Dutch city pilots radical debt cancellation scheme for poor families

The Dutch city of Arnhem is going to cancel the debts of some of the poorest families in the Netherlands in an attempt to break a health-crushing downward spiral and give people a fresh start.

Earlier this month, municipal officials began knocking on doors in the Immerloo II district, one of the poorest neighbourhoods in the Netherlands, offering to pay off problem debts.

At first, people were naturally suspicious, according to Mark Lauriks, the councillor in charge of social security at Arnhem, who is leading the scheme. Immerloo II residents were used to debt collectors and wary of the government, he said. But that soon changed when the details – total debt forgiveness with no strings attached – emerged in the media. “With the exposure, people are actually ringing us up and saying: ‘Well, I have to give this a chance. I think it’s a blessing.’”

The councillor hopes 40-60 families will sign up to the two-year pilot project, which will pay off their debts, without asking for anything in return. Families with children are prioritised, with the size, duration of debt and number of creditors also taken into account when deciding on participation. Debt repayment will be covered by four charitable foundations, rather than the taxpayer, leaving the council and national government only to meet the project’s costs, including research.

In the Netherlands, councils are responsible for helping indebted families. But the current model isn’t working, Lauriks argued: “We have a system in place, but it doesn’t work for the people that need it most. And the entire system costs us billions and billions more than the initial debt.

“The costs are much, much higher than the initial debt … There are welfare costs, health costs. Debts are literally making people sick,” he said.

“When the debt is erased, people get a grip on their own life again.”

Dutch families were struggling with problem debts worth €3bn to €3.5bn (£2.6bn-£3bn) in 2018, while the costs of dealing with the social and economic consequences of the liabilities were €17bn, including €8bn on debt assistance and €9bn on the wider fallout, such as health problems, absenteeism and underemployment, according to De Argumentenfabriek, a data company.

The Arnhem experiment follows debt-relief initiatives from other Dutch cities grappling with entrenched poverty. Although the Netherlands is one of Europe’s wealthiest countries, 16.5% of the population is at risk of poverty and social exclusion, according to Eurostat.

In 2020, Amsterdam took over the debts of young people and allowed them to repay the city, rather than the original creditor. Young people could also have a portion of their debts cancelled if they took up education or training.

Utrecht was reported in 2023 by Dutch media to have halved the number of residents in debt to 12,000, after it took over the finances of the city’s poorest households.

But Arnhem’s approach is even more radical because families face neither conditions, nor repayment obligations. The council argues this offers instant help that could be more effective in the long run. “The chance to get your life together is immediate,” Lauriks said. “We also think that’s a bigger chance for these families in the long run, with even lower costs, health care costs, etc.”

This approach to debt forgiveness may surprise anyone who associates the Netherlands with flinty prudence. In 2017, the then Dutch finance minister Jeroen Dijsselbloem caused outrage across Europe when he appeared to suggest that indebted southern European countries had blown their money on alcohol and women. At the height of the first coronavirus lockdown three years later, another Dutch finance minister, Wopke Hoekstra, infuriated some European leaders by asking why other governments didn’t have the means to deal with the shock of the pandemic.

Tellingly, the Dutch word for debt, “schuld”, as in German, also means fault or guilt.

Debt has long been seen as “a failing, something immoral. It’s got all these connotations of crime, immorality, of not being able to fulfil your end of the bargain,” Robert Vonk, professor of the history of social security at Utrecht university, said in an interview. “If you are in debt, you can get assistance … but this help has always had the implicit message that you have done something wrong and you need to atone for it.”

The proliferation of debt aid schemes are a sign that public attitudes are changing, Vonk said. Growing numbers face “crippling debt”, which he attributed to more flexible labour markets that have spawned low-paying jobs with uneven income streams.

Another factor changing people’s minds, experts believe, is the child benefit scandal, where more than 20,000 families were wrongly accused of fraud by Dutch authorities over several years from 2012. Some victims were forced into bankruptcy, others moved house, or separated from their partner, after unjust claims for repayment, often triggered by simple administrative errors.

The scandal was “a catalyst” in changing public opinions on debt, Vonk said. “The government caused people to get into problematic debt and was also the least lenient creditor.”

Maurits de Jongh, assistant professor at the ethics institute at Utrecht university, was supportive of debt-relief programmes, but questioned whether the Arnhem scheme would keep people out of debt, highlighting “the structural causes of people living in poverty and incurring debts”, including illiteracy, illnesses or incomes that were just too low.

“It is a huge risk,” Lauriks acknowledged, arguing “the minimum wage is just too low to make ends meet”. He also acknowledged “the legitimate question” that low-income families who have stayed out of debt may perceive unfairness. “I would like to help all people in our town, and maybe in all the Netherlands, but [this] is an experiment to let the whole country see there is another way.”