Mr.
Foster: I do not want to repeat the hon.
Gentleman’s point, but we should place on record the fact that,
notwithstanding our concerns about the tax regime, the British film
industry is in pretty good heart and is having significant
successes—it is worth repeating, for example, that it is the
fastest growing cinema industry in the developed world. Last year,
eight of the 20 biggest box-office hits in the Britain were domestic
products. Financially, in the first six months of this year there was
£307 million of inward investment, up from £179 million
in the same part of last year. Production spending in the UK in the
first half of the year was £486 million, compared
with£276 million in a similar period last
year. There have been
enormous international successes on the silver
screen—“Harry Potter”, “James Bond”,
“Bridget Jones” and even “Wallace and
Gromit”. This year, a British director, Ken Loach, won the Palme
d’Or at Cannes for his film, “The Wind That Shakes the
Barley”. We will all say “Hear, hear, yes, well
done,” but I wonder whether Ken Loach would have received
support under the order. After all, one of the criteria, for four
points, is whether a film contributes
to “the promotion,
development and enhancement of British culture.”
Considering that that film is about the
growth of the IRA, I am not sure whether it would meet that criterion.
Perhaps the Minister will tell
us. We know that there
are enormous benefits of having a successful British film industry. One
has only to talk to people in New Zealand about the huge impact that
the “Lord of the Rings” trilogy has had on tourism there
to know that that is another area of benefit. We
look forward to the results of the work of the UK Film Council, which is
looking at the impact of UK films on tourism in the UK. I
share many of the concerns raised by the hon. Member for Wantage.
However, I was surprised to read in The Times today that this
order has provoked a furious response from the film industry. The
Minister challenged the hon. Member for Wantage on whether he had
talked to many people in the industry. I assure him that I have spoken
to a large number of people in the film industry about the issue, and
there is not a furious response—they are just fed up and want
something to get on with. After all, one of their biggest concerns is
the fact that the previous tax regime was suddenly halted and that
there has been a two-year hiatus without anything having been put in
its place. That hiatus, plus uncertainty and lack of clarity, has been
the biggest concern of the people to whom I have spoken.
Olympus
Films, which is based in my region, if not in my constituency, in
Bristol has had to lay off a large number of people. Many of its staff
worked without any financial reward for a long time, waiting for what
they hoped to get under the previous tax regime. However, when the
previous scheme was brought to an end, the company had no alternative,
because there was no new system in place, and it is now in serious
financial difficulty—it will, of course, apply under the new tax
regime, but it has experienced huge delays. The crucial thing that I
have picked up has been a desperate desire for clarity and certainty
about what is going to replace the old scheme. The industry hopes that
we will agree this order, even though it is not happy with some aspects
of it, so that people have the beginnings of clarity.
I share the concern expressed
by the hon. Member for Wantage about the consultation. The Minister
suggested in his response to the Select Committee Chairman, the hon.
Member for Maldon and East Chelmsford, that there has been consultation
on the order. It is clear from the explanatory notes that there has not
been consultation on the system of cultural points. It is worth
repeating, because it is crucial that hon. Members are aware of this
point, that
“The Department carried
out the full 12 week consultation on the existing cultural
test”— the old
one—but that,
“Unfortunately, given
the need to introduce the new relief quickly and the confidential
nature of our discussion with the Commission it was not possible to
carry out a similar consultation on the revised test prior to
introduction.” That is
the bit that we have already heard. However, section 7.7 of the
explanatory memorandum continues:
“Responses from the
original consultation were borne in mind throughout the discussions
with the Commission and consultees’ views have been reflected in
the final test.”
I have spoken to a number of
those people and they claim that their views about things that matter
to them were not taken into account. The location of the filming, for
example, was very important to some people who were consulted on it. In
fact, location was so important that it was the issue about which the
Government boasted in the old scheme. It is worth reflecting that in
another place Lord Davies of Oldham said:
“The fact that 15 of the
points are allocated to where the film is made is a response to the
overwhelming view from
consultation respondees that greater weight should be given to this
section than to the others, so as to incentivise the use of UK talent
and facilities and to build a sustainable British infrastructure for
film making.”—[ Official Report, House of Lords, 30
March 2006; Vol. 680, c.
925.] That is what the
consultees wanted, and it was reflected in the earlier test. That
cannot have been fully taken into account when the new arrangement was
agreed, as the Minister and the explanatory notes suggest.
It is worth reflecting on
paragraph 7.7, which gives an example of the type of things that the
Department bore in
mind: “For
example the need for certainty and clarity offered by the interim
certification.” Of course
the industry wants that. It is desirable to know in advance whether the
test is going to be met, and it is right that that continues. However,
it was never in doubt under the previous arrangements. There are real
concerns about the changes that have been made, notwithstanding the
desire of most people in the industry to have some kind of
scheme. I shall raise
a couple of further points, although I do not want to get into what
constitutes Britishness. We will have to wait for the guidance, but I
note that the explanatory memorandum
states: “Attached
is a copy of the guidance on how the Department will assess the
test.” That guidance goes
into a lot of detail about some things, but on the four
points “awarded in
respect of the contribution of the film to the promotion, development
and enhancement of British
culture”, it states
simply that four points may
be “awarded in respect of
the contribution of the film to the promotion, development and
enhancement of British
culture”. I hope that the
full guidance will contain more
information.
Peter
Bottomley: The hon. Gentleman will recall that the
Minister said that the idea was not to distort the market. Does he
agree that the point of the scheme is to get more people to invest? And
is he as interested, as I am, to hear from the Minister, either now or
by letter, how long after people make an investment they will get the
tax
break?
Mr.
Foster: That is certainly going to be important, but I
hope that the hon. Gentleman agrees that an early indication of the
likelihood of a tax break via an interim notification is crucial to
investment. That is why I asked the Minister if film makers will get a
quick response in which they can have a fair degree of confidence that,
if they do what they say, they will receive that tax break. Investors
need that information, rather than knowledge of when they will get the
money, although that is clearly important,
too. We have not
touched upon a couple of concerns that have been expressed to me. The
first relates to co-production, which is particularly important to
small firms. The Film Council reports that co-production activity is
likely to remain subdued in the second half of this year, reflecting
the reform of the incentive regime. It is concerned
that co-production, which is
clearly very important to many people in this country, might not benefit
from the scheme. Will the Minister comment on
that? Post-production
work could also lose out significantly. It employs about 5,000 people
in this country, and concerns have been expressed to me that the
revised cultural test will remove any likelihood of filmmakers coming
to the United Kingdom for purely post-production work—work on
films made elsewhere, whose makers will not have the opportunity to
come here. I end where
I began: I am uncomfortable with a lot of the cultural test and
preferred the earlier version. I understand the difficulty that the
Government have had in negotiations with the EU, but, frankly, they
should have got those right earlier. However, everyone I have spoken to
is desperate for us to do something, and the order will at least give a
degree of certainty to the industry so that it can continue to be
successful—hopefully, even more so than it has been in recent
years. 5.19
pm
Mr.
Whittingdale: I share many of the reservations expressed
by my hon. Friend the Member for Wantage and the hon. Member for Bath.
I shall start, however, by being slightly more positive.
First, it is generally welcomed
that the Government have put in place tax incentives for the production
of films. The industry was in a state of deep depression for a long
time when uncertainty was created by the original scepticism expressed
by the Chancellor about the value of such tax reliefs, but it welcomes
the fact that we now have a cultural test and it can begin to move
forward with some certainty.
I agree with the hon. Member
for Bath. The test does not represent what the industry would most have
liked, but the industry is resigned to accepting it, as the last thing
it wants is to open any more debate about it. It has got a test and it
might as well take what is on the table. There is no great enthusiasm
for the proposal but at least it is an achievement that we now have a
definition of what is a British film, an issue that has featured in
every debate about the film industry for as long as I can
remember. There have
always been two views. The first is those of people who regard a
British film as essentially a product that is clearly about Britain: it
is set in Britain and it involves British people and includes such
films as “The Full Monty”, “Brassed Off”,
“Billy Elliott” and, most recently, “The History
Boys”, which is in cinemas at the moment. Those films often have
a niche audience and a certain quirky charm, and no one would argue
that they are not British films.
Secondly, however, there are
those who believe, as I do, that the economic contribution of the
British film industry stems as much, if not more, from the big budget
films which are internationally mobile and which producers chose to
make in this country. Such films as “Star Wars”,
“Superman” and “Batman” are not obviously
British, but they were made here.
I refer to the report on the
British film industry by the Culture, Media and Sport Committee, which
I now chair, but which was prepared under the
chairmanship
of the right hon. Member for Manchester, Gorton(Sir Gerald
Kaufman). He said: “None of the criteria
set out in law are aimed at the subject matter of the film and some
British-qualifying films (i.e. Judge Dredd, Gladiator, Troy, Lara Croft
Tomb Raider...) therefore do not focus on stories an audience
would recognise as particularly
'British'.” Yet those
four films all qualified as British films, therefore benefiting from
the fiscal incentives which must have been a large part of why the
production companies chose to make them in this country. However, it is
highly doubtful whether any of those four films will qualify as British
under the revised cultural
test. I accept that in
drawing up a cultural test there has to be a points system, because
there are so many different components which contribute to whether a
film is British. In respect of the original cultural test proposed by
the Government, I may have argued about whether the points system
properly reflected the importance of that criterion rather than
another, but in general we could all agree that the Government had made
a pretty good stab at the
test. The Minister
said that the cultural test we are debating has been widely welcomed,
but it bears no relation to the one proposed originally; in fact, it is
completely different. For example, the hon. Member for Bath pointed out
that cultural hubs—essentially whether or not the film was made
here—originally counted for 15 points and now count for only
three. The cultural practitioners—whether the people making the
film, the actors and the crew, are British—originally counted
for 13 points and now count for only eight. As a result, those two
factors, which originally accounted for 28 points out of 31, now count
for less than half, and alone would not be sufficient to make a film
British. That is a huge change, which is difficult to justify. It has
led to some speculation that “Macbeth”, for example,
would qualify as a British film but “Hamlet” would not,
because one is set in Britain and the other is set in
Denmark. We are
privileged to have on the Committee one of our great actresses, the
hon. Member for Hampstead and Highgate. One or two of her best
films—I am thinking of the Ken Russell films—probably
would not count as British films under the revised cultural test. That
is an extraordinary change. I do not propose that we should oppose it,
but I express some sorrow that what started off as a reasonably good
stab at defining a British film has now been amended beyond
recognition. It also leaves out one or two key factors which in the
past were regarded as rather important, such as the source of the
finance that goes into the film. That does not now appear to have any
relevance at all and yet it previously occupied enormous amounts of
time in debate about whether a film should be regarded as
British. My hon.
Friend the Member for Wantage was speculating about whether “The
Sound of Music” would qualify. It seems to me that it certainly
would not qualify under this test but “Mary Poppins”
would. The two films are both essentially Hollywood musicals, but one
is set in London while the other is set in Austria and so one is a
British film and the other is not. This definition of what constitutes
a British film seems very difficult to justify.
My final point is another word
of welcome. One of the complaints that I have had from producers,
particularly those involved in co-production, is that it has been
almost impossible to obtain guidance from the Minister’s
Department in advance as to whether a film will qualify as British.
There have been cases where large sums have been committed and yet a
film which may in all respects be identical to films which previously
have been accepted as British is suddenly ruled not to be British by
the Department. That has caused considerable financial losses, and in
some cases films have never reached the
screen. The Minister
emphasised that a higher priority will be attached to giving guidance
to the industry so that producers can proceed with a certain degree of
confidence that a film will qualify as British under the test. That is
badly needed and has been absent until now. It will be particularly
important in the co-production sector which the hon. Member for Bath
mentioned. I finish merely by echoing the reservations that have been
expressed by both the previous speakers. We cannot do much about it
now, but this will do much less for the British film industry than the
proposal that was originally put forward by the
Department. 5.27
pm Glenda
Jackson (Hampstead and Highgate) (Lab): I had not intended
to make any kind of contribution to today’s debate, but I felt
that I should respond to the hon. Member for Maldon and East Chelmsford
who referred to me. I must thank him for his most courteous
definition. The
greatest strength of the British film industry is probably its
technical expertise, and if we are genuinely concerned with ensuring
that it has a future there has to be a continuum of production. We have
markedly failed to create that over many decades, regardless of who was
in government. If I look back to the time when I was appearing in front
of a camera, I would be hard pressed to find a single film that was
financed by British money. Virtually every film that I appeared in was
a co-production and the majority of the finance came from America.
There is a concomitant to that. If that is where the bulk of the
finance comes from, that is where the bulk of the profit
goes. The hon. Member
for Maldon and East Chelmsford referred to major blockbuster movies
that have been made in this country such as “Star Wars”,
“Superman” and many others. They were all made in this
country because the financial structure here made it feasible for the
producers so to do. There was a huge bulk of brilliant technical
expertise to enable them to be made and to be brought in on time and on
budget. As a nation, we gained not one penny piece of profit for the
continuation of our own film industry from the vast profits that were
made by these
films. Hon. Members
have been much exercised by the fact that the points system is based on
cultural definitions of what constitutes being British, but everyone in
this room knows that what we are talking about is money. That is all
that is being discussed here. How can a production company qualify for
tax breaks for financial support? I would have thought that hon.
Members should welcome this. In my perception, the order is not going
to play terribly well with American
studios or producers who are looking exclusively at huge, big-budget
films, which they will probably make all around the world. The idea
that the pre-production and post-production of the film
“Gladiator”, for example, took place exclusively in this
country is nonsense: it was shot all around Europe. A wide range of
countries contributed to the completion of that film.
A
large proportion of our young people are interested in participating in
the future film industry, as my hon. Friend the Member for
Stoke-on-Trent, North, said. If there is to be a viable industry in
which they can participate, we have to ensure that there is
bread-and-butter film production in this country year in, year
out. Nobody has
mentioned the major shift in film production, which is towards films
that are made to be released directly on DVD, not to go into cinemas.
In the future, those films will go directly on to CDs. A point has been
made about niche films that are produced in this country. Sometimes,
they have huge international success, but nine times out of 10 they do
not. They certainly make their money back, however, and in many
instances make a not inconsiderable profit. People could put that money
back into the film
industry. The order
is, I suppose, a way of meeting European Union requirements and I have
no problem with that, but I am stunned at the lack of imagination that
has been shown by British film makers in entering into more
co-productions with our European partners. However, that is a whole
other debate. If the order means that we are able to ensure that there
will be more bread-and-butter films made year in, year out, which will
reach a wide variety of audiences and make their production costs back
and make a profit, we should welcome that. Let nobody be under any
illusions that what we are talking about has anything to do with
culture or entertainment, however. It is about money. That is how the
film industry manages to make films; that is the big driving force. I
must admit that I see no reason why makers of massive, billion-dollar
films should cry because they do not get a particular tax break from a
particular country, but I am concerned about the independent producer
or director who has an idea for a film that does not meet the bottom
line of most people’s cost-benefit analysis. If the order
encourages the creation of a much more solid British film industry that
can work year in, year
out—
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