Draft Films (Definition of “British Film”) (No. 2) Order 2006

[back to previous text]

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 before—the 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 Commission’s 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 Commission’s 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 Commission’s 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.”
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 industry’s 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 changed—again, 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 Government’s intention then—rightly in my view—to 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 Government’s thinking then and the wrongness of it now. At the time, the Minister’s 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 Minister’s 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 that—as hon. Members have pointed out—the 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 record—they 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 Webber’s “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 announced—without warning and via a Treasury press release—sparked 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?
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
Previous Contents Continue
House of Commons 
home page Parliament home page House of 
Lords home page search page enquiries ordering index

©Parliamentary copyright 2006
Prepared 12 December 2006