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We all know that the biggest barrier to the UK’s success in respect of jobs is the problem that we have in relation to skills. That was highlighted in the Leitch review of skills in the UK. There is a huge ambition throughout government to grow the number of apprenticeships to 500,000 by 2020. We want to play our part in that with the creative industries, and we have set ourselves an ambitious target of having 5,000 apprenticeships a year up and running by, I think, 2018. That is very important. We have talked to employers across all sectors who have welcomed that. Indeed, I have talked to a number of computer games employers who are already taking part in the pilots for those apprenticeships. If we want to meet the diversity challenge
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that we have in the creative industry sector with more opportunities for under-represented groups, the apprenticeships will help us to do that.

I come now to research and innovation. Four out of five creative firms are what are known as active innovators—innovation is at the heart of what they do. The way in which the industry works is changing fast. In the past, Government support for innovation has focused on work that leads to the establishment of patents, and I think that insufficient recognition has been given to the importance of the effort that leads to the development of a copyright. Computer games are the classic example that springs to mind.

We have achieved and committed ourselves to important innovations. First, the Technology Strategy Board will provide £10 million for new and collaborative research and development, with a package of measures specifically to engage small creative firms. The focus will be on the underlying technology challenges and opportunities facing the sector.

Secondly, last week, with the National Endowment for Science, Technology and the Arts, I launched a £3 million creative innovators growth programme, which will be focused on bringing existing businesses through to that high growth status. The initiative that I launched involved the film industry, but NESTA is considering other sectors, too. That will involve examining new business models and how they can succeed. That is an important initiative.

Thirdly, we hope that a knowledge transfer network will shortly be up and running. That will provide an opportunity for businesses to interact with one another and with the universities sector, so that we can bring together all the expertise to try to deal with some of the challenges that they face.

Fourthly, the Department for Innovation, Universities and Skills announced in its innovation strategy that it will commission research better to quantify the economic benefits of the creative industries, with special attention to the value added by innovation in those industries. I hope that that series of recommendations in the paper will allow us to unlock stronger research.

We also talk about the role that we can have in supporting businesses. This is an interesting part of the document that hon. Members may want to talk about. We have always said that the Arts Council’s primary aim is to support artistic excellence—that has been confirmed by the Brian McMaster review—but public funding for the arts can be a powerful stimulus for the creative industries, not only because of the skills that it develops, but because of the networking spaces that are provided. Quite often, it can underwrite risk that the financial markets would not be willing to accept. We have therefore asked Arts Council England and other bodies to take account of the objectives of the creative economy programme in their corporate plans and strategies.

Mr. Don Foster: I am grateful to the Minister for being generous in giving way. I particularly applaud what she has just said. She will not be aware of this, but three years ago, I arranged a meeting of the Arts Council and the UK Film Council to ask them which of those two bodies had responsibility for the creative
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industries. Both denied that they had a key responsibility. There is an urgent need to have detailed discussions with all the lottery distributors about where their responsibility lies in respect of the creative industries. I am glad that the Minister is having those discussions.

Margaret Hodge: The hon. Gentleman and I agree about that. We have to get the balance right, so that it is not seen as us in any way undermining the excellence that we want those organisations to fund in the creative sector.

Mr. Vaizey: I am not sure that I share the enthusiasm of the hon. Member for Bath (Mr. Foster). Perhaps he wants to copy the Scottish model, which has elided the Scottish Arts Council and the Scottish Film Council into Creative Scotland. It seems extraordinary in a such paper that the Minister could simply hand over responsibility for the creative industries to the Arts Council without a wider debate. Is it not time to have a proper debate about the role of the Arts Council now that it is 60 years old?

Margaret Hodge: Let me correct the hon. Gentleman: I am not handing over the role of sponsoring the creative industries to the Arts Council. I am saying that there is a synergy between the creativity that comes out of the funding in the Arts Council and the development of successful businesses in the creative industries sector. The Arts Council has come very successfully through a radical funding round—I applaud the way in which, on the whole, that has been managed—and it will clearly be taking time to reflect on how it makes progress. No doubt, the hon. Gentleman, I and other hon. Members will be engaged in discussions with it on its role in a fast-changing world.

Our enterprise capital funds are supposed to meet the gap in the equity market, which is a particular issue for the creative industry sector. The Chancellor announced an extra £150 million in three further rounds to establish more capital funds. I am really pleased that the UK Film Council will be submitting a bid in that round.

I will now touch on intellectual property, which is of key concern to the creative sector. To support those industries and others, we need a balanced IP framework, which is relevant to today’s world. We need to encourage businesses to develop new business models—only they can do so—that recognise and exploit the changes in technology. We also need the right tools to tackle IP crime, and we should continue to improve the education and understanding of IP. We should also recognise that, with changes in technology, there is a massive democratisation of information, which is hugely powerful to the industry and to society. So we must strike a constant balance between those objectives in the public domain.

My right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform will shortly consult on legislation that will require internet service providers and rights holders to co-operate in taking action on illegal file sharing, with a view to implementing that legislation by April 2009. That reflects a definite change of tone by the Government. Although, of course, we prefer a voluntary approach—we encourage all partners to seek one—we also have to underpin it with action if necessary. We will not hesitate to act if we need to.

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The UK Intellectual Property Office has also put in place a plan of action on IP enforcement. The report mentions a range of things that it will do, including a fake-free London campaign in the run-up to 2012, a national centre of excellence on tackling IP crime, the establishment of a forum between Ministers and industry to keep the issues under review and voluntary enforcement funds to try to get more action on behalf of the police.

Mr. Mark Field: The Minister will be aware that some of the biggest concerns in the manufacturing sector are to do with patents and intellectual property rights and their breach in China, which is an important trading partner for the century ahead. She also refers to the 2012 Olympics. Clearly, an opportunity exists over the next four years to firm up relationships between our two capital cities. As the Minister refers to democratisation, what action will the Government take to ensure that we put intellectual property rights into some sort of framework? Will that be left to the companies that wish to ensure that their creative industry product is seen in China? Or will the Government consider working with the Chinese Government to put in place protocols to ensure, as far as possible, that our creative industry does not lose out because intellectual property rights are largely ignored in that part of the world?

Margaret Hodge: About 18 months ago, in my previous role as Minister at the old Department of Trade and Industry, I met Chinese Government officials and Minsters in China to discuss having a proper intellectual property rights regime. It was one of the key areas of debate and discussion. I am sure that my successors are continuing those particular debates. For me, getting internet service providers to manage their information properly is the best thing that we can do in the UK to protect the intellectual property rights of individuals. Beyond that, the way forward has to be through diplomatic negotiations and using the World Trade Organisation when that is appropriate as well.

We are also considering how to do a better job in educating people in IP rights and IP frameworks. I do not know whether we will incorporate that issue in the new diplomas that are emerging or in the review of the primary curriculum.

Janet Anderson (Rossendale and Darwen) (Lab): Before the Minister leaves the subject of intellectual property, may I, as chair of the all-party parliamentary group on intellectual property, thank her for her recognition of how serious a problem this is, particularly in the digital age? Does she agree that perhaps the Government should look at the resourcing of trading standards officers in local authorities to see whether their role can be strengthened in some way?

Margaret Hodge: I was pleased that we were able to find an initial sum of money to support the implementation of section 107A of the Copyright, Designs and Patents Act 1988, as that has allowed the regime to start that work rolling. Our thinking now, subject to further negotiations, is to get industry to put in a bit of money to support the effort that we want the police and the officers in local authorities to undertake. My hon. Friend is right; the more resources that we have, the more successful we will be in that regard.

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I want to talk a little about the roles of regional development agencies and local government in the creative industry sector. We know that the sector works best in clusters. We propose to pilot the development of a regional creative economy strategic framework—thinking about such industries in the region—both in the north-west and south-west. If those frameworks are successful as a mechanism for the regional development agencies to intervene and support the creative economy at regional level, we will try to roll it out across the country. We are working with the Local Government Association to develop advice for local authorities on how to improve their creative infrastructure, and that will include advice on things such as providing suitable business space, developing links with universities and colleges, and encouraging networking and local networks.

I turn to our international work. The UK is at the forefront of the world’s creative economy. An OECD study showed that we have a higher percentage of our economy working with creative industries than any other country in the OECD family. A large part of that strength is down to our reputation for creativity and innovation. As incomes and aspirations rise in developing countries, there should be more opportunities for British companies to work abroad. However, we have to maintain that advantage and ensure that London and Britain continue to be seen as the best places to trade.

I am, therefore, pleased that UK Trade and Investment agreed a five-year strategy—we have put it into our document—to look at our international competitive position. The strategy has three themes: developing stronger messaging, which resonates with overseas buyers; ensuring promotional activities; and encouraging other new initiatives in target markets. We want to combine two of the UK’s and London’s key strengths in the creative industries and financial services to initiate what we have called a world creative business conference, which we want to become a regular feature in the calendar and which we aspire to have the same status as the Davos World Economic Forum. That would cement the UK as the world’s creative hub and help to develop the ongoing and important dialogue between the creative and the financial sector, which is very important to get equity into the creative industries. The creative industries are extremely fast moving. They have changed massively in the past five years, and I have no doubt that they will change massively in the next five, which is why we have said that this is the next phase in an ongoing programme.

I want to establish a mechanism in which I can have a continuing and regular dialogue with industry representatives and other important stakeholders, so that they have an effective voice in shaping our agenda and programme as we move forward. Their contribution so far has been a major factor in the success of the creative economy programme. I hope that all parts of the industry will continue to engage with the Government.

The document “Creative Britain: New Talents for the New Economy” is the summation of nearly three years of work. It could not possibly articulate all the issues that we have investigated, debated and discussed; similarly, we could not discuss all the issues within the document now in this debate. I hope that I have given the Chamber a good taste of the challenges that face the creative industry, and I look forward to the contributions of other hon. Members.

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3.9 pm

Mr. John Whittingdale (Maldon and East Chelmsford) (Con): I very much welcome the fact that we are debating the creative industries. The Minister gave us some statistics showing that their importance to the economy is growing, and I think that we all recognise that. Our manufacturing industry has slowly disappeared eastwards and has been followed by our service industries, which are now run from call centres in Bangalore or administered by migrant workers in this country. The one thing that we are left with that we are extremely good at is the creative industries, so it is extremely important that we give them every support.

There are many things in the documents that I welcome. The “Find Your Talent” programme certainly has a worthy objective, although I am little sceptical about it, given the figures that the hon. Member for Bath (Mr. Foster) mentioned that show what the programme actually amounts to in financial terms, and given that already hard-pressed teachers will have to squeeze the programme into the school day. None the less, the objective is a noble one, and other measures, such as the growth in apprenticeships and the investment in research, are also admirable.

I shall, however, focus on one key issue. In supporting the creative industries, the Government have a fundamental role to play in respect of copyright, because that is the one thing that only they can enforce. Without copyright, the creative industries cannot survive, because they depend on being able to achieve a return on the creation of intellectual property.

Copyright enforcement has always been a challenge. A long time ago, I started life as a special adviser at the then Department of Trade and Industry; I remember the debates that took place about whether we should introduce a levy on blank digital cassette tapes. I could see why they were a problem because, as a teenager, I had always tuned into the top 20 on a Sunday evening, with my cassette tape recorder poised to record—

Mr. Vaizey: The Undertones.

Mr. Whittingdale: Indeed—and others. I did not realise at the time that what I was doing was illegal, and certainly not that it was doing such damage to the music industry. Although the music industry did not like blank tape copying, however, it accepted it, because the results were not particularly high quality and the DJ usually interrupted halfway through, so the recordings were not really a substitute for buying an album.

The problem now is that digitisation means that the quality of the music recording, which can be made available in digital format and easily pirated, is no different from that of a CD. Such recordings represent a far greater challenge because the quality has increased so dramatically and because of online distribution. Of course, online distribution is not the only problem; there has always been a problem of physical piracy. Indeed, the day before yesterday, I spent a couple of hours with film piracy unit of the Metropolitan police, whose officers were talking about the continuing problem of pirated DVDs and, to some extent, CDs, which are churned out in garages up and down the country by server towers that can produce 40 or 50 discs at a time. A lot of that is done by Chinese immigrants who have been trafficked
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into the country and who are then required to repay those who brought them here by undertaking criminal activity, which very often involves piracy.

That type of piracy is a challenge, but it is online piracy that is growing rapidly and that poses an even bigger threat. It is obviously important to update the law to take account of that threat. The Select Committee on Culture, Media and Sport has looked at the challenges posed by new media to the creative industries, and we feel that the law is lagging behind. To give a specific example, almost every teenager—indeed, probably the vast majority of the population—owns an iPod, and such devices are becoming the preferred method of listening to music. However, it is still technically a breach of copyright for me to purchase a CD in a shop, take it home and put it on to my iPod, which is plainly ridiculous.

The record industry will say, “Well, of course, we never dreamed that anybody would try to enforce that provision,” but the fact that copyright law has not taken account of format shifting and the way in which people now listen to music and, increasingly, watch video content, brings the law into disrepute to some extent. It is difficult to tell young people that one bit of copyright law is really important and that they must obey it, but that another bit does not matter too much so they can ignore it. I therefore welcome the discussions on putting in place a private copying exception. The industry has some concerns about it, and that exception will need to be narrowly drawn, but we need to amend the law so that home use is made legal and acceptable.

As the Minister said, the industry will also need to take account of consumer behaviour regarding online distribution when it develops new business models. The record industry was very slow in responding to online distribution. It started off by saying, “This is awful—it will be the end of the world. We must stop it.” Latterly, it has accepted that online distribution could create whole new markets and that it is an opportunity, and legal downloads are now growing. We are seeing a gradual shift, whereby more and more music is being made available online very cheaply, and quite often for a single payment that gives access to a huge library of music. That will probably result in a decline in revenue streams, but there is an acceptance of the inevitable and of the fact that it is better to get some revenue than none at all, which is the consequence of illegal distribution. Another consequence of the shift may be that live music performance becomes more important and that it will represent a bigger return for artists, which I would also welcome.

The industry is waking up to the problem, but that problem is growing exponentially. In the past four years, the record industry has seen a 20 per cent. drop in its revenues, in large part due to piracy. The Minister mentioned the estimated £480 million loss by the TV and video industry in 2006. One survey in November 2007 revealed that 10 per cent. of the population had either home-copied a DVD or bought a counterfeit DVD, that 16 per cent. had illegally downloaded, streamed or burned discs and that 23 per cent. had borrowed and copied a disc, which, technically, is also illegal.

Mr. Don Foster: It is not the same.

Mr. Whittingdale: No, indeed—the hon. Gentleman is quite right. However, a huge amount of illegal activity is being undertaken by a large proportion of the population.

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