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Session 2001- 02
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Finance Bill

Finance Bill

Column Number: 407

Standing Committee F

Tuesday 18 June 2002


[Mr. Joe Benton in the Chair]

Finance Bill

(Except clauses 4, 19, 23, 26 to 29, 87 to 92, 131 and 134 and schedules 1, 5 and 38)

Clause 98

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

10.30 am

Mr. Howard Flight (Arundel and South Downs): I beg to move amendment No. 86, in page 75, line 3, after 'release', insert 'or constitutes long-form drama'.

The Chairman: With this it will be convenient to take amendment No. 87, in page 75, line 19, at end insert—

    '(d) ''long-form drama'' means a production of a duration of 60 minutes or more in total, shot to cinematic standards, of single or short episodic type with a budget in excess of £600,000 per hour.'.

Mr. Flight: As the Committee will be aware, clause 98 restricts the reliefs for expenditure on the production or acquisition of British qualifying films solely to those intended for commercial cinema release. The tax relief was originally introduced in 1997. We obviously all want the British film industry to prosper, but we want other industries to prosper as well. There was a general view when the provision was introduced that the tax incentives were potentially over-generous and—dare I say it—intended for interest groups not that far away from the Labour party.

The tightening-up amendments are somewhat flawed. First, there are several outstanding contracts in relation to films being made for television where money and other factors are already committed. It is against principle to change rules in the middle of that. Secondly, in ruling out all television productions, there is the issue of expensive and serial productions. Amendments Nos. 86 and 87 are designed to retain the tax incentives for long-form dramas. Amendment No. 87 defines a long-form drama as

    ''a production of a duration of 60 minutes or more in total, shot to cinematic standards, of single or short episodic type with a budget in excess of £600,000 per hour.''

I would describe such a drama as a type of production such as ''The Jewel in the Crown'', which, although made for television, was a valuable export and not a minor production. I will deal with the other aspect in clause 88, but amendments Nos. 86 and 87 are designed to question whether the Government want to rule out even serious, major television serials.

Dr. John Pugh (Southport): This is another example of the Treasury trying to make things happen. Not content with bean counting, an objective of the Treasury now is to encourage cultural development. Historically, Governments have had two routes by which they can do that. They can make things happen by negotiating with other Departments, such as the Department for Culture, Media and Sport, and

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releasing money to Departments and agencies to stimulate growth, in this case in the creative film industry. They can release immense largesse, but in those circumstances, they are always unsure as to how the money will be spent.

That particular route raises questions such as whether the DCMS is the appropriate organisation to stimulate the film industry, and whether it has the capacity to make the right judgments or is involved in micromanagement of an industry that it may not perfectly understand. None the less, we are aware that much Government thought goes into stimulating the creative film industry, and not just Government thought, but that of Government agencies such as the Welsh Development Agency, the Scottish Parliament and so on.

There is a variety of different initiatives taking place within the different regions of England and the different countries that make up the United Kingdom. I wonder what assessment the Treasury has made of the different levels of support, whether it is assured that economic aid is wisely used in the best way, and whether there is a similarity in the different levels of aid across the United Kingdom. However, I am fully confident that the route that I have just described is not the route that the Treasury prefers to use to produce the desired product. It has always preferred, and seems increasingly to prefer, route two: to create a fiscal environment in which an industry—in this case the film industry—may thrive. The Treasury prefers that, I think, because it enables it to have a level of hands-on control of the process that might be left to other Government Departments.

The argument against that route is that the levers that the Treasury ends up using are not sufficiently sophisticated. That is certainly proved here, where several issues of selection arise. In one sense, the Government have been selective—they have singled out a particular industry, as the hon. Member for Arundel and South Downs (Mr. Flight) has just pointed out. They have given benefits to one particular sector of creative industry as opposed to another. However, there is an argument that they have not been selective enough. The first experience of the fiscal benefit has been that a number of enterprises, such as soaps, have benefited, which was never the Government's intention. We here have a tightening up of the fiscal regime so that the Treasury can achieve whatever it understands its objectives to be.

The Treasury is then assailed by the objection that it is being too selective. Equity and other such organisations have pointed out that long-running and entirely creditable enterprises that do not end up as a fully fledged film are excluded, but should not be.

My general conclusion, and that of my party, is that the Government are here very unclear about what they want to achieve. I would appreciate some clarification from the Paymaster General about what they intend to achieve, how far they feel that they have yet achieved it and how they will extricate themselves from the position—something of a muddle—that they have got into. I should also like to ask the Paymaster General whether, prior to producing these changes, the Government have assessed the efficiency of the

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changes already made and how the changes in the tax regime have married, or complemented, the various supports that the film industry receives from other Government Departments.

Chris Grayling (Epsom and Ewell): Good morning, Mr. Benton, and welcome back to the Chair.

I support the amendments, and commend my hon. Friend the Member for Arundel and South Downs for them. In tabling them, he has highlighted an extremely important issue. While I fully understand the Government's aspirations to ensure that the reliefs provided to the film industry do indeed support the film industry and cannot be used to support the television industry, which is not noticeably short of money, the practical reality is that the film and cinema industry is very different from what it was, even 10 years ago. We are seeing a continual growth in the number of formats and different outlets for creative works. We are seeing the expansion of DVD and will increasingly see the development of online services. My hon. Friend's use of long-form drama as a vehicle on which to focus the reliefs provides important support to the independent producers who are producing high quality cinematic-standard material but who might ultimately use different forms of distribution to earn money from their work.

The amendments provide a sensible balance between meeting the obvious requirement to ensure that reliefs are limited to providing the proper support to the creative sector in this country for which they were intended, and ensuring that we do not focus exclusively on a format that, if still the most important outlet for major works of that kind, represents only part of the market in today's world. For many productions, that format does not represent the market at all.

I hope that the Paymaster General will support the amendment. It will help to clarify the law and to give support to an important part of our creative sector.

The Paymaster General (Dawn Primarolo): Good morning, Mr. Benton.

In response to the amendments, I start by saying clearly to the Committee that the relief was not put in place to recognise the different ways in which films are distributed, but to recognise risk, particularly different production risks. Before I respond to the amendments, I shall quickly remind the Committee why the relief was introduced, and of the purpose of the clause.

The clause restricts film tax relief for British qualifying films to films made for the cinema. That was the original intention of the relief, which was clearly stated in Committee and in all drafting. It will end the heavy misuse of relief by television programmes of all descriptions, including soap operas, game shows, makeover programmes, reality television and so on; however creative that industry is, and however much we respect it, such programmes are not, by any stretch of the imagination, films intended for cinema release.

The main relief was introduced in 1997 and was aimed specifically at pump priming the production of low-budget British cinema films. We were prompted

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by the evidence of the Middleton report, which focused on the structural problems in the film industry that make it difficult for British film makers to find a market for their films and get them screened. I shall return to that problem because it is crucial.

Dr. Pugh: Will the Paymaster General give way?

Dawn Primarolo: The hon. Gentleman has already asked a question, which I should like to answer by explaining to the Committee what we are doing. I shall then be happy to give way to him.

I am a little perplexed by the hon. Gentleman's contribution. The hon. Member for Kingston and Surbiton (Mr. Davey) said on the Floor of the House when the measure was announced in the Budget debates that the Government were doing precisely the right thing because an outrageous abuse of relief was going on; the Liberal Democrats supported the Government.


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