The social affairs minister has torpedoed hopes by the Zeeland town of Terneuzen to become the first in the country to experiment with a basic income.
Town councillors wanted to give 20 people currently living on welfare payments a monthly income of €933 with no strings attached.
But now the ministry has said that the experiment cannot go ahead as planned because the people who receive the money do not have to do anything in return, and this is against the law.
The ministry says the council must come up with a scheme which meets the current rules and is prepared to help come up with a solution, RTL news reported.
Several other towns and cities, including Wageningen, Utrecht, Tilburg, Nijmegen and Groningen are also keen to experiment with basic incomes. Last year, the government agreed to give more leeway for experiments with different forms of income and welfare benefits.
Teurneuzen, which has a population of 25,000 and 1,136 people on welfare benefits, plans to select its basic income recipients from a pool of people who have been claiming bijstand for more than three years.