Finance Bill

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Dr. Pugh: It is always a pleasure to be patronised by the Paymaster General, so perhaps I can give her another opportunity. In saying that the Government will make savings of at least £100 million, has she not acknowledged that the Government have already lost hundreds of millions by poor drafting? Is it not appropriate at this point to blame not only those who have abused the legislation but those who possibly framed it inadequately? Part of the burden of blame must lie there.

Dawn Primarolo: I find that patronising a Minister is never a good way to bring them round to an hon. Member's way of thinking. Of course, there is a risk for any Government when they draft legislation. The previous Government had the same problems, for example with profit-related pay. Governments draft legislation on the basis of good will, understanding and agreement that they wish to encourage a specific activity. Unfortunately, there are those who then take it beyond its intention, in tax planning. That is also the nature of complex anti-avoidance legislation. If every

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time that the Government introduced legislation, it had to be accompanied by massive anti-avoidance clauses, the Committee would find its job even more difficult.

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I would also say to the hon. Gentleman—this may be a little old fashioned—that the Government acted in good faith, and we believe that that faith has been breached. We know that in the industry, those who were using the relief knew that they were on borrowed time. We have had extensive discussions with the representative bodies. There is an important issue concerning British film makers and risk, particularly for low-budget British films, and what we can do to assist them. We have left that assistance in place. However, we cannot allow the current situation to continue.

I would say finally to the hon. Gentleman that if Governments are not prepared to act to encourage what they believe is of use and a good contribution, and if the Treasury only ever operates on a dead cert, when it knows that it totally controls the situation, an awful lot of current legislation would not be on the statute books. We do not see similar scales of abuse elsewhere, and we will not tolerate it in this instance. I hope that the hon. Gentleman can see that I do accept that if the matter can be settled, there may be an issue concerning the high-value dramas. We have not been able to settle it thus far, but if the point of risk can be satisfied and the structural issues resolved, I would certainly be prepared to consider it.

The wider points raised by the hon. Member for Epsom and Ewell (Chris Grayling) may be the subject of a future debate about the changing nature of the creative industries and whether the Government should be involved in that area. That would be a detailed and long debate, which I look forward to his pressing on the Government in future. It is not the right place or time to do it now, however.

Mr. Mark Field (Cities of London and Westminster): I wish to make a brief contribution to the debate. I confess that I have considerable sympathy with the Government's position on tightening up on the eligibility for tax relief in relation to United Kingdom film production. It is perhaps the case that the Minister has put forward the armageddon scenario that £150 million of taxpayers' money would be swallowed up by a vast array of television and other industry bodies, if that tightening up did not take place. None the less, the point has been relatively well made.

One of the great concerns that we have expressed, which is one of the reasons that we have tried to tailor a sensible compromise in relation to the amendments, is that it is difficult five, seven, eight or nine years after these provisions were put in place in the Finance Acts to ensure that the British film industry had some sort of encouragement to entirely qualify what we were trying to achieve. I know that it might be said that the provision was supposed to be entirely narrowed to encourage the British film industry, but several of my hon. Friends have made the valid point that the

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entertainment industry is now much more interdependent and interlinked.

I fully appreciate the Minister's point that the direct intention was not to allow—dare I say it—second and third grade television programmes to benefit from such reliefs, but it is probably the case that the reliefs put in place initially were envisaged to encourage the film industry in the broader sense. Therefore, there is a risk that without amendments of the sort that we have proposed for high quality long-form drama, some of the product that was envisaged to benefit from the provisions when they were introduced in the mid–1990s will now fall outside their remit.

Much of the British film industry is based in my constituency, in Soho and the west end of London. It is fair to say from the indications that I have had from the industry, which has clearly lobbied the Treasury not just in the last few months but, I suspect, fairly continuously during recent years, that most of the feedback about the proposed changes has been pretty positive. It would be a disaster for the film industry if the Chancellor, or a future Chancellor, felt that the whole system was being abused and decided to draw a line through the whole thing and say that the film industry should have no benefit whatever given the abuses that are open to it, which would obviously not be the right way forward. The film industry reaffirms the support that Governments have given to it by reducing its costs under the Finance (No. 2) Act 1997 and the Finance (No. 2) Act 1992.

Restoring the credibility of the entire scheme is at the forefront of the Government's proposals, and there has been ongoing lobbying from the Film Council and various film bodies. Outside the confines of the amendment, there are other narrow concerns that the Paymaster General will wish to address at some point during the debates on this clause and clause 99. It is important to re-focus the tax relief, but we need collectively—I accept that this is ultimately a Treasury decision—to consider what we are trying to achieve. In relation to both these amendments and similar ones that we may propose in future, the fast-changing world of the entertainment industry may make it too difficult to tailor relief.

I appreciate that the real risk is that the amendments are not watertight, and if they are not we run the risk of the abuse to which the Paymaster General earlier referred.

Dawn Primarolo: First, I agree with the hon. Gentleman that the Government are maintaining the commitment to support the film industry in the original relief.

Secondly, I want to remind him that the Red Book's scoring shows that the measure will save the Government £225 million in 2003–04 and £295 million in 2004–05. Those are not insubstantial figures. Although I am prepared to look at the issues that the hon. Gentlemen have raised, I must say that that is a lot of money. To give that money back inadvertently by providing other reliefs would not be acceptable, and we need to concentrate on that point.

Mr. Field: I accept the Paymaster General's remarks. However, it strikes me that the intention,

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which goes back some years, is to produce high quality product that is predominantly, if not exclusively, British. If we take too narrow an interpretation we shall run the risk of high quality drama going overseas, which would be bad news for not only the film industry but the whole entertainment industry in the UK.

It sounds as though the Paymaster General is unlikely to support the amendments, but I hope that we can keep an eye on the situation in the years ahead. If there is a real risk over and above the day-to-day special pleading that any industry puts forward and there is real evidence that we are losing a significant amount of business overseas, and in particular to the nascent and fast-growing eastern European film production market, we would want to look at the matter again to ensure that the intention to promote high quality film product in this country is maintained.

Mr. Flight: First, I am sorry to tell the Paymaster General that I do not have lots of friends in the film industry, which is not territory that I know very well. I suggest, perhaps cheekily, that her colleagues will have more friends in the film industry than me.

No one wants tax incentives to be used unnecessarily when production risks are not there. In 1997, we suggested that the incentives were more generously drafted than was necessary. Although it is fine to blame the industry, it is fair to say that if one uses such incentives, there is little sense in not crafting them to achieve specifically what one wants; otherwise they will be abused, as the Paymaster General said.

I am glad that the hon. Lady has recognised the issue to which the two amendments refer. My understanding is that the original purpose of the relief was to generate new economic activity in the UK film industry. The amendments refer to long-form drama, which is very much a part of the industry, and there is a danger that much of it will leave the UK if it is cut out completely. Therefore, I bowl it back to the Government to try to craft with the industry what, if anything, they feel is appropriate to address the issue that the amendments raise. That was their intention.

It is accurate and fair to say that the incentives are designed to encourage those parts of the industry that have production risks, not just films for cinemas. I may be completely out of date, but I repeat my earlier point that ''The Jewel in the Crown'' was the best thing made by the British film industry at the time and for a long time afterwards. I recollect that that enterprise was actually very high risk. I hope that productions such as that, some of which may be more deserving than some stuff made just for the cinema or theatre, will be considered.

I believe that the Government understand the point and seek to address it. I do not know whether the amendment is too wide fiscally, but I shall take the Paymaster General's word on that and hope that she can solve the problem.

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