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Mr. Chris Smith: Will my right hon. Friend also take into account the economic impact on the Exchequer and our whole economy of the 60,000 working weeks of employment that such investment would generate?

Dawn Primarolo: I considered the employment question very carefully, and I have to tell my right hon. Friend that, regrettably, although the relief is claimed on the full production expenditure of those dramas, sometimes as little as 20 per cent. of the expenditure occurs in the United Kingdom. When we look at the industry's structure, we see that people are employed in many different parts of the industry and that they move around. The industry is not wholly dependent on such inward investment.

I also have to tell my right hon. Friend that I have considered the inward investment issues very carefully. I have not ignored them, but the difficulty is that we have to consider whether any contribution would be made to the industry's development if a British company made a television drama costing £800,000 and did not receive the relief, but a high-value drama did—or, vice versa, whether a wholly British company should not receive the relief and, for example, American finance company should.

Mr. Edward Davey: I congratulate the Paymaster General on not listening to those voices and on saving the taxpayer £100 million. Although the relief will be restricted under the Bill, what will the ongoing cost be to the taxpayer?

Dawn Primarolo: I had that figure to hand a moment ago because I thought the hon. Gentleman might ask me about it, but I have put it down. I believe that the ongoing cost of the relief is about £70 million, but I will certainly check that figure, and I will write to the hon. Gentleman if it is incorrect.

This is not a "push me, pull you", "congratulate you on listening, congratulate you on not listening" game. As a Treasury Minister, I have sought to consider the

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arguments put before us on the relief's importance to the industry, on the impact on low-budget films in particular and on the industry's structure and employment. I have considered whether it was fair to allow the relief to be used in a way that was never intended, whether it represented a good investment for the taxpayer and whether the Government were behaving fairly in relation to taxpayers' legitimate expectations.

The Government's underlying view, which is not shared by the hon. Member for Kingston and Surbiton, is that we are committed to the British film industry, and we intend to continue to be committed to it. However, we will not allow parts of the industry that do not require the relief to get it, thus bringing into disrepute a relief that was intended for small producers, as I have said.

My right hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) and the hon. Members for Epsom and Ewell (Chris Grayling) and for Kingston and Surbiton asked whether the Government would continue to review this issue. First, there is no question but that the Government will keep a very close eye on how this relief is used, the costs, and whether it is stretched beyond what is intended. In response to the hon. Member for Kingston and Surbiton, I am as confident as I can be that the Government have made the necessary corrections, but there are some very clever tax planners, who work very long hours for very high fees, and I am not in a position to say that they will never find a way around this provision. That is a fact of life, and that is true of any relief.

I will confirm, however, that this relief expires in 2005. Clearly, the Government and the House will need to take a view at that stage about whether it is the best way to continue to give encouragement and support to the British film industry. I will also bear in mind the comments of the hon. Member for Epsom and Ewell with regard to the different distribution channels, online developments and so on. To return to my point about £1 million per hour allowing access to relief, when I examined which categories of companies might gain as a result, I saw—looking at the development and movement of the industry—that they were not start-up companies or those to which the hon. Gentleman referred. Those companies are at the other end of the chain, where the low-budget British films are made. We must strike a balance in relation to whom we support in the industry.

I assure the House that I will consider this issue very carefully, now, throughout the rest of the year, and, if I am still the Minister responsible, when it is up for review in 2005—I would have considered it very closely by then. I assure the House that whoever has responsibility for this relief would have done so, and that those issues that hon. Members have raised will be considered in the round. However, I cannot give any hope at this stage—it would mislead the House were I to do so—that we will change our minds on the question of high-value television drama. I do not have a closed mind on the matter, but I have not been convinced, and there is no substantive evidence to justify providing that relief. I could not therefore recommend it to the House.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

3 Jul 2002 : Column 263

New Clause 22

Films: restriction of relief for successive acquisitions of the same film

'(1) Relief under section 48 of the Finance (No. 2) Act 1997 (c. 58) (relief for expenditure on production or acquisition of film with total production expenditure of £15 million or less) in respect of acquisition expenditure is available only in relation to an acquisition—
(a) by the producer, or
(b) directly from the producer,
and not in relation to any subsequent acquisition (or in relation to any acquisition within paragraph (a) or (b) other than the first).
(2) For this purpose—
(a) "acquisition expenditure" means expenditure to which subsection (3) of section 42 of the Finance (No. 2) Act 1992 (c. 48) applies (relief for acquisition expenditure);
(b) "acquisition" means acquisition of the master negative of a film, or any master tape or master disc of a film, within the meaning of that section; and
(c) "the producer" means the person who commissions the making of the film and is entitled to control its exploitation.
(3) This section applies to acquisition expenditure incurred on or after 30th June 2002.
For this purpose when expenditure is incurred shall be determined as for the purposes of section 48 of the Finance (No. 2) Act 1997 (c. 58) (see subsection (9) of that section).'.—[Dawn Primarolo.]

Brought up, read the First and Second time, and added to the Bill.

Clause 99

Films: restriction of relief to films genuinely intended for theatrical release

Amendment made: No. 13, in page 76, line 13, leave out Clause 99.—[Dawn Primarolo.]

New Clause 1

Supplementary charge in respect of ring fence trades: financing costs

'. After section 501A of the Taxes Act 1988 insert—

"501AA Supplementary charge in respect of ring fence trades: financing costs

The adjusted ring fence profits of a company shall be computed without regard to the assumptions in section 501A(3) to the extent that the financing costs are incurred for the purposes specified in section 494 (2)(a)(i) and (ii) of this Act.".'.—[Mr. Flight.]
Brought up, and read the First time.

5.45 pm

Mr. Flight: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: New clause 2—Termination of supplementary charge

'. After section 501B of the Taxes Act 1988 insert—
"501BA Termination of supplementary charge
The provisions of section 501A shall cease to have effect for accounting periods beginning on or after 31st March 2005.".'.

3 Jul 2002 : Column 264

New clause 3—Supplementary charge: termination

'. Section 92 above shall have effect for a terminal straddling period beginning before 31st March 2005 and ending after that date.'.

New clause 4—Ring fence trades: capital allowance supplement

'. After section 501AA of the Taxes Act 1988 insert—
"501AB Ring fence trades: capital allowance supplement
(1) A company's adjusted ring fence profits for an accounting period shall be subject to a deduction for the capital allowance supplement.
(2) For the purposes of subsection (1) above the capital allowance supplement is the amount A + B where A and B are as calculated below—
(a) A = 10% x C, where C is the written down value at the end of the immediately preceding accounting period of the separate plant and machinery pool of expenditure required pursuant to section 162 of the Capital Allowances Act 2001; and
(b) B = 10% x D, where D is the written down value at the end of the immediately preceding accounting period of expenditure qualifying for allowances under Part 5 of the Capital Allowances Act 2001.
(3) For the purposes of computing the capital allowances supplement only, any expenditure incurred on or after 1st January 2003 qualifying for capital allowances under the provisions of Part 2 or Part 5 of the Capital Allowances Act 2001 shall be ignored.
(4) For the avoidance of doubt, the capital allowances supplement for an accounting period shall not reduce the amount of unrelieved qualifying expenditure carried forward into the following accounting period for the purposes of any provision in the Capital Allowances Act 2001.
(5) Where an accounting period is less than twelve months the capital allowances supplement shall be restricted to the amount given by the following formula—
(A + B) x E/365
where E is the number of days in the accounting period.
(6) The provisions of this section shall have effect for the company's first accounting period ending on or after 1st January 2003.".'.

Amendment No. 42, in clause 63, page 41, leave out lines 13 to 27.

Amendment No. 43, in clause 91, page 64, leave out from beginning of line 34 to end of line 33 on page 68.

Amendment No. 44, in schedule 21, page 252, leave out from beginning of line 5 to end of line 30 on page 257.

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