Finance Bill

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Mr. Mark Hoban (Fareham): Will the Paymaster General give way?

Dr. Pugh rose—

Dawn Primarolo: I will have to first give way to the hon. Member for Southport (Dr. Pugh) if I am to give way at all.

Dr. Pugh: I concur with my hon. Friend the Member for Kingston and Surbiton that an abuse is going on, and that we want it cleared up. Has the loss to the Exchequer owing to that abuse been quantified?

Dawn Primarolo: Yes. If the hon. Gentleman looks in the Red Book at the income generated as a result of closing off the relief, he will see that the projected savings to the Exchequer are in the hundreds of millions. The relief, which was for use in a limited number of circumstances, originally cost £30 million; however, a time lag occurs in the claiming of that relief. Last year, and during the current financial year, there has been a sudden and massive growth in the use of relief as a direct result of television accessing it, which was not the intention.

I could refer the hon. Gentleman to the Red Book or to the savings figures. I assure him that we are not talking about tens but hundreds of millions. The relief was not designed to be a subsidy to television companies.

Mr. Hoban: I almost regret intervening on the Paymaster General, as I simply rose to be helpful. My recollection of Second Reading—perhaps the hon. Lady remembers too—is that the hon. Member for Kingston and Surbiton was in favour of abolishing the relief in its entirety. As the hon. Lady said, such comments strike a jarring note.

Dawn Primarolo: Indeed. I am very grateful for the hon. Gentleman's prompting. I was saving that point in case I needed it later in the debate, but now it is on the record.

On behalf of the Liberal Democrats, the hon. Member for Kingston and Surbiton said that his party did not support the relief in the first place. It beggars belief that we should analyse something that it thinks should not be there.

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The most important point concerns structural problems, risk and films being made for the cinema. As far as we can see from the substantial evidence that has been presented to us since we announced our intentions in the Budget, TV productions do not encounter the same problems as cinema films. A typical TV drama series is made by commission from a broadcaster and its producer has a guaranteed customer and income. The Government believe that in such cases the relief has been used not at all as originally intended. Producers have accessed tax relief in order to reduce the price paid by the broadcaster, which is not acceptable to the Government. There is no justification for TV's use of special incentives that are designed to support the British film industry, and the clause is designed to stop that happening.

The amendment moved by the hon. Member for Arundel and South Downs addresses the question of what he describes as high-value TV drama. Since the Budget announcement, we have received a number of representations from the industry to retain relief for high-value TV drama. If high-value TV drama is defined by a clear principle, it is interesting that suggestions from the industry as to what it is have ranged from dramas costing £600,000 an hour to those costing £1.5 million an hour, which shows that the industry has not formed a consensus on what it is and what sets it apart from other TV dramas. If the argument that high-value TV dramas face risks and structural problems similar to those of films is going to be advanced, we would expect the industry to have a clearer definition of what constitutes high-value TV drama.

I should say very clearly to the Committee that the Government accept that high-value TV drama is often made at the same facilities by the same technicians as cinema films. We also recognise that that type of production attracts inward investment of about £150 million a year and operates in a very competitive environment—as do many other industries. The question is, of course, why we should make an exception here, and those factors by themselves are not enough to justify special tax incentives.

Chris Grayling: Has the Paymaster General given full consideration to the fact that although TV producers normally have, as she mentioned, guaranteed revenue, many TV groups that are independent from the broadcasters invest in their own right in productions to sell around the world without guaranteed contracts? Does she accept that such TV groups are facing challenges in some marketplaces from producers that have tax reliefs? Did she assess the competitive position of such organisations in the international markets before drawing her conclusions?

Dawn Primarolo: We have considered the question of films and productions, the rights for which are sold elsewhere, and if we were to receive clear information on that we would be prepared to consider it further. However, the problem is that one would end up with a huge range of reliefs, because the distinction cannot necessarily be made on the basis of cost per hour in production. For instance, there could be a debate

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about whether television drama that is made in a particular way or sold in a particular market should also be considered for assistance. The case for such relief would have to be made separately. On behalf of the taxpayer, the Government would have to make a judgment on whether using a relief on a scale that was not intended was a sensible expenditure.

The problem with approaching the matter in the way that the hon. Gentleman suggested—he is right about the diversity of production—is that we could end up with a totally unworkable relief and an open door for any claim. For instance, my understanding is that relief was not claimed only for productions of high quality television drama; it was claimed per episode. That is just not on. It is not as though the industry was not warned that that was not the Government's intention. Therefore, if the relief has been spoiled, if there are those who cannot now get access to the relief although their claims might have been justified previously, they must look to their own industry. If the assistance is not sensibly administered, the Government cannot be expected to sit by while huge amounts of revenue are used. Frankly, we have other, higher priorities for the money.

We are discussing high-value drama, particularly the big-budget television series made by multinational producers, not the smaller producers that the hon. Gentleman mentioned. From all the evidence, it is clear that they are not subject to the same structural and commercial constraints. Therefore, relief is not justified, as the risk is not the same. We continue to consider the question of high-value dramas, but the industry must demonstrate clearly that the risk, structural problems and use of the infrastructure are the same, before we would reconsider our decision that access to the relief is for cinema production only. That has not been demonstrated yet. Therefore, the Government are not minded to consider any exception on that basis. If the case were made, I would certainly reconsider the decision.

Chris Grayling: May I give the Paymaster General an example of a case in which the legislation might actually cause problems? Increasingly, authors are publishing their first works on the internet. With the arrival and substantial spread of broadband, it is perfectly conceivable that smaller companies might produce low-budget movies and try to provide access to them through online means rather than through the cinema. They would be excluded from benefiting from any of the reliefs, were they to do so. My fear is that the change that the Government propose would actually close avenues of creativity for the smaller producers in a way that perhaps would not be desirable.

Dawn Primarolo: I understand the hon. Gentleman's point and acknowledge that he is experienced in such matters. However, he will understand, not only because members of his party constantly point it out to us, that the complexity in trying to deliver a relief in specific circumstances as proposed by the amendment would lead to pages and pages, we fear, of legislation and we are not sure how much added value, in terms of assistance, we would be able to provide. Because of our experience with the

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relief, our particular fear is that if the Government try to be of assistance, we will find that, in the words of the old adage, we will give an inch and they will take a mile. Here, people have taken a million miles from the intention. There are times when Governments of all political persuasions must say, ''No, that was not the intention.'' Our patience and interpretation of the relief are being stretched to breaking point, and we shall return to the original intention by closing off the places where we see abuses taking place.

The £600,000-an-hour limit that the hon. Member for Arundel and South Downs suggested in the amendment would exclude soap operas from the relief, but would include a lot of what we consider to be the more ''ordinary'' television dramas—if anyone is a fan of them, as I am, I hope that they will excuse me for calling them that. I enjoy watching such dramas, but they should not necessarily be within the scope of the relief. They are far removed from the films that were originally intended to fall within its scope, however much viewers enjoy them.

That type of product should not, in principle, be able to obtain the film tax relief, so I am not prepared to accept the hon. Gentleman's amendment. In particular, I must say to him that given current behaviour, what appears to be, and what I am sure he thought was, a modest suggestion runs at an Exchequer cost of £150 million in 2003–04. That is just not acceptable. On that basis, I hope that he will agree not to press the amendments and will tell those whom he knows in the industry of the seriousness of what has gone on and the Government's resolve to stop it, and implore them to focus specifically on the question of risk and whether the risks of such television productions are really the same as those involved in making a film. If that case can be made, the Government still have time to consider it and I would be prepared to do that. However, we are not prepared to consider providing a relief to those whom we never intended to include in the remit of the relief and who are not so included.

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