Examination of Witnesses (Questions 625
- 639)
TUESDAY 7 NOVEMBER 2006
DTI, DCMS
Chairman: Can I welcome to the final
session of our inquiry the two Ministers with direct responsibility
in this area, the Rt Hon Margaret Hodge from the DTI and Shaun
Woodward from DCMS, and invite Helen Southworth to begin?
Q625 Helen Southworth: Could you
start by giving us an outline of your evaluation of the strengths
of the UK creative industries?
Mr Woodward: Yes. I think our
vision for the UK's creative industries is to ensure that we maintain
our position and build our position so that we are one of the
world's creative hubs, by which I mean the talent involved in
content creation, in technology, right the way across the board
in all the creative industries that we might define from film,
music, television, through architecture and video games. That
obviously is about engaging fully with the whole agenda of new
media, again about content and about technology. We are in the
UK, as you know, in a position whereby the creative industries,
if you put them together into a block, represent something in
the order of 7.5% of GVA of the economy. They have grown in the
last five years at about twice the rate of the rest of the economy.
Each year they employ an additional 2% of the workforce which
compares with around 1% for the rest of the economy. For the 21st
century for the UK, this is an enormous engine of growth and an
enormous opportunity. The digital revolution that is taking place,
the consequences of convergence of platforms and of content are
presenting the UK with an enormous opportunity which puts us,
I think, as primus inter pares in Europe and creates enormous
opportunities for us globally. Our task is to ensure that those
industries are enabled to grow. It is not our task, I think, to
pick the winners and spot the losers. What does matter is ensuring
that we create an environment in which those industries can prosper
and grow. That is about therefore enabling them in terms of access
to skills, access to finance. It is about ensuring that we have
the right regulatory environment which is not an invitation to
regulate; it is, on the other hand, an invitation to make sure
that the environment in which these grow—and the consumer
enjoys these incredible choices now—is one which, on the
one hand, protects vulnerable groups like children but, at the
same time, does not stifle innovation, enterprise and progress.
You see that, for example, with the problems that we are currently
encountering with the European Union and the Audiovisual Media
Directive that we have been engaged in in the current year. You
see it in the challenges to issues around intellectual property
and, as you know, the Gowers Report will look at that very shortly.
It raises challenges for government of course because we are operating
across a number of government departments. I think that is as
much an opportunity and probably the right place for this to be
because the temptation is to think: is what you need is a department
for the creative industries? The problem is that the creative
industries engage across many government departments and you do
not necessarily solve it by creating a special bureaucracy. What
you do have to have is an awareness in government about the opportunities.
One of the most important things that will be emerging in the
next 12 months at a government level on this is the Creative Industries
Green Paper out of the DCMS and the DTI next year, which will
examine, in the context of government these 13 creative industries,
their role in the UK economy, the problems that were thrown up
for them, the challenges, the opportunities of the global competition
that takes place. I think that will allow the industries the opportunity
as well to see themselves in the same way that manufacturing and
financial services do. Instead of being seen independently as
a group of craft industries operating in the margins of the economy,
their full strength and positions, the opportunities and the challenges
they face can be embraced collectively. We have a very strong
vision in government emerging for the role of creative industries.
Our task is to enable those industries to be extremely successful
and to ensure that the UK holds a position as one of the world's
creative hubs.
Q626 Helen Southworth: In terms of
the DTI are there any special issues for the department?
Margaret Hodge: I think it is
very good. Shaun and I work very closely together on the issues
surrounding the creative industries and there is a lot of work
that I do which is relevant to this particular sector. I am trying
to pick up the primary examples. Many of the creative industries
start as micro and very small ventures. Therefore, the work that
we are doing to support SMEs is absolutely crucial, whether it
is support through the RDAs, Business Link, trying to look at
deregulation so you get an environment which enables them to grow
or whether it is looking at equity finance for businesses. That
is all important. There is a whole area of advice and support
that we can give to the creative industries in the support we
give through the RDAs and Business Link first. Second, there is
a whole lot of work that we can do through our research and development
endeavours which will support the creativity in those industries.
I take, for example, the technology strategy, where we have a
board which is business led, whose task is to ensure that knowledge
created in the university sector can be translated into products
in the market. Much of their work is supporting the creative industries
and over the last couple of years there has been £30 million
invested in a number of projects around the creative industries.
That would be another example. The BBC has the money out of that
and a number of other small companies have. The third one is for
regulation. Shaun and I worked very closely together on the regulatory
framework, particularly looking at the impact of European regulation
on the UK and the development of creative industries. Fourth I
suppose is the work that UKTI do in trying to ensure that we get
the proper inward investment. We think of Nintendo and those sorts
of people that we want to come in. Also, that we get exports and
outward investment. I have just come back from a trip to Japan,
Korea, South Korea and China where I spent some of my time working
with British companies looking at the export of computer games
and that sort of thing. That is something else. I suppose another
area would be spectrum where again Shaun and I are working together
on spectrum allocation to ensure that that also supports the development
of the creative industries and other things. Those are just some
examples where I do work, Shaun does work and we work together.
Q627 Helen Southworth: We have taken
evidence from people who have reminded us that Silicon Valley
worked incredibly effectively in developing knowledge transfer
because it had the lawyers, the accountants and the other business
networks for people to be able to role things out. How effective
do you think we are in developing relationships between universities
and the RDAs and the local business sector to get that to work
effectively here?
Margaret Hodge: I think we are
doing much better than we were 10 years ago. When I compare us
to the States, the States have a slight edge on us in two ways.
There is a better entrepreneurial spirit there which we are still
trying to grow here through the work that we are doing with education
and training and through the work that we are doing encouraging
entrepreneurship through the RDAs. The other thing is access to
finance is much easier. People are willing to take risks more
in the States than they are here, so it is easier to raise the
first bit of money. If you do not succeed, that is not seen as
condemning you to for ever being not good for credit ratings and
therefore not able to raise alternative money. It almost becomes
a badge of respectability to try and do business and fail. You
can start again. I think that is the difference. Beyond that,
I think we are getting much, much better. I do not have the patent
figures in front of me but we are much, much better at developing
the knowledge and converting that into products. We have to keep
remembering we have more Nobel Prize winners per capita in the
UK than anywhere else in the world, so we have a huge strength
in our university sector. We have to consistently build on trying
to get that translated into priorities better than we have. The
move we are making with the Technology Strategy Board to establish
that as an entity itself entirely run as a business but advised
by the various sector skills councils and others who have an expertise
in a particular sector of industry I think will strengthen our
ability to translate academic findings, new ideas and research
into productive endeavours in the UK economy.
Mr Woodward: The issue of access
to capital is an issue that we need to address in the UK. That
is not the same as saying of course that the government should
be stepping in and picking the winners and the losers. Undoubtedly,
I think access to capital, the spirit and environment of venture
capital investment in the US and the role of Angels in the US
in relation to creative industries are more vibrant. I was there
last week looking at that. Having said that though, I think we
should be cautious about doing ourselves down by becoming enamoured
with a mythical view of Silicon Valley. There is no question that
Silicon Valley was the golden place to be in the 1990s but we
also remember that burst that took place on the back of that.
An awful lot of finance fell as a result of the collapse of that
dot com billionaire boom that suddenly fell apart. I think it
is worth therefore just saying to ourselves: "What are we
trying to achieve as a result of this?" Let us take, for
example, the global media and entertainment business. This is
a business which is growing by 6% a year in the globe. This is
a business which is valued at 2010 to be in the order of around
1.8 trillion across the globe. How is the UK placed? Again, last
week I spent time going to Disney and Fox. It is incredible if
you sit down and talk to them about their appetite for consuming
UK television formats. If you look at the extraordinary success
that has taken place for the UK markets in television in terms
of programmes like Who Wants to be a Millionaire? The Weakest
Link, Wife Swap, the export of those, the way that, for example,
they are looking in the stations in the US at the format that
Andrew Lloyd Webber developed with How do you Solve a Problem
like Maria?—these may seem small things but they are
very, very successful and they will not be bettered by having
better access to capital or venture capital. Secondly, look at
the video games industry. We are the third largest manufacturer
in the world. We have more consoles sold in this country than
any other European country. We have people on average playing
12 games a head here compared with three or four in France and
Germany. Again, there are issues undoubtedly to do with access
to finance for games developers in the UK, but we should not be
swept overboard by some myth that in Silicon Valley they have
the magic answer to this. Very clearly, although the US and Japan
are first and second in relation to the video games industry,
we have a very successful games industry here. The issue to address
in relation to the video games industry I think is as much about
access to skills, providing students and new people into the industry
with degrees in physics as it is about access to finance. You
have to balance those two. Government can create the environment
for that but government has to be very cautious about trying to
be responsible for picking winners and losers.
Margaret Hodge: I agree entirely
with what Shaun has said. What we are trying within DTI and across
government to do is look at where there is a market failure on
access to finance. It is in that SME sector so it is relevant
to the issues that you are talking about in the course of this
inquiry. We have established a number of funds where we are a
partner. They are mainly private sector led and try to fill that
equity gap for the very small SMEs who may not be able to find
the risk capital, under two or three million, that sort of level
of finance. Those are incredibly successful and appear to be really
effective in filling that gap in the market.
Q628 Helen Southworth: In terms of
the government creating an environment or an environment being
created, what is your evaluation of the significance of Media
City in that? You describe the BBC as one of the country's most
powerful creative engines. What role should it be playing?
Mr Woodward: You only have to
go anywhere in the world to hear about the reputation of the BBC.
I think the government quite rightly values it, and thinks it
is extremely important that we have a strong, independent, vibrant
BBC that can be an engine which maps part of the digital world
in which television is moving. That being said, whilst the BBC
must be strong and independent, it must also offer value for money.
I suppose it might just be worth therefore parenthetically reminding
the Committee that is why it is taking so long to achieve a settlement
on the licence fee because it is extremely important that at the
end of the day whatever figure we emerge with is one that does
give the public value for money. There is no question they are
willing to pay for the BBC. There is no question that they want
the BBC. There is no question that the government wants anything
other than the strongest, best BBC we can possibly have but it
is not a BBC at any old price. Having said that, I believe that
the indication from the governors to say that they want to move
to Salford is very, very important. You raise the issue of Media
City. It is important for the Committee to recognise, as I am
sure it does, that when the governors were looking at where they
would move the three departments they had a choice in the end
between Manchester city centre and a 200 acre site at Salford.
They could have taken a brand new office building or reconverted
building in the middle of Manchester. That undoubtedly would have
been a fine thing to do for Manchester city centre and 3,000 people
would have moved. The opportunity that is afforded by going to
Salford is to create what you would see in Dubai or in Seoul,
for example, which is a Media City. In other words, the 3,000
jobs that the BBC intends, as the governors have indicated, to
put into Salford will create probably another 12,000 job opportunities
as well, opportunities for other television production companies,
for independent companies, for film companies, for video games
companies, for other areas like architecture, publishing and software
to move in; to create on the back of that a learning environment
with an academy, links to research and development centres of
the kind Margaret was talking about with universities, all for
the creative industries. Suddenly we would have the prize that
you see in other parts of the globe which represent our fiercest
competitors. Why is Seoul doing so well? Why is Dubai doing so
well in relation to this? Because they understand the importance
of convergence and the opportunities that are created by having
a physical environment for that convergence to also happen. I
think the BBC's declared intention to move to Salford is essential
and I obviously think it is extremely unfortunate that indications
were given by the BBC that, if they did not get as much money
as they had originally bid for, in some shape or form the move
to Manchester might be at stake. That would be, quite apart from
anything else, a huge mistake for the BBC's long term success
because I think the environment they intend to create at Salford
is one that cannot possibly be created in the physical spaces
that are available to them in London. The physical space, that
200 acre site of which they would only occupy a quarter, is the
vibrant digital community that I think has spurred much of the
success in other parts of the globe. If we are to be successful
in the UK in the long term, the opportunity created by the digital
Media City in Salford is absolutely essential.
Mr Evans: I hope also that your words
will act as a restraint on the BBC from giving millions of pounds
of licence payers' money to people like Jonathan Ross and his
ilk.
Chairman: I do not think we will go down
that road at this moment.
Q629 Mr Evans: Would you like to
comment?
Mr Woodward: On the one hand,
I am wishing to accept the restraint of the Chairman whose physical
and intellectual restraints I am always happy to be subject to
but, more importantly than that, I think one should recognise
that the BBC operates in a market. We have again to make a decision
as to whether or not we want an independent BBC or whether or
not we wish to say we want independence and, at the same time,
to tell the BBC what contracts they can and cannot make. I think
the BBC can be in no doubt of the displeasure they have incurred
from Her Majesty's Opposition in paying Mr Ross so much money.
Having said that, if they were going to have quite so much opprobrium
from the Opposition, perhaps it might have been better for the
leader of Her Majesty's Opposition to have declined the invitation
to appear on Mr Ross's show.
Chairman: Hindsight is easy. These are
important issues that we are covering but, since both Ministers
have indicated that they would like to get away roughly on time,
we have a lot of ground to cover. May we try and move relatively
briskly?
Q630 Alan Keen: For those who have
only worked in London, the reason Helen Southworth is so happy
is that Warrington is near Salford. The Secretary of State for
Culture, Media and Sport was here just before the recess and used
almost oratory to describe what the Green Paper would achieve.
She said that it would set out the next steps of concrete and
tangible action led by the industry not just as it is now but
as it will be in five or 10 years time. What progress has been
made, particularly with the new media which is what our inquiry
is really about? What tangible progress has been made?
Mr Woodward: The description by
the Secretary of State about the government's vision and plans
for the Creative Economy Programme is absolutely right. If we
do not aim high, it will be difficult for us to succeed. When
you appreciate the scale of the competition that we are facing
in China, Japan and South Korea and from the USA, it is perfectly
clear to me that it is absolutely essential that the UK does draw
the creative industries together and that we explore the opportunities,
problems and challenges that they are facing so that government
can do its best to enable them to succeed. The noble vision is
absolutely right. In terms of the rhetoric being converted into
action, which is obviously what you are pressing for here, one
of the proofs of the pudding here is in relation to the Green
Paper that we are planning next year which comes out of the Creative
Economy Programme. If I may, I can best illustrate that by the
sort of ideas that have come by bringing the creative industries
together and working alongside the non-departmental government
bodies for those creative industries, the government departments,
the Regional Development Agencies, the local authorities, all
the partners involved in making this a success. The reason it
is a Green Paper and not a White Paper is it is still meant to
be a discussion, not a prescription. What it will throw up are
the specific challenges. In relation, for example, to education
and games should we be having academies for computer games or
a games development centre as they have in South Korea? Should
we be setting up digital schools film clubs? I put the emphasis
on film clubs in relation to schools because we want to nurture
creativity, as the Roberts Review rightly pointed out, within
schools. If we want young boys and girls to think about a career
in the creative industries, let us capture their imagination early
on. Let us enthuse them. Let us expand the opportunities inside
schools to interest them in film and television and the creative
industries. What is emerging from the Green Paper in relation
to education is also the need for a new generation of creative
partnerships led by NESTA. In relation to access to finance, the
work on the Creative Economy Programme and the Green Paper has
thrown up the idea of an Arts Council venture capital fund and
a national programme for the Design Council, pairing up design
students and business students to plug the gap again that we have
spotted between those new small and medium sized enterprises that
Margaret referred to, which emerge precisely because of the creative
talent and skills of the individuals involved, who may have no
formal business education at all. Then, suddenly, they find themselves
running a £100,000, a £500,000 or a multimillion pound
business but they have no skills to run it as a business. How
do we put the creative skills of people on the one hand together
with the business skills on the other? There are issues around
research and development. How do we develop the knowledge transfer
network partnership around intellectual property? Gowers is doing
some important work but Gowers is not the only master in this
field. A great opportunity was created when the Chancellor said,
"Let's review the entire intellectual property environment."
What is important here is not again to think that Gowers in a
few weeks' time is going to produce all the answers. I think it
will put onto the platform for discussion by everybody the issues
that need to be addressed in intellectual property. They are many
from piracy issues in film through to issues around should we
have a Copyright Minister, for example. Should we revisit some
of our own intellectual property law at the moment? The whole
issue of access has to be balanced against protection of rights
for people. It is important we put these issues out and I think
Gowers is a great opportunity for doing that. Again, those have
been thrown up in the Creative Economy Programme because intellectual
property after all is at the heart of the creative industries
because what defines these as opposed to, say, car manufacturing
is that at the heart of these industries are ideas. It is the
monetising of those ideas, building them into a business, that
defines these industries rather than the others. What the Creative
Economy Programme has done—of course it is a new venture
by government—is to bring these industries together with
an opportunity of seeing what are the issues that they have in
common that government needs to address, but not only government.
Again, we should be cautious here because the solutions we are
looking at are not necessarily about regulation or legislation.
Indeed, if they are about regulation, it does not follow that
it has to be state regulation or Member State regulation in relation
to the European Union. Self-regulation is the preferred option.
What is interesting is to look at the creative industries and
see where self-regulation—for example, in the video games
industry—has been so effective and in the film industry
as well. There is the case of the European Union with the replacement
for the Television Without Frontiers Directive. In areas where
people instinctively feel that they should get government involved
and regulate, the consequences of their current proposals would
be disastrous for creative industries, not only in the UK but
in Europe, because whilst on the one hand with the best of intentions,
protecting children, they might drive out some of the bad, new,
on-demand services, at the very same time they would drive out
the good, new services that are coming to market precisely because
the cost of compliance, the cost of the licensing regime, the
cost of the bureaucracy, which would only operate in a market
of the European Union but not beyond it, would simply mean that
the good, new services, the YouTubes and the MySpaces, would never
come here in the first place. Again, it is about producing a balance
and the Creative Economy Programme has been a very important first
step in that. Let us be clear: this is not the first or the last
word; this is the beginning of government beginning to address
the issues of the opportunities and challenges for creative industries
and it is a task which should go on for the 21st century.
Alan Keen: It is encouraging to know
that you recognise that the infrastructure is important, particularly
when you are trying to develop creativity, because people do not
always want to be involved with the bread and butter building.
Silicon Valley's success was due to the fact that finance was
available and business was ready to move in to help the creative
people. I am very happy with that answer. Thank you.
Q631 Chairman: You say that the Creative
Economy Programme is a new initiative in government. In fact,
the terms of reference are almost exactly the same as those of
the Creative Economy Task Force which was set up by Chris Smith
eight years ago, when it identified precisely the same problems
that you have been describing. What has happened in the last eight
years?
Margaret Hodge: I think it is
a bit unfair to say there has not been action. The Green Paper
will take us to the next phase. If you look across government
as a whole—Shaun has been doing more work on it in the DCMS—there
has been a huge effort with a substantial impact on ensuring that
we maintain our leading edge in the creative industries. Whether
you look at research and development, training and education,
the development of the academies, what we have done around regulation
in Europe successfully to date, what we are doing around intellectual
property rights, where we have a flexible system which has been
quite effective to date, quite a lot has happened which give us
this leading edge position and this growth that we have enjoyed
over the last decade or so. We constantly have to renew and refresh
and that is what the Green Paper will do but it is renewing and
refreshing on the back of a lot of success, cross-government effort
and effort from the industry as well.
Mr Woodward: You need to see a
balance taking place here. It is not just about what the government
does; it is about the whole environment with which business operates
in this country. The whole success of the UK economy now, nearly
10 years of uninterrupted growth alongside the rest of Europe
and the western world, is extremely important to the creative
industries succeeding. The point I am making is not that something
magical has happened in the last year. I am not suggesting that
at all. What I am marking is the fact that in the last decade
the UK has rightly begun to recognise the power of the creative
industries. If you put that alongside what is happening in France
and Germany, you can see that part of the problem we have with
the European Union is the envy they have of what is happening
here in the UK. One of the things that worries me when you ask
a question like that is that there is a tendency here to diminish
this into some sort of political debate. I do not think this is
about political ownership of the creative industries. When one
day there is a Conservative government again I am sure that Conservative
government will want to do the same as this government is doing
for the creative industries, which is to enable them to succeed.
The question is how you do it. I think Chris was visionary to
want to put this together eight years ago. It is right that it
is still there and it should be there in 80 years' time because
I suspect the creative industries in the UK will by then far have
outstripped financial services and manufacturing. If you look
at the size of that global cake that is at stake that I discussed
earlier on, the UK is best positioned of all the countries in
Europe to have the primus inter pares share of that. The
question is how do we keep it there? What I would point out to
you in the example of video games is: why is it that we are still
doing so much better than Germany? It is not that German young
people and indeed older people do not enjoy video games; it is
just that we have a better climate here. The video games companies
like being here. If you visit a company like Image Metrics in
LA, which comes out of a UK company, what you see is that we have
created the right environment here but it is the right environment
now within which the CEO of that company can take the leap forward
that he and the company now have. They are now employing 40-odd
people in LA and they are absolutely at the cutting edge of the
application of video games technologies to all the creative industries.
Q632 Mr Sanders: Would it not be
better if those 40 people were employed in the UK rather than
LA?
Mr Woodward: It would not be possible
for them to do that because what they are doing is directly serving
markets in LA. The point is that it has a back reference to what
happens here because what the owner of that company wants to do
is to continue growing here in the UK. They have not relocated
out of the UK. They have just expanded into America. As a result
of that, money is coming into that company in America that benefits
us back here. It creates more exciting opportunities for the people
working in that company. If you talk to lots of young people,
it is not difficult to understand that they are ambitious to work
all round the world. We should not restrain their ambition. The
question is: can we harness that ambition and intellectual enterprise
in a way that benefits the UK in the round. What a company like
Image Metrics does, by moving into those markets in LA, which
also by the way has application now into the medical industry
as well in that company, is fantastic for the UK. It creates an
image of the UK as this creative hub and the interest that Image
Metrics has attracted in LA in what is happening in the UK is
a kind of cross-fertilization process for companies in LA to want
to invest in what is happening here in the UK. I think there are
huge benefits for us and we should be very cautious of viewing
sceptically why a company like Image Metrics wants to have an
office in LA. I think it is good news for the UK, not bad.
Q633 Rosemary McKenna: What you have
described is an issue that is facing all of industry in this country,
this fear of failure. It is encouraged by the media. Only last
week there was an announcement about the number of bankruptcies
in the country. It was portrayed in all of the television and
news media as a dreadful thing, whereas if people are going to
try and succeed in a business it is inevitable that some of them
will fail, but there is this feeling in this country that, "I
must not do that because . . . ". What is the DTI doing to
try to overcome that fear of failure that inhibits a lot of our
people not just in the creative industries but in industry in
general?
Margaret Hodge: I think we are
being successful. We have 600,000 more small businesses today
than we had in 1997 and their sustainability is better. They are
maintaining the businesses over a longer period of time, so there
is some success. What are we trying to do? We are trying to provide
the right economic environment which is absolutely key, so low
inflation, low interest rates and steady growth, the environment
in which business can prosper. The right support, decentralising
Business Link into the RDAs, for example, to ensure a much more
localised effort and support to individual companies, is important;
and rejigging, as I am presently trying to do, the schemes of
business support. We have something nearing 3,000, we think, separate
business support schemes across the country and we are reducing
those to 100 so it is very clear what you can get in terms of
business support. That is important. Getting peer to peer support
is really crucial so that it is people who also become the mentors
and supporters to new innovators in business. We are expanding
that a lot. I talked about the access to finance. We are filling
that gap because there is an equity gap for the SMEs. I think
everybody recognises that that has been an incredibly effective
intervention by government. I talk constantly to the banks. I
compare ourselves with both America and Germany. If you look at
America, there is a greater willingness by the lending institutions
to take risks.
Q634 Rosemary McKenna: Do you talk
to the media? Is there any work going on with journalists in all
sections of the media to try and get them on board to say that
failure is not necessarily a bad thing. Is there anything going
on?
Margaret Hodge: Not specifically,
if I am honest with you. It is a good idea. I also compare ourselves
with Germany. Germany has a regional banking infrastructure and
I think that is very helpful in getting the regional banks much
more closely related to the economics of development agencies
in the regional governments in Germany. Therefore, there is a
much better collective view around putting money behind entrepreneurs.
Can we get the press to be kinder about business failure and see
it as part of the way in which you innovate and risk? You will
not always succeed and you have to risk and innovate and innovate
and risk again. I think it is a good idea. I will look at it.
Q635 Philip Davies: What do you say
the banks should do? Be prepared to take more risks?
Margaret Hodge: Yes, take a bit
more risk.
Q636 Philip Davies: Do they not feel
perhaps there is a mixed message coming from government? The government
is always criticising irresponsible lending and lending money
to people who may not be in a position to pay it back and yet,
on the other hand, you are encouraging them to lend money to businesses
that they think have a much higher chance of failing.
Margaret Hodge: I think you are
muddling two completely separate issues. One issue is the indebtedness
of individuals which is of concern to us and the other is the
risk around business ventures which is completely different. There
may be a tiny overlap on the margin but they are two completely
different sets of issues. I think there is a caution on the part
of our financial services industry here which is not mirrored
in the States. Hopefully, the more exchange that we have and the
more global we become, the more we will engage in a little bit
more risk to back a few more potential winners. Until that time,
our role in filling that gap is very important and we are doing
that. It has been welcomed.
Q637 Mr Sanders: Turning to issues
around intellectual property, what themes emerging from the consultation
under the Gowers Review have particularly caught your attention?
Margaret Hodge: This is an attempt
probably to try and pre-empt the Gowers Review recommendations
which you clearly want us to do and which we are not in a position
to do. We wait with interest for the Gowers Review. If I say some
general things, we have on the whole an IPR system in the UK which
has served us well. It has been pretty flexible and that is important
particularly in this area where technology is changing so rapidly.
It is really important to maintain that flexibility so that you
can respond to new circumstances. As Shaun said quite rightly,
Gowers will not be the last word on it but what we are looking
at is ensuring that our legislative and regulatory framework is
appropriate for the digital age and ensuring that we have the
right balance between the interests of those who produce the creative
industries content and those who consume it. We will see what
he comes out with. There are a whole lot of circumstances which
at the moment do not make sense. If I take one, if you are a teacher
in a classroom and you put something on a blackboard, that is
fine because that meets the education exemption and is not seen
as disseminating the information, the poem or something that you
may put on the blackboard. You are not disseminating that poem
to others so there is no intellectual property right that you
could possibly contravene. If you use a white board and it therefore
comes up on individual PCs, you may be accused of disseminating
and contravening IP rights. That sort of instance is where we
want Gowers to modernise the system and make sure it works. Some
of the techniques certainly in the digital world, where people
are trying to manage rights, are problematic. Controlling the
number of copies that can be made is fine until somebody breaks
the code and therefore that management of the right in that way
becomes ineffective. There are really complex and difficult issues
that Gowers will be looking at.
Q638 Mr Sanders: In general terms,
are you minded to look at this from the view of the producer or
from the view of the consumer?
Margaret Hodge: No. The whole
point is that Gowers has to balance the interests of the consumer—hence
my example of education—against the interests of the producer.
Hence the example of those who have rights around a CD or a DVD
and do not want it copied indiscriminately. You have to balance
it. There is not a magic bullet on that. The judgment has to be
made around balancing those two sets of points.
Mr Woodward: These two issues
around producer and consumer have arisen again and again in the
work of the Creative Economy Programme and I am sure not only
were they in Chris Smith's mind eight years ago, John, but they
will be in your mind in future years. This issue is not going
to go away. There are a few things that may be worth remarking
on here. Even if the government follows every single one of Gowers
recommendations, I believe this is an issue that we will need
to revisit again in five years' time precisely because of the
speed with which things are changing. A very good illustration
of that is traditionally, for example, if you produce a written
piece of work, you deposit it in one of the copyright libraries.
How today do you deposit a website in a copyright library? Huge
amounts of intellectual property are being created because of
digital technologies in websites. How do you enforce that? I am
sure Gowers will have views on jurisdictions beyond the UK but
by and large we have to recognise our own limitations here. We
cannot legislate for the rest of the world, even though sometimes
some people think that we can. The intellectual property framework
takes place not only therefore in a global environment in the
UK but at EU level—as you know, there is a review going
on at EU level in relation to intellectual property—and
on a world stage as well. We have to persuade our partners out
there to want to work with us because we cannot legislate on their
behalf. We cannot force them to do things that they do not want
to do. That immediately is instanced by something I know this
Committee has been very interested in and has taken evidence on
in relation to intellectual property and piracy in the film industry.
I know there are proposals that some would like to make here to
make camcording illegal here in this country, but if you look
at the way that Harry Potter was released on 4 June and
was available on pirate DVDs within the day that camcording almost
certainly did not take place here. We can pass all the laws we
want to protect the intellectual property here and make camcording
illegal, but the point is if it happens in Taiwan or somewhere
else what are you going to do about it? We have to be realistic
about what we think we can achieve in all this. That is not to
say that government should not take an active role in protecting
intellectual property rights. It is not to say that government
should not want to strike a balance between the needs of consumers
for fair access and the producer protecting her or his work. There
are many ways of doing that and, as you know, there are many proposals
on the table for how you achieve these things. Without in any
shape or form diminishing the importance of the Gowers Review,
we should see it in context. I know, Adrian, that to some extent
that is what you are hinting at. What we are going to have to
do, like it or not, is work with our partners at a European level
to create a better framework for the protection of intellectual
property and fair access. Equally, we are going to have to recognise
that we are dealing with these issues in the US and in the Far
East. If you look at some of the major challenges to piracy of
video games, for example in China, how do you deal with that?
One of the answers that is emerging now—and there is a whole
set of issues that comes out of this—is that the video games
industry, some people think in 10 years' time, will only be available
online. What they will do is make it available in the first instance
completely free but then to sign up to different levels you have
to effectively buy that dimension of the service. What does that
mean for retailing? I do not share the view, by the way, that
video games are going to disappear from retailers in 10 years,
but again talk to some of those in the industry in the US, which
after all is the number one in this industry. There are people
there who are very serious players in this industry who think
that may be a way forward. One of the drivers for that is the
protection of intellectual property. It is a very complex issue.
It is right that government should be engaging in it but what
I am trying to suggest here is that any solution that we come
up with is limited by our own jurisdiction. Secondly, any solution
we come up with is likely to be overtaken by the speed with which
these industries are emerging and changing.
Q639 Philip Davies: We certainly
might not be able to stop piracy on video games in China but ELSPA,
the body that represents the video games industry here, certainly
felt that the government could do something to help here which
would be to implement without delay, as they put it, section 107A
of the Copyright, Designs and Patents Act 1988, which has been
on the statute book since 1994 but has never been brought into
force. Their director general told us that bringing it into force
would enable piracy to be dealt with much more vigorously and
he could not understand why it had not been brought into force
after more than a decade of it being on the statute books. Could
you explain to us why it has not been brought into force?
Margaret Hodge: Let me deal with
the Chinese point first because I discussed IPR with various ministries
in China and they are now making enormous efforts with a huge
policing exercise. An army of people have been put in there to
try and ensure that they provide a more secure IPR environment
because they see that as absolutely crucial both for inward investment
and for their exports. Let us not just write that off in the first
instance.
|
