face of the Working Families Everywhere project, launched by David Cameron in 2010 to assist families with several generations of unemployment. As she resigned, the project’s website read: “We’ve pledged to help 100,000 families get back to work. We’ve still got 99,979 families to help.”

Speaking before the fraud allegations came to light, Mark Lovell, A4e’s executive chairman, defended the use of work experience, but not extended unpaid placements in large companies that could afford to take on new workers. “Twelve weeks stacking shelves for Tesco isn’t right when Tesco are hiring people to work,” he said. Yet according to a DWP response to a Freedom of Information Act enquiry, at least one A4e centre had placed unemployed people in unpaid work experience at Asda and Sainsbury’s under the Work Programme’s predecessor scheme.

Meanwhile, opportunities for extended study to develop more advanced skills have proved rare for Work Programme participants. Only about 7 per cent of people have been put into more structured, longer-term training lasting from three to nine months, according to A4e, which is the lead provider in five regions of the UK. What training there is tends to focus on interview skills, CV writing and “soft” employability skills such as punctuality or teamwork.

Lovell insists that there are enough job vacancies to warrant getting people into work instead of offering extensive education or training. “Labour markets are difficult, of course, but there’s a lot of activity still going on, particularly among small businesses. It’s important that we recognise that jobs are still being created, because aspiration and ambition are so important,” he says.

He points to growth areas in social care, new technologies such as solar power, and business process outsourcing - call centres and administration. In the last, he says that job opportunities also exist for higher-level roles such as supervisors.

Supply and demand

Official figures for the progress of the Work Programme are not available, but Lovell says that young people are, so far, more likely to be successfully placed in work than older jobseekers. About 15 per cent of under-25s have found jobs, compared with 12 per cent overall.

Figures collected by the trade association for welfare to work providers, the Employment Related Services Association, found that those who had been on the programme the longest - starting at its inception six months ago - were more likely to have jobs: up to 23 per cent of them were in work.

But these numbers fall short of the 40 per cent target expected by government. Providers are paid by results; they have to absorb the up-front costs and claim money when people move into sustainable employment. As a result, the government’s spending watchdog has warned that some could go bust.

In its report earlier this year, the National Audit Office estimated that only about a quarter of people on the Work Programme will stay in work in the long term and warned that providers were over-optimistic. At the same time, it said that the programme was avoiding many of the jobseekers who had the toughest prospects of finding work.

But Lovell suggests that official figures underestimate the number of job opportunities. In any case, they vary hugely by area. There are about six jobseekers for every job in the UK, but according to the Trades Union Congress, that number rises to 35 in Lewisham in south-east London and falls to less than two in south Gloucestershire and Oxfordshire.

Lovell says that about a third of vacancies never reach jobcentres or the official figures, because in times of recession when labour is in abundant supply, employers can fill them through their informal networks of friends and family. A4e’s links with employers can give out-of-work young people the network of contacts they would otherwise lack, he explains.

For MPs who interrogated government officials and providers about the programme, this idea was far from reassuring. If employers can fill the few vacancies that they have without even using jobcentres, why pay an employment and training provider to help? Labour MP Fiona Mactaggart, a member of the public accounts committee, called it “job substitution”, where providers are paid regardless of whether their intervention was necessary.

Martin Bright, a journalist who founded New Deal of the Mind to campaign for opportunities for creative jobs in the recession, put it this way: “The Work Programme was dreamed up in opposition and was designed for a buoyant jobs market.” Presupposing a healthy supply of jobs, it is focused on short-term interventions, confidence-boosting measures and help with interview skills.

The key issue is that suitable workers are not in short supply, but jobs are. “The supply side of the UK labour market already works pretty well. It’s the demand side that is the main problem for the foreseeable future,” Jonathan Portes, director of the National Institute of Economic and Social Research, wrote recently. He believes that allowing young people to become disconnected from the labour market or to lose their skills while out of work risks creating higher unemployment on a permanent basis. “We are accepting the future economic and social damage that will be done by these levels of unemployment.”

We know that education could work in reducing unemployment even as job opportunities fall, however, because it already has worked. While policy for over-18s, who are eligible for Jobseeker’s Allowance, has focused on finding work to get them off benefits, 16- and 17-year-olds are being encouraged to stay in education to meet next year’s target for raising the participation age in education and training.

The result was that when the recession hit in 2008, under-18s were hardly affected. As David Miliband’s employment commission observed, for every job that disappeared among this age group, an educational opportunity was there to fill the gap. In fact, the numbers out of work or education even fell slightly in the face of the financial crisis.

Rise of the Neets

Under the September Guarantee, every under-18 student was guaranteed a suitable place in education, and the education maintenance allowance ensured that they could afford to attend. (There are signs that the reduction in financial support under the new bursary system is undermining this: the number of 16- to 19-year-olds who are out of education, employment or training rose by 1 percentage point at the end of last year, the first increase for five years.)

But more and more over-18s began to drop out of work, education or training. And in the 18 to 21 age group, an increase in the numbers going into education could not offset a sharper fall in employment.

Among those aged 23, such as Tutty, the number of people in work fell by 5.9 percentage points, but there was scarcely any rise in education participation: that is the effect of the benefit trap Tutty found himself in.

At the age of 18, when the Jobcentre Plus restrictions on education take effect, more than 80,000 students leave full-time education and the numbers who are not in education, employment or training (Neet) more than double.

The thinktank Demos calls students who choose a non-academic route at 16 “the forgotten half” - one way this manifests itself is in the dearth of options after 18 if you cannot find work. Unlike the Dutch plan, financial support for full-time study is restricted to one group: university students. It is no surprise that, with up to #163;3,250 for one group and the threat of losing benefits for the other, the number of 19- to 24-year-olds at university outnumbers those at FE colleges by more than three to one.

Making training mandatory for those out of work, as in the Netherlands, may be a step too far for a government that is unwilling to enforce participation in education even for 16- and 17-year-olds. But the alternative to financial support for the young unemployed to go back to college is the status quo where we pay people like Tutty to stay out of education. Can we justify funding the lawyers and doctors of the future while offering nothing to the future carers, IT technicians or builders?