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News: Families spared as Revenue calls off tax clawback

U-turn in credit overpayment row; casual workers losing out; Truro is No 1 property hotspot; garages slated for poor service

Struggling families embroiled in a dispute with the taxman over tax-credit overpayments were thrown a lifeline last week when the Government suspended his attempts to recover the money.

The decision follows two reports from the Parliamentary Ombudsman, Ann Abraham, and the Citizens Advice Bureau (CAB) criticising the automated benefits system. As a result of these criticisms, the Prime Minister was forced to apologise for the "distress and hardship" caused to families.

In an emergency statement to the House of Commons, Dawn Primarolo, the Paymaster General, then announced she had asked Revenue and Customs (the merged body replacing the Inland Revenue) to suspend its recovery of overpayments wherever there was a dispute with a claimant.

According to the CAB, a third of claimants whose tax credits had been overpaid fell into poverty when asked to repay. Many families were trying to survive on as little as £56 a week and, in extreme cases, the Salvation Army was helping with food parcels.

The Parliamentary Ombudsman's report focused on poor administration. The tax-credit system, one of the Government's flagship policies, was introduced in 2003 to streamline the payment of benefits; some six million families are recipients.

But the complex nature of the scheme, coupled with the Revenue's own computer errors, has led to misery for hundreds of thousands of families. Part of the problem is that the "reclaim" mechanism for overpayment is built into the system and does not operate independently.

Tax-credit awards are calculated on family income figures dating back two years. Any significant increases will automatically reduce entitlement to benefits and so prompt the Revenue to claw back the money. But many recipients either weren't prepared for the repayment or found themselves short-changed by the administrative process; low-income families saw vital benefits disappear.

Worse, computer errors at the Revenue resulted in inaccurate calculations of individual claims. Around £600m was overpaid, and the Revenue then demanded this money back, adding to families' problems.

Of the £13.5bn paid out in tax credits in 2004, the first full year of operation, some £1.9bn - 14 per cent - was overpaid.

Ms Abraham has recommended that all overpayment resulting from government error be written off. The Treasury said it was reviewing its credit reclaim procedures.

TUC fights for temps

The employment rights of the UK's temporary workers are among the worst in Europe, a report from the TUC has found.

Most of the UK's 600,000 temps receive no pension, paid holidays, training or sickness pay and have no protection from unfair dismissal. On top of that, they are usually paid less than colleagues doing the same job.

Of the 20 EU countries with information available for comparison, only the UK, Hungary and Ireland did not give temps the right to be paid the same as a permanent employee doing a similar job.

And the UK does not require employment agencies that find work for temporary staff to have a licence to operate.

The problem is partly down to delays in introducing an EU directive that would give temps greater protection at work, including equal pay, maternity rights and safeguards against discrimination. The directive has been stalled by a disagreement over when a temp should get these rights. Some countries want them to kick in after one year's employment; others say six months is fairer; others believe they should start from day one.

The TUC wants the Government to use its EU presidency to implement the reform. However, the CBI, which represents businesses, said that this would force companies employing temps to make cutbacks because of the burden of extra regulation.

Inflation location

Truro, a cathedral city in Cornwall, has played host to the greatest house price growth over the past 10 years, new research has shown.

Between 1995 and 2005, prices increased by 272 per cent, according to a report by County Homesearch, a company that seeks properties for buyers.

Using data from the Land Registry, it found that towns and cities with the biggest rises included Exeter (224 per cent), Bath (221 per cent) and Northampton (217 per cent). The slowest growth was seen in Middlesbrough (116 per cent) and Hull (123 per cent).

Repairs on the ropes

Less than one in four cars are properly serviced in UK garages, say trading standards officers.

In a "mystery shopper" test, 88 cars were sent in for service with faults such as loosened wheel nuts, blown circuit fuses, defective brake lights and soft tyre pressures. When the cars were picked up, only 21 had been correctly serviced. Over a third were left with serious faults.

If the quality of workmanship does not improve, Trading Standards intends to call on the Government to tighten its regulation of car-repair services. This could lead to compulsory licensing of garages.

Several garages in the survey now face either prosecution or written warnings. The Retail Motor Industry Federation, some of whose members were involved, said it would be working with trading standards officers to investigate the claims.

The motor repair industry is under increasing pressure to clean up its act. In April, the National Consumer Council threatened to lodge a "supercomplaint" to the regulator about poor service.