Dutch city wants to cancel debt for 40 poor families, struggles to find volunteers

Arnhem is trying out the social experiment to test what giving indebted households a fresh start would mean in reality

In Dutch, the word schuld means both ‘debt’ and ‘guilt’ and that says a lot about the way many in society may feel, especially towards those who fail to meet their financial liabilities. One Dutch city called Arnhem, however, is willing to try out something new with a bold experiment that sees the debt cancellation for 40 to 60 of its poorest local families just to find out whether this will inspire the beneficiaries to move their economic standing upwards.

The experiment, which has focused on the Immerloo II low-income neighbourhood in Arnhem, began in April and has a timeline of two years. The essence of the experiment is actually rather simple, the households are offered the chance to have all of their debts taken over by the city without any expectations in return.

Surprisingly, however, the enthusiasm on the part of low-income families has not been as strong as expected despite the unique opportunity for them to turn their lives around. So far only 10 families have signed up for the trial although there are ongoing talks to recruit more volunteers.

Breaking the debt spiral

The Arnhem municipality justifies its project with the argument that people who accumulate a lot of debt and fall into a spital they cannot get out of incur additional costs for the larger society, such as the increased medical and social costs that come along with chronic poverty.

The experiment, however, will not cost taxpayers anything. The 700,000-euro budget used for the buying of the families’ debts was accumulated through charities. The city’s social department found that major creditors, such as utility companies and insurance companies are willing to offer a discount if they can receive a lump sum, which is how Arnhem has agreed to pay in the name of the debtors.

So why is the interest on the part of the debtors themselves so low? Reportedly, it has to do with reduced trust and increased suspicion towards institutional authority.

The reluctance might also be linked to a recent childcare benefit scandal in which thousands of people were accused of fraud and forced to pay back thousands of euros, even though they had done nothing wrong.

Indebted people might have gotten too accustomed to the idea that nothing in this life comes without strings attached and so this attitude is transferred to the otherwise-pioneering initiative.

To qualify for debt clearance families must owe a large amount, have more than one creditor, and have children. Reportedly, other Dutch cities are following the trial in Arnhem with interest and if successful it may be the basis for a new approach to fighting poverty.