Arnhem wants to buy up the debt of dozens of families without compensation

Arnhem wants to help forty to sixty Arnhem families get out of debt in one fell swoop. The municipality will start an “experiment” on Tuesday in which the entire debt of a number of residents of Immerloo II, one of the poorest neighborhoods in the country, will be bought. “There is no quid pro quo for this buyout,” said Alderman for Subsistence Mark Lauriks (PvdA).

He therefore calls the experiment “unique in the Netherlands”. Previous, similar initiatives focused only on young people. There were also conditions attached to the buyout.

Directly purchasing private debts with government money is not allowed. That is why the municipality set up a fund in which three local foundations together deposited 700,000 euros. “We expect to be able to help up to sixty families with this,” says Lauriks. The councilor cannot give an exact number, because the average debt in Immerloo II is not yet known to the municipality.

Arnhem started approaching potential participants in the experiment last week. The municipality also made agreements with major creditors such as health insurers and energy companies, and found them willing to forgive parts of any debts. Only Arnhem residents from Immerloo II are allowed to participate. “We start with the poorest neighborhood,” says Lauriks. In 2022, 34 percent of households there lived below or around the social minimum, the net labor participation (the percentage of the working population that has a paid job) was 41 percent. The average annual income per resident was 13,600 euros.

The municipality also gives preference to families. “Debts and money problems within a family have an effect on the well-being and school performance of children, and thus have a negative impact,” says Lauriks. Participants in the experiment must also have more than one creditor. “People who knock on the door of potential participants see a lot of distrust towards the government and many unopened envelopes,” says Lauriks.

To survive

The councilor calls the experiment an “indictment against the system”. “I find it very strange how we deal with debts in the Netherlands,” he says. “In the Netherlands, debt assistance costs us 17 billion euros per year, while the total debt amounts to 3 billion euros annually.” In neighborhoods such as Immerloo II, the councilor sees that debt assistance is not working. Last year, the debt assistance program – a national program in which people with debts pay off what they can – was shortened to eighteen months, which is still too long, according to Lauriks. “It is not attractive for people in debt to only have a way out after a year and a half. And yes, the rational choice is to take that year and a half, so that you don’t get into even deeper trouble. But people who are deeply in debt often cannot make that choice. They are mainly concerned with survival.”

Researcher Rosanne Oomkens, affiliated with Utrecht University of Applied Sciences and specialized in debt, also sees this. “When you have debts, especially if there are multiple amounts to different creditors, it becomes difficult to oversee the situation and make good choices. People often make payment arrangements that they cannot keep.” Although the scale of the debt problem has been constant for years, Oomkens sees a decrease in the number of registrations for debt assistance. “This is partly due to shame, distrust of the government and difficulty with the conditions of a debt assistance program.”

Yet Oomkens is critical of the Arnhem experiment. “Of course it sounds very sympathetic, and it will really bring relief to individual families, but it is not a sustainable solution for people who structurally have too little money and therefore end up in debt.” Because what happens after the debt has been paid off? “How does Arnhem ensure that people do not get into debt again?”

A low income is one of the major causes of debt in Immerloo II, councilor Lauriks acknowledges. “People with low incomes often have no buffer. But we cannot increase the minimum wage and social assistance, that must be done in The Hague. Due to the enormous worries that people have through no fault of their own, we see that they cannot do other things such as looking for a job or arranging social care. We therefore want to remove the ‘guilt’ factor, to see where this leads.” The Arnhem and Nijmegen University of Applied Sciences will conduct two years of research into the families participating in the experiment. The municipality also offers families a – non-mandatory – coach who helps them with matters such as applying for income schemes, budgeting or applying for jobs.

Also read: Young, debtor and stuck in systems

Oomkens also sees an ethical objection. “I am curious which families the municipality ultimately chooses and which not,” says Oomkens. “I certainly wouldn’t want to make that choice. This experiment also affects people who have a normal debt settlement of one and a half years. They may think: gosh, I would like this too. There is inequality.”

Lauriks understands those objections. “I would prefer to help everyone, but if we don’t do this, forty to sixty families will not get out of trouble. And that’s the purpose of this experiment, to see if this helps people. Because it certainly won’t work in the current system.”

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