Arnhem city council is to clear the debts of some 40 to 60 families who live in the city’s poorest neighbourhood in a two-year trial to “break the toxic spiral of poverty”.

“People who are in debt will often have additional problems and that is costing society a great deal of money. Taking over their debt will be cheaper in the long run,” city poverty chief Mark Lauriks told RTL.

The money, some €700,000, is a gift from private associations. Local council reserves can’t be used, Lauriks said, because it is public money.

The families all live in the Immerloo II area, which is one of the poorest in the country. To qualify for debt clearance families must owe a large amount, have more than one creditor, and have children.

“I would prefer to help everyone who is in debt in this city but that is impossible,” Lauriks said. “This trial is also meant to start a rethink on how society and the government handle debt.”

During the year-long preparations, the council found major creditors, such as energy firms and health insurers, are prepared to lower the outstanding amounts in exchange for a lump sum, he said.

The families will be coached for the next two years on how to better manage their finances and find work.

Reactions from the families involved have been mixed. “Some feel it’s too good to be true. There is not much faith in the authorities, and people are ashamed to discuss their problems,” Lauriks said.

He admitted there is a risk that people who know they will be bailed out by the council will get into debt more easily. “But I know few people who tell me it’s worth being cut off from water, gas, and electricity so they can buy an expensive TV that the council will eventually pay for,” he said.