The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr. Shaun Woodward): I beg to move,

I begin by welcoming you to the Chair, Mr. Conway.

The order modifies the definition of a British film in schedule 1 to the Films Act 1985. The Government have set out to promote a long-term sustainable film industry in the UK. The new tax relief scheme that was announced by the Chancellor last week will ensure that we will not only succeed in achieving that, but will do so in a way that does not distort the single market and, critically, in a way that will enable the UK to continue to be the best place in the world to make films.

The scheme works entirely within the spirit of the single market. It is not simply a vehicle to allow venture capitalists to hide tax losses, and it will not reward people who register here and then make films outside Britain, perhaps with the use of cheaper labour. The scheme has instead been designed to provide direct benefit to film producers who make a financial commitment to the UK film industry and, essentially, promote culturally British products and services.

Mr. Tom Watson (West Bromwich, East) (Lab): The Minister knows that I am from West Bromwich. Will he give me the definition that he is using for “culture” in his speech?

Mr. Woodward: That is an exciting opportunity, Mr. Conway, although I suspect that you will quite shortly rein me in. West Bromwich has a particular culture that we very much hope will be caught by the new definition. The midlands is thriving and has a contribution to make to the promotion of film in this country. The definition of culture is broad: it includes social practices, history, traditions and writers. Inthe broadest context, we want to see a long-term sustainable film industry develop from that contribution to our economy. I hope that subject matter, actors and writers are used to promote British culture.

Peter Bottomley (Worthing, West) (Con): Does the Department now know the answer to Andrew Lloyd Webber’s question why theatre has been excluded?

Mr. Woodward: Andrew Lloyd Webber has many questions, and it is not always easy to find the exact answer to them. This afternoon, we are discussing the film industry rather than the theatre industry. I would be happy to have a long debate—I suspect that you would want it to happen outside this Room, Mr. Conway—on Lord Lloyd-Webber’s views on the theatre industry and their relation to culture in Britain.

Our goal is a sustainable long-term film industry. We want to see films made in the UK, and we want to see more films made in the UK. We are aware of the enthusiasm around the globe for our industry, and we are particularly aware of the enthusiasm of film makers in the United States, who recognise the talent and skills of our industry and who want to make more films here. That is not exclusive, however. We want to see money from the film industries in India and China being invested in our industry. We believe that this order is the ideal vehicle for those countries that genuinely want to come to the UK and take advantage of our skills.

I would like to put on record my thanks to all the Departments which have helped us to produce this scheme. We have worked in conjunction with the Treasury, Her Majesty’s Revenue and Customs andthe Department of Trade and Industry, along withthe United Kingdom Representative Office and the European Commission, which I know will give cause for some excitement to Her Majesty’s loyal Opposition. The Commission has worked extremely hard with us to ensure that the scheme that we have devised not only meets the demands of our industry, but works within the compass of the principles of the single market.

Mr. Don Foster (Bath) (LD): Notwithstanding the Minister’s comments about the importance of companies coming to make films in the UK, will he accept that that does not square with the reduction from 15 points to only three points for where the film is made?

Mr. Woodward: I will be very happy to deal with that point, when I come to it in the course of my remarks.

As I have said, the order is about promoting and investing in a culturally British film industry. Production companies that use our film skills and facilities will find that if they tell British stories and contribute to British culture and film making, they will be warmly welcomed.

The hon. Member for Bath asked about the changes that we have made to the points system. To pass the revised cultural test, a film will require 16 points out of a possible 31. The test has four sections—cultural content, cultural contribution, cultural hubs or facilities and cultural practitioners. The first is now worth 16 points and assesses to what extent the content is British, awarding up to four points depending on how much of the film is set in the UK, another four depending on the number of British lead characters, another four if the subject matter of the underlying material is British, and a final four depending on how much of the film is in English or recognised regional or minority languages.

In the second section on cultural contribution,

made by the film to British culture—in other words, the extent to which the content of the film portrays British creativity, heritage and diversity.

Joan Walley (Stoke-on-Trent, North) (Lab): Staffordshire university has a wonderful film and media studies department. Will the Minister indicate to the Committee what that cultural contribution will mean for film students such as those in Staffordshire?

Mr. Woodward: My hon. Friend has asked an important question. The answer relates not only to the long-term film industry that we are trying to sustain through this tax relief scheme, but to the national films strategy that we are developing in conjunction with the Film Council, the British Film Institute and regional partners across the country. We are very much aware that the film industry in this country has not only a long and proud history and tradition, but a vibrant future. Over the last few weeks, I have had conversations about the scheme here and in the United States, and informal conversations with the studios went on throughout the summer and early autumn. I reassure my hon. Friend that the studios recognise the value of the scheme in creating a long-term, sustainable film industry in this country. They really value the skills being developed and want to come here and use them, which will guarantee that for students, such as those about whom she spoke, there will be many more future careers than there have been in the past.

Mr. John Whittingdale (Maldon and East Chelmsford) (Con): The Minister has said that he has spoken to many studios which welcome the new cultural test. In those discussions, did he talk about the cultural test originally proposed by his Department or the one amended by the European Union, because they are completely different? I suspect that the studios would welcome the EU version less than the one that the Minister initially put forward.

Mr. Woodward: I rarely disagree with the hon. Gentleman, but on this occasion it might help if I tell him that, of course, we discussed the proposed changes—not the test put forward in Committee in March this year, but the changes. We have had dynamic conversations. As he will be aware, the UK Film Council was essential in the formal consultation process that ended late last year. It is important that he knows that the scheme being put forward today has the backing of the studios, about which we have been talking at length.

Peter Bottomley: I want to follow the question posed by the hon. Member for Stoke-on-Trent, North about the fourth test and cultural contributors. Am I right in saying that test includes people in, say, Trondheim or Zurich, because it includes the European Union and the free trade area? Will the test be whether people are nationals of those countries, or would somebody who comes from Russia to train in Staffordshire count as a British cultural contributor?

Mr. Woodward: I shall come to that point in a few moments. Before hon. Members get too excited, what matters is that 16 of 31 points will need to be achieved, and those points will not be achievable in any one small category. The design of the scheme is intended to ensure that we promote our industries without distorting the principle of the single market, to which all parties in the House subscribe. Of course, the scheme recognises our co-production treaties with other countries, but we are confident that those treaties allow us to further the interests of the British film industry without distorting the single market. That is why the dialogue with the studios, the Commission and all our partners has been so dynamic and useful in the past few months.

Tony Baldry (Banbury) (Con): On a slightly different matter, we now have a large non-resident Indian community in the UK. What will happen if a film producer from Southall wants to make a film in Hindi, basing many of the scenes in India? He might be a UK citizen, using UK people and UK capital. It would be strange if a Russian in Trondheim were classified as British, but someone from Southall wanting to makea film about experiences in the empire or Commonwealth were not.

Mr. Woodward: I shall deal with the hon. Gentleman’s question, but we could fill our entire hour and a half with a series of such hypothetical situations. I anticipate that other hon. Members might wish to raise similar points.

What matters is whether a film obtains 16 points in the four categories. As I shall explain, there are golden points that a film must have, and our interest is ensuring that at the heart of the system are points that recognise British content. I say to the hon. Gentleman, who has rightly raised his concern, that my Department and officials will be available to consult production companies and studios to enable them to meet the criteria. That might in some cases mean that we say to them, “I am sorry, this does not fit the criteria.” Similarly, there will be cases in which a film obviously fits. We particularly want to help when there is a genuine case of somebody wanting to make a film that they believe fits the criteria but is on the borderline. We will discuss with them what must be done, and I shall outline that system in a moment.

As I have said, the second section of the test, on the cultural contribution, covers creativity, heritage and diversity. It is being introduced to give the test the flexibility to reward a film’s contribution in reflecting or representing British culture in its widest sense. Under the third section, on cultural hubs, up to three points will be awarded, depending on the amount of film-making work that takes place in the UK. The final section, on cultural practitioners, will carry up to eight points, awarded depending on whether the personnel involved in making the film are nationals or residents of Britain or a member state of the European economic area.

As hon. Members will have noticed, it will be possible to win four points through making a film in English dialogue, three in the cultural hubs category and eight in the cultural practitioners section. That would give 15 points, which is one short of the crucial 16. It is therefore right to introduce the concept of golden points to take a film beyond 16 points to ensure that a film contains a culturally British dimension in either its setting, characters, subject matter or representation of British creativity, heritage or diversity.

We have put the scheme together in partnership with the European Commission. We make no apology for that, although I understand that the Opposition are somewhat exercised about the fact that that has been achieved through dialogue. In the interests of a sustainable long-term film industry in the UK, we were absolutely right to do so.

The scale of the consultation on the test was unprecedented, which ensured that we kept many partners on board, both nationally and internationally, in developing the scheme. Hon. Members will know that in 2005 a full 12-week consultation was carried out on the original cultural test, which resulted in 39 formal responses. A number of seminars also took place during that period, the importance of which was the involvement with the studios. It may be helpful to remind hon. Members that many of those studios wanted to attend a seminar rather than making a formal representation, because much of the material they disclosed was confidential and commercial.

We have not gone through a formal consultation process as the discussions have evolved through the summer and the autumn this year, but that does not mean in any shape or form that that dialogue has failed to continue—quite the opposite. Throughout this year, and throughout the negotiations, we have been keen to continue that dialogue, and we are continuing to do so as we develop the guidelines interpreting the test.

Finally, it may be helpful to remind hon. Members how the process will work. Those production companies that want to make a film will apply to the Department for Culture, Media and Sport for certification under the new cultural test to see whether they qualify for the tax relief scheme. They may do so at any stage, but, to answer the question from the hon. Member for Banbury, that includes doing so at the very early stages of a film, and we welcome such dialogue.

The film production company must complete its tax return for the period in question within 12 months of the end of that period. Once the claim is received by HMRC, any tax credit claim will be paid to the film production company, subject to normal risk assessment procedures. Some films will clearly pass the necessary number of points, some will not and some will be borderline, which is why we are actively encouraging early consultation with the DCMS.

We have to ensure that there is no distortion of the market, but equally we want to enable film production companies and film makers with films in the margins to think about what changes they might be able to make to ensure that they pick up the extra crucial points that would qualify them for the scheme. My Department remains happy to discuss any questions that film companies or individuals have about the new cultural test or the certification process.