Mr.
Foster: The Minister has rightly mentioned the importance
of certainty for those who apply. Can he give us an assurance that film
companies that apply for interim certification will get a quick
response to their requests for information?
Mr.
Woodward: As a point of principle, yes, of course, because
that is the spirit in which we entered into the process. I can only
reassure the hon. Gentleman by saying that that is what we have been
doing and what we will continue to do.
Tony
Baldry: What contingency has the Department set aside for
funding for judicial review? I declare an interest as a member of the
Bar. The number of cases of judicial review on what is British and
Britishness will be legion, especially if considerable sums of money
are involved. I am prepared to make a bet with the Minister that the
cost to his Department of judicial review of this order and the way in
which it is drafted will run to hundreds of thousands of
pounds.
Mr.
Woodward: As I have said, we are working on the
guidelines at the moment. We are in consultation with our partners and
those in the film industry, and we are relatively confident that we
have managed to identifya set of criteria that will work. I
used the word relatively, because one should have a
degree of humility and show some caution. I understand the question
asked by the hon. Member for Banbury and I will, of course, write to
him about it. With that offer, I commend the order to the
House. 4.50
pm Mr.
Edward Vaizey (Wantage) (Con): I am grateful,
Mr. Conway, to have the opportunity to debate the order
under your wise chairmanship this afternoon. As you probably know, some
of us have been here beforethe order is designated No. 2,
because we were here in March this year. In February this year, the
Government laid an order for the designation of a British film, which
was debated in Committee on15 March. At the time, the then
Minister said that the order was being laid
to introduce a more effective way
to certify culturally British films and, in particular, to ensure that
support given to film under that framework is consistent with the
European Commissions rules for providing state
aid.[Official Report, Eighth Committee on
Delegated Legislation; 15 March 2006; c.
4.] That was all well and good,
but unfortunately, we now know that the test was not consistent with
the European Commissions rules on state aid. No one in the
Department had bothered to ask the Commission whether the test proposed
by the Government was consistent with the European Commissions
rules on state aid, so after spending parliamentary time debating that
order, the Government were called in by the European Commission and
forced to rewrite the test. That negotiation with the Commission was
conducted behind closed doors, without any consultation of any kind.
That is made clear in paragraph 7.7 of the explanatory memorandum, in
which the Department states that
it carried out a full 12
week consultation on the existing cultural test. Unfortunately, given
the need to introduce the new relief quickly and the confidential
nature of our discussions with the Commission it was not possible to
carry out a similar consultation on the revised test prior to
introduction. It
is simply nonsense for the Minister to assert that he believes that
this test is absolutely right and that no consultation took place
because of the confidential nature of the discussions. The truth is
that the order
that was debated in March was the order that the Government wanted; that
that order was consulted on properly; and that the Commission has
overruled that order. The Government are in a blind panic and haste to
get the order passed in time for the new tax relief on 1 January, which
is why there has been no consultation.
Mr.
Foster: Does the hon. Gentleman agree that there is one
further reason why consultation would have been difficult? We have
heard from the Minister that that the Department is only now working up
the details of what each of the characteristics refers to. For example,
we are told:
(4) Up to 4 points may
be awarded in respect of the contribution of the filmĀ to the
promotion, development and enhancement of British
culture. How can any
consultation with anybody take place until each of those terms has been
defined?
Mr.
Vaizey: The hon. Gentleman is absolutelyright,
and I will turn to that theme in a minute. Itis astonishing
that the guidance for the order, which is being passed in haste and
panic, is not yet ready. It is still draft guidance that we are
considering. The
Government have sought to reassure the industry that its views have
been borne in mind when negotiating the
current test. Given the
result that is before us today, it may well be that the
industrys concerns were borne in mind, but I submit that they
were also clearly ignored. The film industry, contrary to what the
Minister has said, is very concerned by the order, because the new
cultural test, as has been asserted by the hon. Member for Bath and my
hon. Friend the Member for Maldon and East Chelmsford (Mr.
Whittingdale), is very different from the measure that we passed in
March Both cultural
tests, it is true, were based on a points system. However, the
weighting of those points, as the hon. Member for Bath has pointed out,
has been significantly changedagain, that point is made clear
in the explanatory note at the end of the draft order. The number of
points relevant to where a film is made has been reduced from 15 to
just three, and the number of points relevant to the nationality of the
people making the film has been reduced from 13 to eight. A wholly new
category, contribution to British culture, which, as the hon. Member
for Bath has pointed out, is still under discussion, is worth four
points. Most relevant
of all, the number of points in respect of whether the content of the
film is British, has been increased from four to 16. That change is
hugely significant, because under the old test, plainly and simply,
films made in Britain by a British crew with British actors were
British films. Under that test, only four points out of 32 related to
the subject matter of the film, so it was clearly the
Governments intention thenrightly in my viewto
maintain the bias in favour of where and by whom a film is
made.
Tony
Baldry: I commend my hon. Friend on his excellent
analysis. Would it not have been more honest, or sensible, if the
Government had described this as the Support the UK film
industry (getting round the EU state aid provisions) order,
because that is what it is all about? Does my hon. Friend think that
the
Government are leading themselves into a minefieldby trying to
define British culture in a statutory instrument of this kind? And what
will happen to UK nationals who are part of diasporas in the UK? Where
will they fit into the definition of British
culture?
Mr.
Vaizey: My hon. Friend is right. That is the danger of
altering the weighting so strongly in favour of a cultural test rather
than a straightforward test about where the film was made. I disagree
with him about how to rename the regulation. My preferred name would be
the British films (No. 2) (we forgot to ask the European
Commission) regulation, because that is precisely why we are
here. Ministers have been completely turned over. The new test, as hon.
Members have said again and again, is very vague. A contribution to
British culture is now the prerequisite for any new film, which is
simply daft.
The key point is
that the test severely threatens not only inward investment but,
potentially, films that any of us might consider to be British.
Returning again to the debate on 15 March, one sees clearly the
rightness of the Governments thinking then and the wrongness of
it now. At the time, the Ministers predecessor
said: The test
strikes a fair balance between the interests of domestic film makers
and inward investors. It is an effective way to obtain culturally
British film without being parochial or setting the expenditure bar too
high and discouraging a globalised industry from investing in
culturally British films. The British film industry succeeds not by
choosing between inward investment and domestically British films. We
make both types, such as Batman Begins and Vera
Drake, and this cultural test is flexible enough to enable that
to continue.[Official Report, Eighth
Committee on Delegated Legislation; 15 March 2006; c.
5.] Later
in that Committee, the Ministers predecessor
stated: We
want the test to allow films to qualify either by being British in
content or by being British because of who made them or where they were
made.[Official Report, Eighth Committee on Delegated
Legislation; 15 March 2006; c.
7.] That either/or has now
disappeared, and the film has to be British. The new test fails the
test that was put forward by the previous Minister. It is clearly a
U-turn and a climbdown, and it is clearly being rushed through to the
extent thatas hon. Members have pointed outthe revised
guidance is not even
complete.
Mr.
Watson: The hon. Gentleman has been clear about his
version of the truth. Is he at any point going to call for a delay in
the implementation of the measure, which will give tax relief to the
British film
industry?
Mr.
Vaizey: I was simply putting on record what the Government
have been doing in terms of their stated mission of providing certainty
to the British film industry. I know that the hon. Gentleman is an
amateur film maker, so he will take a close interest in the debate,
although it remains to be seen whether his films pass the cultural
test.
In any event, the test is
already having an effect. I understand that the makers of the Batman
film have changed the setting of a scene from Paris to London in order
to comply with the new test. One wonders whether future film makers
will be willing to make such alterations. I am told that out of four
films currently in production, at least two would fail the new test.
According to an article in Screen Finance dated29
November, two films have been, in its words, blindsided
by the new rules. In addition, the article states that the new rule is
a disincentive for most US studios.
Mr.
Woodward: I am loth to interrupt this entertaining and
almost fantastical account of events, which I shall seek to correct
when I sum up, but I should like to ask the hon. Gentleman whether, as
well as reading the newspapers, he has discussed with any of the studio
heads in America whether they are going to continue with their
investment.
Mr.
Vaizey: As the Minister well knows, one of our studio
heads is now over in America trying to repair the damage. Our studios
have heard about the huge concerns that the American film industry now
has about this order. I have discussed the order with them, and I have
discussed it with a number of film makers, although it is perhaps a
tribute to the Minister and to the climate of fear engendered by his
Department that none of them were prepared to go on the
recordthey all talked to me in
confidence. Returning
to the cultural test, my hon. Friend the Member for Worthing, West has
mentioned the point made by Lord Lloyd-Webber in the other place, where
the regulation was debated last week, and, inadvertently, he made a
very effective point. The point is that Lord Lloyd-Webber, a cultural
institution in himself, might wish to monetise his highly successful
production of The Sound of Music, perhaps by turning it
into a film, which he might wish to make with the current British cast.
He might wish to use a British cast and a British crew, but he would
have to satisfy the new cultural test. We would have to have a debate,
and perhaps a judicial review, about whether Andrew Lloyd
Webbers The Sound of Music was part of our
cultural heritage. How ever many points he accumulated, he would fail
to pass the golden points test, which requires a film to be set in the
United Kingdom and to be a British story. He would have to try to
convince the Minister or the courts that his film was part of our
cultural heritage. We have had some fun debating this measure, which is
nevertheless
important.
Peter
Bottomley: Going back slightly further than The
Sound of Music, there is an interesting question about
Lawrence of Arabia. Given that a lot of the filming
took place in what appeared to be Saudi Arabia, would it be necessary
to rewrite the film to show more of the time that T.E. Lawrence was
preparing to read hieroglyphs during British Museum expeditions in
Mesopotamia in 1910, or could we go on with the camel scenes and other
things that happen in that film?
Mr.
Vaizey: Inadvertently, my hon. Friend has made an
excellent point. He has shown up the complication of this test. We
would have to look at proposed new paragraph 4A(3)(b) which
reads: up to 4 points
depending on the number of the characters depicted in the film that are
British. There is then a
very complicated test of how many of the lead characters are British
and so on and so forth. Those are the sort of hoops that our British
film industry, which had a perfectly workable test, will now have to go
through. The test is
important because the British film industry is important not only to
our cultural life, but to our economic life. According to the UK Film
Council, the British film industry had a turnover of £3.5
billion in 2002, the most recent year for which figures are available.
Our British film industry has suffered in recent years, and much of
that is down to this Government. Film tax relief was introduced by the
Conservative Government in 1992 and remained unchanged for the next
five years of that Government. In 1997, however, the big clunking fist,
the Chancellor of the Exchequer, who himself has views on the
definition of what it is to be British, changed the tax relief so that
it could all be claimed in one year, and he changed it again in 1998
and 2001. Because of
systematic tax avoidance, the Government were forced to introduce
anti-avoidance measures on no fewer than four occasions. The manner in
which the last changes were announcedwithout warning and via a
Treasury press releasesparked a huge crisis in the UK film
industry and led to a massive reduction on spending on UK film, which
is why we are here today with a new film tax break and a new cultural
test. That lack of clarity and that U-turn could not have come at a
worse time. Not only is the United States itself considering
introducing further film tax breaks, but we face stiff competition from
accession states such as the Czech Republic, Romania and Hungary, which
can now offer tax relief for foreign films made in their countries in a
way in which Britain cannot. That point is particularly relevant to
Hungary, where there is already a very generous tax relief system.
What measures will
the Minister take to ensure that there is a level playing field across
Europe? As he knows, the French are seeking to introduce a tax credit
for their video games industry. They will have to introduce a cultural
test, and my suspicion is that their negotiations will be more
effective than ours. Will he ensure that they introduce a cultural test
similar to ours? What system is in place to monitor how different
member states construct and implement their
tests? To make the
best of a bad job, will the Minister outline how he intends to operate
the pre-certification scheme that he has mentioned? Like any other
business, the film industry needs certainty. How quickly will the
Department pre-certify a film, and what level of detail will the
Department require from the film maker? Perhaps most importantly, can
the Department guarantee that any film that is pre-certified will not
be de-certified either during production or after it has been
made? Will the
Minister guarantee that this is the last change that he will make to
the scheme? I understand that the current test was negotiated on the
basis of the
Commissions 2001 audiovisual communication. However, that is due
to expire on 30 June 2007, and the UK authorities are committed to make
any changes required by new EU rules. Is the film industry, which has
contacted me in confidence, right to be concerned about such imminent
changes? Finally, will
the Minister give the Committee his views on the points made by the
Producers Alliancefor Cinema and Television? According to its
press release,
it maintains that there
is an important opportunity to make a significant enhancement to the
new relief, and to ensure that culturally British independent films are
able to obtain the headline level of benefit announced by the
Government. UK expenditure, on which the relief is available, is
currently defined as expenditure within the UK. Pact understands that
there are other EU countries whose new film tax incentives include tax
relief on a wider definition of national expenditure, and which have
been approved or are likely to be approved by the EU. Pact urges the
Government to revisit its decision and extend the definition of UK
expenditure, to include expenditure on UK talent, crafts and services,
whether working in the UK or
overseas. We
have before us a Government mess-up. A perfectly good order, passed by
Parliament in March, has returned to us because the Government failed
to check whether it complied with European Commission requirements. We
still await the guidance in its final form, so will the Minister tell
us when it will be available? We look forward to hearing what he has to
say. 5.8
pm
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