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A large group of Netherlands households will quickly end up in financial trouble due to loss of income in the coronavirus crisis, despite the social safety net of unemployment benefits and the coronavirus income bridging scheme for self-employed TOZO, according to a stress test performed by the central office for economic policy assessment CPB and the Dutch authority on financial markets AFM.

106 thousand households will be in financial trouble within six months of losing income. 73 thousand will be in trouble within three months.

Self-employed people are particularly vulnerable to loss of income. Without the TOZO scheme, they would be 10 times more likely to end up in financial trouble than employees, according to CPB. With the TOZO scheme in place, self-employed’s risk of getting into financial trouble within three months is still four times higher than for employees.

The CPB added that the coronavirus put the most vulnerable households at the greatest risk of losing work. “These are more often lower incomes, single people or single earners and young people. After losing their job, the costs of these households are on average 10 to 40 percent higher than their income,” the CPB said.

According to the planning office, this group has little room to improve their financial situation. “There is a risk that they will turn to unregulated ‘credit’ resulting in potentially unsustainable or inappropriate indebtedness.”

The most obvious solution is to encourage people to build up higher financial reserves, CPB said. But added: “Some of the vulnerable households have structurally too little income to build up financial reserves.” Preventative solutions are needed for these “working poor”, the office said.

The CPB suggested adjustments to tax and social security scheme. This group can also benefit from training and guidance towards suitable work, the CPB said. “It is also important that insinuations keep track of signals about payment arrears to prevent the situation of these households from deteriorating further”