Households with children suffer from benefit debt more frequently and for longer
Households with children and households with an annual income of between approximately €20,000 and €71,000 (i.e. between the minimum income and twice the modal income) have to pay back undue benefit payments the longest and the most frequently. With one repayment demand frequently following another, repayment is often a long-term problem for this group. The repayment debts also pile up for these households.
The Netherlands Court of Audit has analysed data on 7 million households that had received housing benefit, healthcare benefit, childcare benefit and/or child budget payments between 2012 and 2017. This was the first audit of the effect of the repayment of undue benefit payments at household level in the Netherlands. The Court of Audit also looked at the income situations of 5.6 million households out of the 7 million households covered by the audit. The audit therefore revealed for the first time how the amount and duration of benefit debt were related to household composition and income. Households with children and, especially, one-parent households suffered from benefits debts more frequently and for longer than other households.
Advance payments
The Court of Audit’s Board member Ewout Irrgang said, “Our audit found that most households can pay off benefit debt relatively quickly. A group of several hundred thousand households, however, are unable to do so.” He also noted that the system behind the benefits made it harder for households to manage their financial situation. The system works with advance payments that can change during the year. “That leads to households often receiving more money than they are entitled to and having to repay it years later. In the six years we audited, from 2012 to 2017, 7 million households received 23 million repayment demands.”
The audit also found that nearly three-quarters of the 9 million people who received benefits (together constituting 7 million households) saw a reduction in their benefit payments at least once, for instance if they earned more, their children left home or they married or cohabited. Between 2012 and 2017, the Tax and Customs Administration reduced 27.6 million benefit payments. This led to nearly 23 million repayment demands. Of the households that received payment demands, 62% received one at a time, but 9% (616,000) of the households received four or more at the same time.
Number and amount of repayment demands seem to be falling
The Court of Audit asked whether the government policy introduced in 2012 had actually reduced the number and amount of repayment demands. Its audit covered all people who had to repay undue benefit payments, about 3 million every year. It found that the number and amount of repayment demands increased until 2015 but the pattern reversed in 2016 and 2017. It cannot be said whether this trend has continued because the benefit payments for 2017 have not yet been finalised (89% have currently been finalised).
The Court of Audit would comment as follows on the government’s aim of reducing the number of repayment demands in excess of €500. Setting a fixed limit harbours the risk that the strategy to reduce repayment debt will not concentrate only on the most problematic cases. The audit found that 2.6 million households (36%) on average had to repay more than €500. Such repayments are easier for households with high incomes than for households with low incomes. The audit also found that households with high incomes repay benefit debt more quickly.
The Court of Audit therefore recommends that the government approach benefit debt from the households’’ perspective and consider the time it takes to repay undue benefits and the amount of the repayment relative to household income. The audit found that the benefit debts of six out of 10 households were higher than 10% of their monthly income.