Examination of Witness (Questions 137-183)
EDWARD TROUP
20 OCTOBER 2010
Q137 Chair:
Good morning. I wonder, Mr Troup, for the record, could you just
tell us who you are and what your position is?
Edward Troup: Yes. I am Edward Troup. I am Managing Director of Budget, Tax and Welfare at the Treasury.
Q138 Chair:
You are aware that we are looking at the video games industry.
Particularly in this session, we want to look at the question
of taxation and support for the industry. Can you just start
off by clarifying for us why you believe that the tax relief that
was initially endorsed by all the political parties before the
election was poorly targeted?
Edward Troup: I
am not sure I would say it was poorly targeted. It was targeted
at the video games industry. The current Government, having looked
at this and having looked at its overall approach to how best
to support the economy and growth, has taken the approach that,
actually, the best way to support growth is through stimulating
the economy as a whole by not picking particular sectors but by
reducing the cost of taxation.
Chair: I understand that.
We are going to see the Minister in a little while. Indeed,
no doubt, somewhere he will be lurking and listening to this,
I would have thought. Yes, we had noticed he is here.
Edward Troup: I think you will find he is here.
Q139 Chair: I
just want to pursue with you the question I actually asked, which
was whether or not this tax, as proposed and endorsed by the three
parties, was poorly targeted. Can you just clarify for me who
you believe the proposed tax break was targeted at and were there
any disadvantages in that approach?
Edward Troup: First of all there was an announcement, as you know, earlier in the year that there would be a video games tax relief but that the details of it would be consulted on with the industry in order to get the design and the targeting right. Obviously, the General Election intervened so we did not get to the point of detailed design. We had looked at the existing film tax credit as a precedent and we had obviously seen the report from the industry.
I think what I can say is that in looking at any support like this there are problems with targeting simply because very few industries are completely hermetic and defining who should benefit from the relief and how they should benefit creates boundaries at which people who are just outside complain. So we were having some trouble working out exactly how to target it, but I think it was perfectly designable if we had continued with it.
Q140 Chair: Can
you just clarify for me a little more about what were the difficulties
exactly of targeting this on the industry?
Edward Troup: I am in danger of going beyond where we actually got to, but as we have seen with the film tax relief, which has taken 30plus years to develop in its current form, initial attempts to define qualifying expenditure for films ran into quite a lot of trouble. We ended up giving huge amounts of tax relief to people who invested in television series and television programmes, and it took about 30 years until we actually got back to the reforms in-I am sorry, I can't remember exactly what year it was-the film tax industry three or four years ago.
Obviously we learnt a lot from that but I can't say exactly how those problems would be replicated in the video games industry. Video games have some similarities to films in its production and development techniques, but it is not exactly the same and it wasn't just a matter of taking the film tax credit and crossing out "film" and putting "video games" in. I am sorry, because we haven't done the work in detail I can't actually tell you exactly what the problems would be.
Q141 Chair: Can
I just clarify though? Was there anything about the video games
industry and its structure that makes it particularly difficult
to draw up a targeted tax relief programme?
Edward Troup: I
don't think so. Any targeted tax relief is difficult to design
simply because one person's view of whether they work in this
industry or that may not be the same as somebody else's view.
I don't want to try and take parallels with other businesses
but-
Q142 Chair: It
would be helpful, actually, if you did. If you assume that we
don't know very much at all, which is always a good idea with
MPs, it would probably help us understand the position. I see
when I said that a couple of people behind you are nodding.
Edward Troup: I am glad they are being helpful. Again, you have got to realise I do not have a very, very detailed knowledge of this industry. My responsibilities extend across the whole of the tax system, so I am aware of and have been briefed on this industry but not in the details of exactly who does what.
To take an example, we are interested in other industries—and we have had representations about this before—about innovation, high-tech industries promoting high-tech activities. If I say to you a "high-tech industry", you probably think as I do, of my iPhone or whatever it is but, often, what actually adds value to these things are rather odd products like the kind of glass they use in the screen or the little plastic switch or something. Whoever is working designing better plastic switches or better glasses for screens wouldn't necessarily see themselves as being part of a high-tech industry if a minister stands up and says, "We are going to have a tax relief for high-tech industries."
As I say, I have not been into the details of exactly how the video games industries work, but there will be problems of that kind; there will be the issues of people writing little bits of code and the artists who are providing support. Do these benefit from the tax relief or not?
I don't want to overstate the problems because I am quite confident the Treasury and my colleagues in Revenue and Customs would, if given the chance and given the remit, be able to write a set of rules, as they have for the film industry, which define the relief. So I am sure we could do it. Whether everybody agreed that was well targeted I couldn't say.
Generally, what has happened with all of the reliefs that we have introduced over the years is that at the boundary the people who are just outside come back and say, "It is not very well targeted. You have overtargeted it. You have missed me out." I am sure exactly the same thing will happen here. But this would be possible. We could do this if we wanted to. There would be issues; there would be boundary issues, but it would work.
Jim McGovern: A good Scottish
surname, Troup.
Edward Troup: It is, indeed. There is a Troup tartan I am told, but I don't possess any.
Jim McGovern: I think
it originates in Forfar.
Edward Troup: Yes.
Q143 Jim McGovern:
With regard to the comparison that you mentioned about the British
film industry, are you aware that the games industry generates
as much for UK GDP as the film industry? The film industry gets
some £110 million a year tax relief.
Edward Troup: I don't want to sit here and do too much of a classic Treasury thing of bandying figures around, but I am told that the video games industry, based on 2008 figures, contributed £386 million to GDP. I am told that the film industry, based on 2009 figures admittedly, contributed £4.5 billion.
Q144 Jim McGovern:
But you don't want to quote figures?
Edward Troup: I don't want to bandy figures around. I am very happy to quote them. That would suggest the film industry does contribute 10 times as much to GDP as the video industry. Obviously, we would love the video games industry to contribute 10 times as much because that would be very good for the economy.
Q145 Jim McGovern: I
would certainly appreciate if you would forward those figures
that you didn't want to quote to me?
Edward Troup: I am happy to quote them. I don't want to enter into a sort of, "My figures are betters than yours".
Q146 Jim McGovern: Part
of the problem, certainly with TIGA, the games association representative,
is that prior to the General Election the Secretary of State for
Scotland visited Dundee, the Chancellor visited Dundee, a Minister
from BIS and a Minister from Culture, Media and Sport. Following
these visits, the then Chancellor, Alistair Darling, announced
tax breaks for the computer games industry. Between March, when
that was announced, and June, when we were told it wasn't going
to happen, there seemed to be no consultation whatsoever. Have
you any idea?
Edward Troup: I know that you met the Exchequer Secretary, David Gauke, last week and I am sorry I couldn't be at that meeting. I think you did raise this with him and I believe that he told you that the Treasury and Treasury Ministers had to put together the June Budget obviously in less than 50 days-47 days, I think it was-and that clearly limited the time available for consultation. But there were meetings with officials during that period, I believe.
Q147 Jim McGovern: Officials
of?
Edward Troup: Let me just check, but I believe that the games industry met with officials in BIS and DCMS. I am not sure that they met during that period with officials from the Treasury, but obviously we had had a number of meetings over an extended period with representatives of the industry. So while there wasn't full consultation there were—
Q148 Jim McGovern: Can
I just clarify that between March and June meetings were held
with officials from the games association?
Edward Troup: Let me not go on the record and say that definitely happened, but I do recall being told there had been meetings. I am not sure that, in a sense, it really alters the point that David Gauke made to you that, actually, we had to put together the Budget for June at very short order.
Q149 Jim McGovern:
What David Gauke said was that there wasn't time to have many
meetings. I said, "Did you have any meetings?", and
he said, "No."
Edward Troup: No. I have just been handed a note. There were conversations with Treasury officials after the election but there were no actual meetings.
Q150 Jim McGovern: Treasury
officials and whom?
Edward Troup: The industry—representatives of the industry. I have not got the names and details but I am told there were conversations. The industry spoke to Treasury officials, but there were no meetings.
Q151 Jim McGovern: We
have already heard from the Chair that both parties who are now
in the coalition had said prior to the General Election, "We
support tax breaks for this industry". Why was it scrapped?
Edward Troup: What members of the current Government said before the election I think is something you must take up with them. In terms of the reasons why it didn't go forward, again, David Gauke, I think, when you saw him last week, said the Government wasn't keen to extend the number of reliefs in the tax system unless there was strong evidence of market failure. There had to be strong evidence to support any intervention. As I said at the beginning of these comments—
Q152 Jim McGovern: Presumably,
these decisions are made on advice from people like yourself?
Edward Troup: Indeed.
Q153 Jim McGovern: Do
you believe this sort of one size fits all? Do you think that
is appropriate?
Edward Troup: Me and my colleagues' role is to give advice. I think we set out and the question of what advice we gave is a matter between us as Ministers, but there are clearly choices between selective intervention to industries and an approach which seeks to create the conditions for growth more widely in the economy. This Government has been clear that it is more in favour of the latter than the former, but I do think this is a question of direction of choice rather than, "We are definitely only doing this and definitely not doing that." But in this case the view, as I have said, was as expressed to you by David Gauke last week.
Q154 Lindsay Roy: Good
morning, Mr Troup. Can you tell us how you have made the SMEs
aware of different schemes where additional finance might be forthcoming
to support them?
Edward Troup: Sorry, tax schemes or business finance schemes?
Q155 Lindsay Roy: Tax
schemes and additional finance.
Edward Troup: Right. I think you probably need to ask representatives of the Business Department about business finance schemes because it is not the Treasury's role to communicate business finance issues to individual businesses. But, obviously, there is an extensive Government network and there have been a number of bodies around the country sponsored by BIS as well as the Department itself which communicate and manage the various business finance schemes.
So far as tax schemes are concerned, if we have a tax relief, again the Treasury doesn't go out and advertise to taxpayers. But once the Government has decided that it is going to introduce a particular scheme it is obviously very keen that one way or another that is communicated to those businesses or individuals or whoever it is who may take benefit of it.
In some cases that may be down to HMRC and so in a number of the reliefs that are available, the availability of—I don't want to pick examples but HMRC have had advertising schemes which have effectively notified individuals of their entitlements.
I think I am right in saying that in relation to business schemes there has been a greater degree of reliance on the tax agents and the accounting firms as a network for promulgation of the existence of tax schemes. There is quite a healthy relationship there because it doesn't cost Government anything and, generally, the professional firms are very keen, by way of their own advertising, to go around telling their clients that this scheme or that scheme exists, to mailshot everybody in the film industry and say, "Are you aware that this tax relief exists?" So, actually, the market is quite efficient at transmitting the details of tax schemes out to businesses when they exist.
Q156 Lindsay Roy: So
the responsibility doesn't lie with you in terms of advertising.
What about the monitoring of uptake? Is that a role that you
have? If the uptake is small, what action do you take to try
and address that?
Edward Troup: Let me take that in two parts. First of all, the monitoring uptake is done principally on tax schemes through Revenue and Customs, through their own data collection and obviously with, I am afraid, something of a time lag, because of the nature of the business tax return cycle. HMRC will collect data on particular schemes from the corporate tax returns of companies and the selfassessment returns for unincorporated businesses. Those are all collated together. Again, I think you will have to ask BIS how they collect data on business finance schemes, but it does happen.
So far as tax schemes are concerned, yes, we do monitor them. First of all, there is what I might call the crude monitoring of just working out how much they cost each year and we do publish, on a regular basis, the cost of individual tax reliefs. It has not always been published every year but I think it has for the last few years so that we do know how many businesses benefit from any particular scheme and what the cost is.
At a policy level at the Treasury, with the teams that I am responsible for, we do seek to keep all of the tax reliefs under review. Clearly, the amount of resource and effort we can put into reviewing any particular scheme does depend both on ministerial priorities and on our own resource, but we would seek to keep an eye on the schemes and see whether they were continuing fit for purpose. I suspect it is probably the case that existing schemes are not being withdrawn as quickly as perhaps they should be when they have fulfilled their purpose or failed to fulfil their purpose, but Ministers do come back and look at schemes pretty regularly on the basis of our advice, which ultimately is driven by the data from HMRC.
Q157 Lindsay Roy: There
is a purpose to monitoring. If the monitoring indicates a low
uptake what action do you take in relation to advice to the Treasury?
Edward Troup: Again, the question of our advice is between us and Ministers. But if you look back at the historical record and see what has been done with schemes, there have been two approaches generally. There has been an approach that, where there has been low uptake of a scheme and the evidence shows that actually it wasn't fulfilling its purpose, it would just be withdrawn on the basis that it wasn't doing what it wanted to. Generally, when that has happened-and, again, I don't have any specific examples in my mind—Ministers have been keen to find some other way of pursuing the policy end because the policy objective has remained good.
The other approach—and there are a number of examples of this—is where the schemes have been tweaked, where if the scheme has not succeeded at first then, on the basis of advice from ourselves and HMRC, some expansion of the scope of the relief or change of the qualifying criteria has been made to increase uptake.
Q158 Lindsay Roy: Finally,
how do you know it is not fit for purpose, for example, just where
is it advertised?
Edward Troup: I think there are two points. Generally, most tax schemes people do know about one way or another for the reasons I have said, although there is evidence that there are businesses who are unaware of some reliefs. The question of whether it is fit for purpose, in a sense, probably brings us back to video games. Does the analysis show that the impact on business behaviour and activity, investment, employment, whatever it is, first of all exists, that it is material and it represents good value for money, against the criteria which Ministers may want to apply? Of course those criteria may change from time to time.
Q159 Mr Reid: Before
the decision was taken were any calculations done as to how much
the tax relief would cost and, also, how much extra income would
come into the Treasury because of people who would otherwise not
be working in the industry, working in the industry and paying
taxes?
Edward Troup: On the first part of that question, you will have seen from the Budget book in March that we had estimated £50 million a year as the cost of the relief. I don't have in front of me the details of how that was calculated, but I think it was broadly consistent with the level of tax relief which TIGA had asked for in its submissions.
The question of what the fiscal impact would be of any relief—and, obviously, I have seen the analysis which the industry has put together—is more difficult. I think we do take issue with some of the claims there.
I think, without getting into numbers, this is about what happens if you create a job. Particularly if you create a job with an individual who has graduate-level skills, that person may, immediately before he or she got the job, have been sitting at home looking for a job, but if that job had not been created, you would have to say, what would have happened? Would they have spent the next two, three, four, five years sitting at home wondering where their job was going to come from? Of course the answer is generally not. They would have gone and got a job somewhere else, a different job, possibly a lower paid job, possibly a better paid job. But unless they left the country or stayed permanently unemployed they would have entered the labour market, they would have started contributing through PAYE and National Insurance and we would have had tax revenues from their activities. So it is simply not right to say that, if we introduce a tax relief or indeed give a cash subsidy and it creates 100 jobs, the revenue which is directly attributable to those jobs is additional cash for the Exchequer.
Q160 Mr Reid: That
is right but in this case, as I am sure you are aware, TIGA assume
or are alleging that these are trained people who are moving to
Quebec because Quebec gives a very high level of tax relief.
Have you done any surveys, any analysis, to work out how many
people would leave the country if you don't give the tax relief?
Edward Troup: No. This is an extremely difficult question to answer. This is not the only industry or the only circumstance in which claims are made that we need to provide support because otherwise we will lose talent to the UK. The approach the Treasury takes is both looking at the micro-economics, looking at the details of industry, but obviously we have to look at the economy overall.
Part of the assessment of how much revenue we are going to get in total and from individual taxes does depend on assumptions or forecasts about employment, about migration. We can't, in a sense, start adjusting our forecasts because we say, "Oh well, we think this might keep 50 people or 100 people from leaving the country." It is the aggregate level of employment in the UK and migration to and from the UK which ultimately drives our view on tax revenue.
So, although I am perfectly prepared to believe that you could find an individual who would say that his or her choice would have been different and they would have left the country, it is extremely difficult for us. It is impossible for us, effectively, then to say, "Oh well, that makes it worthwhile because this is part of a much larger aggregate picture of employment and migration."
Chair: I wonder if I could
ask if you could keep your answers a little shorter because we
are obviously trying to get through. We have in the past had
people—witnesses—who have tried to play with a straight
bat as long as possible. I am not suggesting for a moment—
Edward Troup: I am here as long as you want me for.
Chair: Fine. I have
got something on at 7, so we are hoping to reach the Minister
before then.
Edward Troup: I will need the Domino's Pizza's number if you are going to go on that long.
Q161 Mr Reid: Have
you done any studies of how many people who were working in the
UK games industry have moved to other tax jurisdictions with games
tax relief?
Edward Troup: No, we don't have the resource to do that. Obviously, we have seen the industry information.
Q162 Mr Reid: Just
a final question, on a point of principle, if another tax jurisdiction
puts in a tax relief that attracts people away from the UK, should
we retaliate or should we just ignore it?
Edward Troup: I think that is a wider policy question. We do not think that it is efficient on either a global or a national level to enter into economic competition. The principles of free trade and good economics would say that, actually, resources should be allocated to where they can be most efficiently used and that is in everyone's interest. So if another country seeks, through tax or cash subsidies, to attract business, this is not something which we would favour.
It is a policy issue for Ministers but, certainly, I think the Treasury orthodox advice would be not to seek to retaliate simply because you get into mutually assured destruction territory. Where do we stop?
Q163 David Mowat: TIGA
last week said to us—and the numbers I think are consistent
with what you said—that the cost of the tax relief was £192
million and it would create 3,500 jobs, which on the face of it
is quite expensive; it is £60,000 a job. They also said,
though, that there would be consequential revenue of £400
million. They actually said those numbers were broadly agreed
with you. I guess what I am hearing is that the revenue one is
the one that is more difficult to have a view on.
Edward Troup: I am afraid we don't agree those numbers. I know that they have said in public that we have agreed those numbers. We haven't agreed those numbers.
Q164 David Mowat: Okay.
So those are their numbers?
Edward Troup: Those are their numbers. I recognise their numbers and I understand their methodology, but we disagree with it.
Q165 David Mowat: I
guess my question then is, what is it about the film industry
that, in your view, means they should have a tax credit—a
tax relief in this way—that does not apply to the video
games industry?
Edward Troup: I think that is a difficult and interesting question. First of all, the film industry, of course, has had support from Governments successively over a very extended period of time. It is an interesting question as to whether, if there were no relief for the film industry anywhere in the world, the Government would seek to introduce it. So, to a certain extent, this is something which has built up over time. Whether it leads to better outcomes for the global film industry I am not sure. It definitely does support the UK film industry in a world in which other Governments worldwide do give support for their own film industries.
Q166 David Mowat: That
argument cuts just the same way as for video games, doesn't it?
Your first point in respect of the film tax credit was that it
has been there for a long time. That doesn't seem a brilliant
argument.
Edward Troup: The UK does have critical mass of infrastructure and creative and technical expertise in the UK to support the film industry. There is a very strong cultural element in the British film industry, as there would be required to be for any video games support. So I do recognise that they are in the same space, but I think I will probably just go, again, back to my opening answer and say that the Government is making choices about new reliefs and its choice on this is that it doesn't feel there is sufficient evidence of market failure to justify intervention.
Q167 David Mowat: You
did say earlier that your group in HMRC was responsible for looking
at the efficacy of tax systems, withdrawing them or adding new
ones?
Edward Troup:
Yes.
Q168 David Mowat:
So, that being the case, it would seem that it is slap bang in
the middle of your responsibility to understand the distinction
between the video games industry and the film industry and what
it is that makes one worthy of Government money and the other
not.
Edward Troup: I think two things. First of all, the film tax relief, which has had a long and slightly chequered history, is now only costing the Exchequer about £95 million or £100 million a year. It is supporting an industry which, as I say, contributes £4.5 billion to GDP. So in terms of what the relative cost of this relief is and therefore if Ministers asked us, "Should we get rid of it?", we would say, "Actually, it is pretty cheap."
The second thing, as I say, is that this has been in the landscape for a very long time and the global film industry is adapted to and, in a sense, is slightly dependent on the existence of tax reliefs around the world.
If you are asking me is that where we might be with the video games industry in 20 years' time, that is an interesting question, and how Government would respond if every other country in the world in 20 years' time was supporting a video games industry with massive tax and cash subsidies, I think would probably be quite difficult for Ministers. But at the moment both the global framework and the cost—sorry, the Chairman is trying to stop me—don't make this worthwhile.
Q169 David Mowat: Just
finally then, the fact that we are discussing both of these industries,
is the reason that their tax relief is even considered principally
because the industries are very movable and therefore the revenue
can just move, or is it because there is a cultural element here
that somehow we perceive as being a good thing to have them done
in our country?
Edward Troup: I think what I would say is that sitting where I am, an awful lot of industries come and see my teams and argue for tax relief—really an extraordinary number of industries. I have just come from breakfast with senior representatives of the property industry who think we should reinstate empty property relief. We have had quite a lot of lobbying about that and I am sure Members here have had lobbying on all sorts of things.
I think what is different about this is that this is quite visible. Whether that is a tribute to the industry and its ability to mobilise public and political opinion behind it or whether there is some intrinsic difference in this industry I don't know. But, certainly, sitting where I sit and seeing a whole lot of papers and notes and submissions coming across my desk, actually there isn't much to distinguish this from other industries who claim that talent is going abroad, that investment is needed here, that tax relief is the answer. This is a good report, but, to be honest, there are other industries which if you substitute their name for video games in this report it wouldn't look that different.
Q170 David Mowat: The
difference is, though, the cultural element, isn't it? What I
was just trying to get to is why films got it in the first place
because it was perceived to be good to do these sorts of things,
whereas property isn't so sexy in that regard?
Edward Troup: It could well be. Obviously, in a sense, the cultural thing has now got tied up with the fact that within EU rules we can't give any tax relief for a specific sector unless it falls within one of the exceptions of which a cultural element is one. So it is difficult to say whether that has driven the claim for relief or whether the shape of the relief has been driven by the EU State Aid Rules.
Q171 Dr Whiteford: Thanks
very much and thanks for being with us this morning, Mr Troup.
You are probably aware that Troup is part of my constituency
in Banff and Buchan. Troup Head is an important nature reserve.
Edward Troup: Excellent. My father has a photograph of himself at Troup Head.
Q172 Dr Whiteford: I
am conscious of time, so I will just try and restrict myself in
my questioning. In reaching the decisions to back away from a
tax relief system that was backed by all the parties prior to
the election, were any direct comparisons done with the tax regimes
in the countries that are direct competitors in this sector, particularly
France and Canada?
Edward Troup: First of all, I have to go back to the point that the advice we have given to Ministers is advice we give to Ministers. But, obviously, in doing our own analysis, hence I think you would be entitled to assume in giving our advice we have looked very carefully at the global position and we are very aware and obviously the industry has been very good at pointing out what reliefs there are in Canada, bits of the US and, to a limited extent, in France. So, yes, we have done the comparisons and I know Canada stands out.
It is quite interesting in relation to Canada that they first of all have a Corporation Tax rate which, although they are bringing it down, is very much higher than ours; and they do have much more of a culture of giving certainly at a province level tax relief for all sorts of things, some of which are quite unusual, like processing pig manure and things like that. So there is a different economic approach.
Again, coming back to my opening remarks, the Canadians appear to have taken more of an approach of more selective tax reliefs, rather than a broader approach to supporting growth, at least in relation to these industries.
Q173 Fiona Bruce:
I just wanted to tease out some further detail regarding some
of the points raised earlier and, really, compare and contrast
this proposal with some funding that Ed Vaizey has recently
announced only this year for Abertay University to boost the Scottish
video games industry and really look at whether we can honestly
say that this games tax relief would be value for money when you
compare it with how we could use other public funds, say, for
that scheme.
I am interested that you say the figures that we were, I think, rather confidently given by TIGA are perhaps questionable. They say that the games tax relief would cost around £192 million and would create or save around 3,500 jobs. What you are saying is that to look at the creation or saving of those jobs without looking at wider economic indicators, like other jobs that they may be able to fall into, is really not something that can be confidently forecasted. That is interesting because, when we look at the figure of £60,000 per job which that scheme would create, that is a very high figure. What you are saying is that that is based on unreliable indicators in the first instance.
Comparing it with the Abertay University scheme, we had a witness at our last hearing from Abertay, a very senior representative there involved in training young people in computer skills and also in the pilot projects that they undertake with small businesses in the area which they bring into the university. So they are crossfertilising skills. They are not just providing, if you like, cash benefits. They are really building skills into our young people in the next generation.
Now, the witness there said that for the £2 million which has been announced will be given to boost the Scottish games industry through the Abertay University training, they are confident—and we are looking at a professional who has been working in the field for many years, working with small businesses, so indigenous businesses—they will create 400 jobs. That is £5,000 a job. Mr Chairman, you will be very relieved to hear that actually I am only asking for a very short answer.
Chair: Right.
Fiona Bruce: Can
we honestly say that the games tax relief is value for money when
you look at how we can use funds to promote our indigenous businesses
in this field in that way—£60,000 a job on unreliable
indicators; £5,000 a job to the professional training?
Edward Troup: I did see the evidence from last week and I thought it was very interesting. I am not an expert in these areas, but it did seem to me that this was quite an impressive return for money and Mr Vaizey may want to say something about it. But if the question is do I agree, from a Treasury perspective, that £5,000 a job is better value than £60,000 a job, even if I accepted that number, did I think that was a good thing, I would say, yes, it sounds like better value for money.
Chair: That was a surprising
answer.
Fiona Bruce: Thank you.
That is all I want to ask.
Q174 Cathy Jamieson: I
just wanted to pick up on a couple of points in relation to some
of the crossdepartmental work that is potentially going
on in relation to this because the written submission came from
DCMS and BIS talking about consulting around a review of taxation
of intellectual property, additional support for research and
development, tax credits and a whole range of things as a result
of the Dyson review. I just wonder, who is actually in the lead
on all of that currently? What discussions are already under
way with the Treasury and when do you think that is likely to
come to a conclusion and make a report?
Edward Troup: The taxation and intellectual property review, as with all tax matters, is very much a Treasury lead. We are hoping to get something out on that quite soon. I am sorry, I don't think we have a date, and I certainly don't have the date with me. As I think you said, certainly it is the case that we are looking at R&D tax credits as part of that.
In a sense it comes once again back to my opening point of actually providing a broader stimulus to support intellectual property and intellectual development in the UK across industries. I think, of the R&D tax credit, in the most recent year for which we have got data, about £50 million of the £700 million or £800 million of support went to software development. So it is not as if the industry isn't already able to access some support. But we do see this as an important broader plank in supporting a whole range of industries but particularly in the intellectual property field.
Cathy Jamieson: In view
of time, Chair, I will leave it at that.
Q175 Julian Smith: Can
I ask you a bit about your calculations or the Treasury's calculations
of the three general fiscal announcements that were made for small
business in the Budget, so specifically the cancellation of the
previous Government's jobs tax, reduction in Corporation Tax and
the NI holiday for businesses outside London in the regions and
what benefits those general fiscal decisions have made on this
industry?
Edward Troup: Obviously, I can tell you what the aggregate figures were for the amounts of money involved in those, but I can't tell you how those break down for this particular industry than I am afraid I could for any other industry of comparable size. The industry is probably better able to answer that question than I am, so, no, I don't have those figures.
Q176 Julian Smith: But
you would confirm that for an industry with quite a large number
of new start-ups this might have some benefit?
Edward Troup: I would expect them to benefit. Indeed, once again back to my opening point, there are a number of measures which the Government have taken through National Insurance, through Corporation Tax, through the NICs holiday for startup businesses, which are generally applicable to the whole range of businesses and which this industry, along with any other growing or existing business, can benefit from.
Q177 Julian Smith: Just
in terms of international competition, would you confirm the information
that we have had? You talked about Canada having reliefs for
this industry but, actually, large gaming markets such as Japan
and Korea don't have any. Can you confirm that?
Edward Troup: As far as I am aware there is no tax subsidy in either Japan or Korea, although I have read that Korea do provide cash subsidies to their industry, but I do not know if that is the case. I am not aware of any Government support given in Japan.
Q178 Julian Smith: The
final question was, really, on the recent change in IP tax relief.
There has been a bit of a relaxation on that for companies that
aren't owned in the UK, which I think came in the second Finance
Bill. I just wondered if you had any comment on that.
Edward Troup: This is getting into a level of detail I don't have the answers for. I am aware there was some change. I don't think it has any direct impact on this industry, but it may do.
Julian Smith: Thank you.
Q179 Chair: Thank
you very much. Can I just ask, before I ask my colleagues if
they have any other questions, if there is any information or
figures that you think might assist when we are producing a report
that would help illustrate some of the points that you have produced?
I take the point that we don't want to bandy figures, but if
we are adding figures to a report that help make points then that
would be useful. So if there is anything, upon reflection, you
would like to let us have after this, could you do so?
Edward Troup: Yes. I did note there was a question as to whether we wanted to put a written note in. Can I confer with my colleagues and actually have a word with David Gauke to see whether he would like to back up any of the points he has either made to Mr McGovern in meetings or I have made with a further note?
Chair: That would be helpful.
Jim, you wanted to make another point or ask another question?
Q180 Jim McGovern: Two
points actually, Chair. I have been in regular contact with
Richard Wilson, who is the Chief Executive of TIGA. Although
quite a few of us here have said we don't want to bandy figures
about but have then gone on to do so, is it fair for me to go
back to Richard Wilson and say, "Mr Troup disagrees with
your figures. They are inaccurate."?
Edward Troup: Absolutely; no, completely. Let's be clear. I am not saying his calculations are arithmetically wrong. I am saying that the assumptions on which they are predicated we would disagree with. I have not checked it myself but I am sure the arithmetic is fine, but the assumption about the creation of a job actually being an addition to the UK economy and hence an addition to our revenues we just do not accept.
Q181 Chair: Perhaps
it would be helpful if you just let us have a note indicating
which of his assumptions you believe are wrong and how, in order
that we can just have a more informed debate going forward. I
think that might be helpful.
Edward Troup: If you are asking for a note to explain the point that I have made about displacement and dead weight costs of tax incentives, I am very happy to do that. My colleagues are probably blanching behind me because they are going to have to write it.
Chair: That will teach
them to nod earlier on when I was saying that Members don't understand
very much.
Q182 Jim McGovern: On
the second point, I take issue with what you said earlier on that
if someone doesn't get a job in the computer games industry will
they sit in the house for five years doing nothing? No, they
will get another job.
I am obviously an MP for Dundee. In recent years, it has been transformed. It now regularly comes in the top 10 of the knowledge economies throughout the world. I would take issue with what you have said and I would actually quite resent it. If they don't get a job in the computer games industry they can go to McDonalds or Tescos or B&Q and get a job. Is that what you are saying?
Edward Troup: No, I am not saying that. I don't want to get too much into the details of where the graduate market is now at the moment, but the historical evidence is that graduates do find graduate-level jobs in the main. They do sometimes have to move location in order to find those jobs.
Q183 Jim McGovern: To
Canada or somewhere?
Edward Troup: The evidence is there has not been mass emigration of graduates. They have found jobs. I don't have any evidence on internal migration. One of my sons has just graduated, was at a graduate fair yesterday and is looking rather alarmed about the prospects, but he is quite prepared to move to wherever a job is and I am confident he will find a job. I think that applies to a graduate who would otherwise have been employed in the video games industry if they didn't get the tax relief.
Chair: Okay. Can I thank
you very much for coming along to see us? We have finished bang
on time. Thank you.
|
