Examination of Witness (Questions 184-230)
EDWARD VAIZEY MP
20 OCTOBER 2010
Chair: Minister, if you
are ready, we could just make a start. Can I thank you very much
for coming along to the Committee today. The light isn't shining
directly in your eyes, is it?
Mr Vaizey: It does feel a bit like an interrogation, Mr Chairman, but I am not giving anything away.
Q184 Chair: If
you move that way it will shine right in your eye. That's excellent,
excellent. Thanks very for much for coming. Could I start off
just by referring to various quotes that we have had from the
industry. We are told that on 29 March you, then the Shadow Cabinet
Minister, told Develop that the Conservatives "are going
to support tax breaks for the video games industry" in the
Conservatives' first Budget. On 26 April, he added: "We
are fully behind game tax breaks. This is my unequivocal statement."
He said: "It's been approved by George Osborne."
Then we have quotes from Don Foster saying something similar.
What changed between those statements being made prior to the
election and the announcement that you were not going to proceed
with games tax relief?
Mr Vaizey: Not wishing to obfuscate right from the first off, that is a question for Treasury Ministers because obviously George Osborne, the Chancellor of the Exchequer, took a view in terms of his Budget about what was the appropriate way forward. Reading, as it were, between the lines, my view is that the Chancellor took a view that in terms of the business support package he was putting together in the Budget, which covered all business sectors in terms of reducing business taxation, the holiday on National Insurance contributions and not putting forward the increase in National Insurance contributions, he was creating an environment which was a good place to do business whether you were in the video games business or in the widget-making business or whatever and that he didn't therefore want to proceed with a specific sector tax break.
I think one Government insight perhaps into the Treasury thinking from the earlier evidence of Mr Troup is where he said, of course, that many different industries put forward their case for a tax break and I think therefore the Treasury took a view they were looking at the bigger picture. I think, if one is talking about the politics of this, you look at how the coalition Government has approached various issues. There are certain policies that they put in place since the election and certain policies they haven't proceeded with because of the nature of the coalition Government and the changed circumstances.
Q185 Chair: I
understand some of that, but the difficulty that I have is
that the quotes we have been given said that you—not as
the Treasury Minister but as the Shadow Cabinet Minister for this
industry—said that you were going to do it and you said
that George Osborne was on board for it.
I am not clear, from your answer, why that was said then and then changed afterwards. Do you understand what we are searching for and why the industry is unhappy? I want to come later on to whether or not it was the right thing to say but, as my children used to say to me, "But you promised". I think there is a feeling from the industry that this was promised and they don't quite understand why the promise was broken, particularly since both partners in the coalition said that they supported a games tax break.
Mr Vaizey: I think that is the key point. Don Foster made similar quotations and again had a similar assurance in terms of the Liberal Democrat position, although I don't believe that a video games tax break was specifically in the Conservative election manifesto. I couldn't speak for the Liberal Democrat election manifesto. But, to put it completely bluntly, as far as I am concerned, after the election all bets were off in terms of the financial situation and in terms of how the Chancellor wanted to approach his Budget.
I think they felt that they were approaching things afresh, both in terms of the Budget deficit, what they could afford, but, also, the bigger picture in terms of the fiscal support they wanted to put in place for business as a whole. So the Chancellor took that decision and that was absolutely within his right to make that decision.
It may be that we can revisit a video games tax break in the future. I heard Edward Troup mention a timescale of 20 years; it might be shorter than that. I am not trying to dodge the question, but I think the Chancellor is entitled to make a decision when he is putting together his Budget. I think there were things we would have liked to have done in the runup to the General Election that just simply proved impossible after the General Election, looking at the state of the public finances but also looking at the approach the Chancellor wanted to take going forward.
Q186 Chair: In
your last answer and the last couple of clauses there are almost
two separate things. The one I want to pursue just now is: was
it badly targeted? Was it the wrong thing to do? I understand
your point that financial circumstances meant there were a whole
number of things junked.
What I am not clear about is that the argument also seems to be being put forward that this was badly targeted. In a sense, that is almost a criticism of the promises that were made beforehand because I don't know whether or not, once you got into office and once you found support from the Treasury and so on, things were then revealed to you that indicated that this was not such a good idea as you had previously thought. That is a different defence from the defence of saying, "The economic situation was so poor that we couldn't possibly do it." Can you just clarify the position for us?
Mr Vaizey: I can't clarify the position for you. I didn't get a chance to lobby the Treasury directly on the video games tax break. I lobbied indirectly and made my views known, but I wasn't aware the Treasury regarded the tax break as poorly targeted. So I can only really extrapolate in terms of why they decided to describe it as poorly targeted and that would probably be unhelpful.
Q187 Chair: So,
from our perspective, the relevant Minister dealing with the cultural
industries still takes the view that this was adequately targeted,
but, as they were a bad boy, they did it and ran away?
Mr Vaizey: No. My view on tax credits is more nuanced than that. If you start, as it were, from the beginning, do I, as a matter of principle, think that tax credits are a good thing? Not necessarily. Did I, as a shadow Minister and Don Foster as a shadow spokesman for the Liberal Democrats, take a view that we were effectively in tax competition with other jurisdictions? Yes, quite possibly.
What would a tax credit bring in terms of the video games industry? I think it is very important to be clear on a number of points. First of all, it could act as a stimulus to inward investment. It wouldn't necessarily support, as it were, the indigenous British or, indeed, Scottish video games industry. It might attract foreign investment from foreign companies.
The Treasury, I think in its written evidence, has indicated that in a sense one is in a never-ending spiral at that point, that if you introduce a tax credit then someone introduces a better one and you are under pressure to introduce even more. It was certainly never my view that we could ever match, as it were, the kind of generous financial support that the Canadians give to their industry and they have clearly made a decision that they are going to try and attract as much of the video games industry as they possibly can.
The tax credit was there as a potential stimulus to inward investment but there is also a recognition that, for example, Germany, which has a growing and successful video games industry, doesn't rely on a tax credit and that Japan and apparently Korea as well don't.
I am now in a position, given that the Chancellor has now made his decision in terms of the tax credit in the light of whatever circumstances were presenting themselves to him when he was presenting his Budget, to look at whether there are other ways in which I can support the video games industry.
Q188 Jim McGovern: Obviously
you heard what was said previously, so you will have heard what
I said about consultation prior to Alistair Darling's announcement
to proposed tax breaks for industry. Numerous Government Ministers
visited Dundee to see for themselves what the industry involved.
The main gripe of TIGA was that prior to the Budget in June no
consultation took place prior to the decision to withdraw any
tax breaks. Could you explain why there was no consultation?
Mr Vaizey: I don't think there was time. I think that the last Government came very late to the conclusion that a tax credit was, from their perspective, the right way forward. You will have seen the statements made in various Budgets and preBudget reports by the last Government in the runup to that, initially ruling it out, making sceptical noises and gradually moving towards that position.
I personally find it slightly frustrating that the last Government came to that conclusion in its last Budget at a point where it seemed likely it wasn't going to be in a position to see that through after the election. I don't think that there was—
Q189 Jim McGovern: Why
did it frustrate you?
Mr Vaizey: Because I felt that if they had been serious about the video games industry and the video games tax credit they would have been putting this through two or three years beforehand, rather than in a last-minute Budget before a May election.
Q190 Jim McGovern: But
you supported it?
Mr Vaizey: You heard the quotes from me, absolutely. In terms of what was an emergency Budget of the Chancellor in June, he had 50 days to put together an emergency Budget which, from his perspective, was about stabilising the public finances and putting in place longterm measures to support British business. So in that sense he would have been superhuman, I think, to have had the chance to consult in detail on a video games tax credit.
Q191 Jim McGovern: Thank
you. When you say that the Government's view is that a cut in
Corporation Tax and National Insurance etc. is the way forward,
do you actually believe that there is no case to say that specific
industries need specific help?
Mr Vaizey: I look after a range of different industries in my position as minister for the creative industry. I always look ruefully at some of, as it were, the heavy manufacturing industries that still, I think, get a lot of political support. One looks at things like the car scrappage scheme from the last Government. I am therefore happy to go in to back what perhaps have been seen as frivolous industries like the fashion industry, which I think is absolutely incredibly important to the success of this country. So if you are asking me should the creative industries receive the same amount of attention and support from Government as perhaps manufacturing industry has in the past, then of course I absolutely agree with you.
From my perspective I think that as the Minister for the video games industry my job now is to make sure that existing Government schemes are tailored or tweaked to support so that the videos games industry can have access to them. So, for example, we have been talking about R&D tax credits. There is going to be a review of R&D tax credits. So I regard it as my role to try and ensure that that consultation takes into account the needs of the video games industry.
We are going to look again at the Enterprise Investment Scheme and venture capital trusts. So, again, I want to make sure that the video games industry is able to access those schemes without too much burden.
Q192 Jim McGovern: Finally,
as I said earlier, numerous Government Ministers prior to the
General Election came to Dundee to see Abertay University and
to see what the computer games industry involves. Unfortunately,
the public perception in a lot of cases is that they think of
young lads sitting in front of computers playing at APB or Grand
Theft Auto but it has, actually, massive implications for medical
research and medical science. So would you be prepared to come
to Dundee to see for yourself and possibly go back to your Government
and ask them to reconsider tax breaks?
Mr Vaizey: I think I am coming on 3 February and I think I am taking David Mundell with me.
Jim McGovern: Oh right.
That's bad news.
Chair: Moving on. Lindsay.
Q193 Lindsay Roy:
I want to focus on the talent pool. Would it be fair to say that
the lack of tax relief was compensated by the project investment
in Abertay? Was that a deliberate decision so to do? It has
been broadly welcomed and is, I think, a recognition of the pioneering
role of the university. What, in particular, secured that investment
for Abertay?
Mr Vaizey: I think that it was an opportunity for me. I think the grant had been considered under the last Government. It didn't come out of the blue and it was an opportunity for me to confirm it and take it forward. It also included grants to MediaCityUK in Salford. We have also given money to Bournemouth University as well. I think direct funding of incubators and areas where video games companies get a chance to prototype their models and development is a good way of supporting the video games industry.
I think, again, what the industry wants is to see active Government investment in key areas, particularly skills, but also in, effectively, research and development. Again, we shouldn't lose sight of that and when we look at the competing jurisdictions it is not necessarily just tax breaks that are attracting companies or helping the development. It is straightforward financial assistance.
I certainly think we need to look, as the landscape emerges in terms of local enterprise partnerships and so on and regional growth funds, at how we can also use that to support the video games industry.
Q194 Lindsay Roy: I
think all universities will say they are the greatest thing since
sliced bread in terms of particular initiatives. Can I probe
you further about what in particular secured the investment for
Abertay and, also, how are you going to measure the impact? How
are you going to monitor the impact of this investment?
Mr Vaizey: I think what secured for me the investment for Abertay was that it was a scheme that was pretty far down the road and Abertay has a reputation that is unparalleled, I think, around the world. I think it was pretty clear that any investment in Abertay would be a sensible investment and a wellused investment by a university that stands absolutely at the top of the tree in terms of its educational value to the video games industry.
Q195 Lindsay Roy: If
you look at the league tables—I am not a great fan of these—Abertay
doesn't feature highly in the university league tables. Have
we got the indicators wrong? Do we need to do something about
reevaluating in terms of outcomes?
Mr Vaizey: I wasn't aware of that point and I would certainly be open to a discussion about ranking universities in terms of their support for either the video games industry or creative industries as a whole. I have commissioned a skills review which you might want to talk about later on, but I hope that will highlight the importance of universities like Abertay in terms of providing the absolutely first-class education in this sector that it does. So I would certainly be open to specific league tables. That is an idea that I hadn't considered but I will take away and consider. We will call it the Roy table.
Q196 Lindsay Roy: Thanks
very much. So you would be considering the possibility of continued
differential support?
Mr Vaizey: Yes.
Lindsay Roy: Thank you
very much.
Q197 Julian Smith: Thank
you, Minister, for coming. You talked a few moments ago about
the IP review, the review of IP and the consultation period.
Do you have a timetable for when you expect that to be completed?
Mr Vaizey: No.
I think that is, as far as I understand it, in the hands of the
Treasury, but I would expect it to be completed in time, or my
supposition is it will have been completed in time, for next year's
Budget.
Q198 Julian Smith: One
concern generally on consultation is just that industries get
truly consulted. Will it be possible? Will the Treasury be really
reaching out to this industry as it will with other industries
to the gaming industry?
Mr Vaizey: I will be making sure that the industry does respond. As far as I am aware, for example, the industry didn't respond to the initial consultation with the IS and the VCT reform, so I want to make sure that they do respond to the R&D tax credit consultation. They have got to be in there making their case and I will certainly support them in doing so.
Q199 Julian Smith: I
also wondered if you could talk more generally about the digital
vision that your Department has for Britain, and, I guess, for
Scotland more specifically, and how you see that helping the gaming
industry, whether it is broadband or the other initiatives that
have been taken? It will be quite interesting to see how that
will benefit this industry that we are talking about today.
Mr Vaizey: I've got a whole range of different responsibilities but, obviously, one of them is broadband rollout, so we want Britain to have the best superfast broadband in Europe by the end of 2015. That is absolutely about making Britain a good place to do business.
I think that we have what I would call an element of convergence going on, so not only do you have the web but you have also got film, television and video games, I think, coming together to form a nexus, as it were, where the barriers, the silos between these different industries are rapidly breaking down.
So, from a policy point of view, as a minister that covers these areas, I want to put in place structures that allow these industries to talk to each other and feed off each other. That involves support from the Regional Screen Agencies; it involves NESTA; it involves the Technology Strategy Board, which I think is a very important player in all of this. It could even involve the Arts Council, surprisingly enough, because we, I think, have a unique combination of being a series of nations that are very creative. We are known around the world for our creativity but also, actually, quite a lot of hightech technical skills which I think come together very neatly.
Q200 Julian Smith: One
of the things that confuses this Committee sometimes is where
London stops and the devolved Administration starts. How does
your Department work with the devolved Government on these sorts
of issues?
Mr Vaizey: I think we work reasonably well. I think the Scottish Government, to a certain extent, could take credit for continuing to pioneer in that area. They put together, for example, Film Scotland and the Scottish Arts Council to create Creative Scotland.
The Scottish Government has a broadband strategy and I think is taking the digital agenda very seriously. So I certainly feel that I, as a Minister, can learn from my Scottish colleagues but also from my Welsh colleagues as well about what they are doing, and Northern Ireland as well. I think it is interesting to see certainly that there are clear digital agendas in each of the nations as well as in Whitehall.
Q201 David Mowat: You
mentioned in your last answer that you had a vision of, I think
you said, film, television and video games coming together in
a seamless way. I am interested, then, to explore why it is that
one of those is subsidised or continues to be and the others are
not, in your view?
Mr Vaizey: I think it is a historic issue and it was obviously at the front of my mind when I was campaigning for a video games tax break before the election that the film tax credit is in place and supports a great deal of inward investment by the film industry into this country and the kind of skills that emerge as a result of that and the industries that emerge as a result of that.
One shouldn't get the idea that the film tax credit has been a stunning success from year zero. It has had a lot of bumps in the road. Indeed, at one point in the mid-2000s it was really a very large tax evasion scheme. But the film tax credit now is working I think very effectively.
Q202 David Mowat: What
I have had difficulty with right from the start of this is
distinguishing what it is about the film industry which says that
they should have a film tax credit and the video games industry
that says, as you rightly said, the Chancellor looked at the fiscal
position and said, "Okay, we can't do that, but we continued
with the film one". I am just interested in the thinking
behind that from a cultural—I guess you were an influencer
in that dialogue.
Mr Vaizey: I think it is politics. I think an existing tax credit is in a stronger position than one that doesn't exist.
Q203 David Mowat: So
the fact that the films get it and video games don't is a historic
anomaly?
Mr Vaizey: Yes. I wouldn't want to use the words "historic anomaly" because that might give the impression that we found the film tax credit anomalous. One thing I can reassure you is that the Government is 100% behind the film tax credit, but it is a historical circumstance, yes.
Q204 Jim McGovern: It
is not 100% behind the games industry?
Mr Vaizey: No, I said 100% behind the film tax credit.
Jim McGovern: Not 100% behind the behind
the games industry? Mr Vaizey: No, I said 100%
behind the film tax credit.
Jim McGovern: By implication
then, not-okay, sorry.
Q205 David Mowat: I
just want to push a bit further because it does seem the best
point that the video games fraternity have is that this other
industry did get this tax credit over a number of years and it
did apparently make a difference. Yet, I think the reason you
gave for it not being given to video games was inertia, "We've
got one; we haven't got the other. Therefore, it is all too difficult
to bring in another one but we will keep the old one going."
You see, had you got rid of both of them it would seem to me that
the Government's position was more tenable in a way?
Mr Vaizey: Yes. You can argue for intellectual coherence. If you were going to try and examine potential differences between the film tax credit and the video games tax credit I think, as we are now back on to the video games tax credit, it is worth perhaps reminding ourselves that not everyone in the video games industry necessarily thought the tax credit was a good idea and there are a number of reasons for that.
First of all, the film tax credit, because it depends on European Commission approval, has to be based on a cultural test, not just on the labour force being British but also on the narrative, as it were, of the film having a British angle, which is why, for example, Harry Potter can qualify as a British film even though it is made by an American studio. So whether you can translate a cultural test to a video game like Angry Birds is an interesting philosophical discussion worth having. Obviously, given that the Prime Minister plays it a lot, it probably would pass the cultural test.
The other issue is the way that video games are changing. More and more games are going online. They are multiplayer games, so, much more than in film, the publishers—as it were, if you take the parallel of the American studios, the publisher of the film—are perhaps not falling away but may play a less important role going forward. Developers will be able to put their games online and get a global audience through iPhone apps and iPads and things like that. So there was a feeling, for example, and quite a strong feeling among some elements of the video games industry when we were talking about a tax credit in the run-up to the election, to say, "Well, actually, are you simply going to put in place a system that supports an old model of making games and doesn't actually stimulate the new model?" Which is why, for example, if one can tweak the R&D tax credit and also look at investment schemes to encourage investment into the games industry, one might actually bizarrely end up with a better result by supporting, as it were, the future of the games industry rather than what some people would characterise as the past.
Q206 Dr Whiteford:
We have obviously heard a lot of evidence over the last few weeks,
but one of the things that has really troubled me is that it is
clear that there is a growing and rapidly diversifying global
industry, yet we are witnessing a contracting UK industry. The
UK and Scotland in particular has been a significant player in
this sector to date but it appears that we are losing market share
to a range of competitor countries, some of which are promoting
their sectors very aggressively and others which aren't.
I suppose my question is, really, how interested is the Government in retaining this sector in the UK as a significant player? If the original commitments around tax are something that the Government is now backing away from, what do you intend to do to create a conducive environment for this sector to flourish and what kind of timescales are we looking at for implementation?
Mr Vaizey: I am very interested in ensuring that we have a successful video games industry. I think that, to a certain extent, the problems that the video games industry faces in this country are similar to some of our other creative industries in terms of creating scale.
Certainly a lot of businesses, when they reach a certain size, get sold either to Japanese or American publishers which have much bigger scales. So those are the kinds of structural problems in terms of creating business of scale in this country.
I think there are massive opportunities for the industry in this country on a range of options. First of all, the reason I commissioned a skills review is that, if I take, for example, one conversation I had with a potential inward investor in this country, there were three legs that they were looking at, as it were, to encouragement to invest. One was skills, which is a big tick for this country; one was ease of doing business, which should and is a relatively big tick in terms of the general burdens on business and running a business, regardless of whether it is video games; and thirdly was fiscal support.
I think if we get the skills review right so that we can get out there and tell the industry that this is a great place to pick up talent, that will encourage them. I think that if we continue to put in place a good business environment and a benign business environment, that will encourage investment.
As I say, if we can put in place some element of financial support, either through direct support through business support schemes, or indirect support through research and development schemes or access to finance schemes then I think that will also continue to support it. But I also do think—and this is my job—that we need a clear narrative for the industry. We need to set out why this is a great place to have a video games business.
I don't want to give the impression that I am in any way criticising UK trade and investment. I am not. I think they do a very good job. But I certainly think we need to learn perhaps from the aggression of some of our competitor countries in terms of their active wooing of different companies. I think we need to be bolder in terms of going after organisations and actively encouraging them to come here.
Q207 Dr Whiteford: I
think that is helpful, particularly in terms of the research and
development side, because we did hear a lot that finance for development
was a particular issue for some companies.
I am concerned about the skills issues, though, because we do have the example of Abertay, but the historic problem in Scotland has been brain drain. I think moving away from an expert labour economy, which is what we have had, where we lose our highly skilled people often to Canada historically, Australia and the US, has been very bad for the country and it has resulted in a lot of people on low paid jobs rather than highly skilled people in better paid jobs, which I think has to be an aspiration. So I would strongly urge us not to be simply just skilling people up to get jobs overseas where the talent is lost.
Mr Vaizey: Absolutely.
Q208 Fiona Bruce: Good
morning, Minister. You heard me asking earlier about the comparable
cost of the investment that is proposed through this tax. Really,
the figures don't seem to stack up. Given the severe financial
constraints that we have inherited from the previous Government,
you cannot, I think, do other than accept that the tax relief
proposal simply isn't value for money?
Mr Vaizey: As I say, I think that George Osborne had to consider a range of factors when he was putting his Budget together. I think the Treasury had a figure in mind about how much tax relief would cost and, as a Minister who has been through the spending review, I know that Departments literally are looking at the smallest possible sums that you could imagine. So I could see that if George Osborne was considering the very difficult financial circumstances that we are in, the actual potential cost of a tax credit, which would effectively be additional public expenditure at a time when he is trying to reduce it, would be a factor that would certainly have influenced him.
Q209 Fiona Bruce: Absolutely,
but what, clearly, you brought out this morning is that, notwithstanding
that, you are looking very constructively at how you can use the
limited funds that we have to really make a difference for this
industry in Scotland and elsewhere.
Mr Vaizey: That is what I am very keen to do. As I say, I was keen to use what money was available to support particular centres of excellence across the country—so Bournemouth, Manchester and Dundee. Also, I am keen to use existing fiscal support mechanisms to ensure that the video games industry, as it were, gets a fair crack of those. So I don't think, in those circumstances, I am adding to the burden of public expenditure or pushing the boat out. I am simply trying to make sure that all the mechanisms which the Government does think are the effective ones to put in place are relevant.
Q210 Fiona Bruce: When
I talk about value for money, I am talking about the comparable
return on investment.
Mr Vaizey: Yes.
Q211 Fiona Bruce: I
am very pleased to hear all that you have said today. Can I talk
about something that is, if you like, for many people, an elephant
in the room regarding the video games industry? I was very pleased
to go to Abertay University because I saw there the constructive
side of this industry and how much they are doing there in terms
of medical development. Only last week actually I visited my
local fire station and saw the technology being used there to
help in fire training—exactly that kind of excellent technology.
That is the kind of investment that I think everyone would want
to see such funds as there are put into developing them—the
small, local, indigenous businesses developing skills, keeping
our expertise and our intellectual property here.
What a lot of people like me, and I am a mother of two teenage boys, are very concerned about is when we use the term "video games industry" it might be perhaps worth thinking again about that very title because at the moment it encompasses so much that is positive. It is about, really, whether it is right that we should be looking even at tax relief for certain products—and I am quoting; I checked with one of my colleagues earlier before I put this to you—where, when we went to Dundee and we talked with the video games producers and someone asked one of the developers, "Well, what sells?", he said, "Well, basically, it is shooting and killing." That might have been, if you like, not the whole picture but it is part of the picture. It is very concerning for mothers like me, just finally touching on one point—and this was picked up by a previous witness when I asked about it—on the streaming of online games where there might be a certification of the age range but there is, really, no effective way of prohibiting youngsters from accessing these games. I think if we are going to invest in this industry then we need to address the very real concerns that there are on the part of parents like me about support for the products which are coming on the market.
Mr Vaizey: I absolutely, obviously, understand your concerns. I am not the father of teenage children but I will be, hopefully, in a few years' time. That is, I have got two young children but they are some way off being teenagers.
Obviously, violence in video games is a perennial debate. I took the view, as a shadow spokesman on this issue and I now take the view as a Minister, that my job is to support this industry as much as I can because it does tend to get some negative headlines. I feel that the negative headlines are somebody else's responsibility. My responsibility is to get the positive headlines. I do think, in the last two or three years, the industry itself has been extremely good at getting out there and explaining the enormous range of benefits it brings not just to interactive entertainment and leisure but to support for the disabled, the kind of technology that will allow someone who is a quadriplegic to interact with people through eye movement and things like that, and, as you say, in terms of simulation for the emergency services and indeed our armed services. So there are a range of massive benefits.
In terms of 18-rated games, I think they make about 3% of the total games available. There will obviously be, occasionally, questionable matters of taste and we have seen that in recent weeks in terms of some particular games focused on the war in Afghanistan. So there is no doubt that those issues arise, but what I always say is you could say the same about film and you can say the same about literature. Tastes do change and evolve. But, as I say, my job is to promote this industry and I will let others highlight its flaws.
Q212 Fiona Bruce: I
will just come back very briefly on this; thank you. You are
absolutely right in so many respects and I wanted to ensure that
I emphasised the positive side. I think the difference between,
say, film or even literature, is that it is the monitoring which
is the issue because we now have, obviously, a generation which
has direct access to these products in a way that, with regard
to the other products, they don't have. So I simply wanted to
highlight this because certainly the witnesses from Abertay University
did say that they would very much like to look into and have some
R&D support for looking into this area but, at present, it
doesn't perhaps seem to be available as it could be. Perhaps
that is something that you might be willing to look into.
Mr Vaizey: That is something I would certainly happily look into and it might be something that, for example, I could talk to the Technology Strategy Board about because that provides a test bed platform for people to test out their games. It would certainly be an interesting way to test technology to see whether you could monitor, as it were, the age of people playing games. I am also a member of the Government's UK Child Internet Safety Group of Ministers. So we sit around a table on regular occasions to discuss how to keep our children safe online, which is very important.
Again, it is not a problem I would argue is specific to the video games industry. It is a whole issue about how children are kept safe online and how parents monitor what they are doing online, and how parents in particular get the kind of instructions and education that will enable them because, let's face it, not all parents are as tech savvy as their teenage children and they do need clear guidance on how they can try and keep their children within bounds.
Fiona Bruce: Thank you.
Q213 Cathy Jamieson: Thanks
so much and thanks for what you have told us so far. I am very
pleased to hear your support for the creative industries particularly,
as you have mentioned, the fashion industry which of course is
very important as well to Scotland. I had the pleasure of seeing
the Scottish Textiles Exhibition at the ICA last week. Interestingly,
some of the points that designers and people involved in the industry
there were making were similar to the points about the computer
games industry.
But I want to take you back, if possible, to some of the things you said right at the beginning of the evidence that you have given us. I understand the position there, you know. You said the Chancellor had to take certain decisions as he was entitled to do. But, surely, in a situation where everyone seemed to be suggesting that tax breaks were a good idea prior to the election, it would have been incumbent then on the Chancellor to seek the views of the Minister directly responsible for promoting the creative industries before he took a decision to scrap it. You seem to suggest that hadn't happened?
Mr Vaizey: I am quite low down on the food chain.
Q214 Cathy Jamieson:
But you have responsibility for this industry.
Mr Vaizey: There
is a famous anecdote about an obscure Minister under the Thatcher
Government which I don't have time to tell. But, obviously, you
have the Secretary of State for Business who would have—I
imagine the Chancellor would potentially consult his Cabinet colleagues
on issues. But, at the same time, as we all know as politicians,
the Budget is very much the province of the Chancellor and the
Chancellor is perfectly able to access the information he needs.
He knew that all three political parties had spoken up in support
of the tax credit but he was also able to access all the information,
particularly for example the information that Edward Troup was
putting forward in the earlier evidence session, and take a view.
He is the Chancellor; I am not. He is perfectly entitled to
reach his own conclusions for his own Budget and for his own priorities
as well. I am not going to be in a position to write his Budget
for him, nor would I want to be.
Q215 Cathy Jamieson: With
respect, Minister, you have made some play that you are the Minister
responsible for the creative industries. I am now concerned that
you feel that you are so far down the food chain for a very important
industry that the Chancellor would not take account potentially
of what you say. If you heard the questions that I asked of the
previous witness, it was around what is going to happen in the
future as a result of the review, for example, on R&D credits.
If you didn't get a result the last time around, what confidence
can we have that the Treasury are going to listen to you next
time?
Mr Vaizey: All I would say in response to that is that I walked right into that one, didn't I? That will teach me to make a flippant remark at a Select Committee hearing. It is up to me to try and deliver for this industry, so I will do my very best to do that.
Q216 Cathy Jamieson: Could
I ask you a question that I asked previous witnesses at earlier
hearings as well, because we have to make some recommendations
obviously arising out of this report. What I asked the previous
witnesses was: what did they want to see as our top recommendation?
I am not going to walk into anything when you tell me that that
is my job, but what I would like to ask you is what recommendations
could we make that would be helpful to you in making those representations
to the Chancellor for the future of the games industry in Scotland?
Mr Vaizey: I think you could say that the Chancellor should certainly, when he considers the review of R&D tax credits and when he considers issues such as access to finance and business support, maintain that he sees the creative industries as being central to that and that he, in particular, looks to ensure that the video games industry is not inadvertently excluded from the opportunity to participate in any future fiscal support schemes that he thinks are appropriate for British businesses on.
Q217 Mr Reid:
Good morning, Minister. Thanks for coming along. Here we have
a situation where we have a successful British industry but another
country, Canada—Quebec, in particular—gives its own
industry tax breaks. It means that our successful industry is
losing a brain drain to Canada. What is the Government's reaction
to that?
Mr Vaizey: Again, if you take a step back to how we got in a position where we are effectively talking about tax breaks, it was all effectively down to Canada. So if Canada wasn't doing what it was doing I am not sure it would be so high on the political agenda.
Again, looking back at the last Government, which in effect took the credit for a tax credit that it never introduced and it only said it was going to introduce it in its last Budget, one of the frustrations I found as the Opposition spokesman was that when I raised the issue of Canada two or three years ago I was told again and again that this was a matter potentially for the World Trade Organisation to look at and that turned out, really, to be a red herring. So if I was being more robust than perhaps I have been in the last 40 minutes I would say that the last Government, to a certain extent, did sit on its hands in the face of Canadian competition.
Again, I do feel pretty confident that we can continue to support this industry and continue to compete with Canada. Canada is putting a lot of direct Government support in and, again, it is at the state level rather than the federal level, so you have got states now competing against each other. But we remain, as it were, a very important jurisdiction in terms of our skills. Britain will become a very good place to do business, regardless of what business you are in. Provided we ensure that the fiscal support mechanisms and Government investment and support for industry takes into account the needs of the video games industry then I am confident about the future.
Q218 Chair: I
wonder if I could touch on one or two other points that have come
up at various stages during our inquiries. Relationship with
the banks: we have had the impression from a number of people
in the industry that the banks don't understand them, that they
are risk averse and that some of the firms in the industry are
having difficulty finding capital to develop. Do you see yourself
as having a role in that in any way and, if so, what have you
been doing and is there anything on the stocks that would make
these problems of the firms in the industry ease?
Mr Vaizey: I have had one roundtable with the video games industry. We are having another one to talk about inward investment and how we co-ordinate the various functions of Government to ensure that we are getting the message out to companies abroad to invest. I also want to have a roundtable on access to finance. Again, I think it is a problem that is wider than simply the video games industry. It is to do with the creative industries and it is to do, again, with why talks about tax breaks tends to enter this discussion because, to put it bluntly, I have also heard the same anecdotes where people will say they will go to a bank and be told, "Well, frankly, if you were coming to me with a proposal for a pizza delivery business of course you would get the money because I know how that works", whereas the video games industry is inherently risky because you are depending on hits. If your game is not a hit, as Realtime Worlds saw only too tragically, that can have very, very serious consequences for the business. So I think that what I can do in particular is also use my knowledge of the film industry as well to work with the banks and investment houses that are specialists in investing in the creative industries and ensure that there is a coherent landscape for people to talk to banks that are more au fait with their sectors.
Q219 Chair: The
second point follows up, really, from the points that Mrs Bruce
raised about the violence in films. I must say I was a bit concerned
by your response, which basically seemed to indicate that you
were interested in the good headlines and you weren't bothered
so much about the bad headlines. It does seem to me, as the General
Culture Minister, that you ought to be concerned about the general
coarsening of cultural life that is just symbolised by the video
games. I heard the argument that it was only 3%. I am not sure
that amongst, particularly, youngsters in my constituency it is
3% by usage because I do get the impression that maybe they are
selling only a relatively small proportion of these but they are
available to a much, much wider group and they are breeding an
attitude which suggests that violence is a way to solve problems.
Relationships and so on and so forth are all softy things. It
is chopping people's arms off and running them over with a car
or breaking and entering and all the rest of it. Grand Theft Auto
is not a childcare video and it just seems to me that you ought
to have a responsibility or take it more seriously than you perhaps
gave us the impression that you were doing. Can you just clarify
whether or not you see yourself as having any role in that sort
of area?
Mr Vaizey: What I was going to say was that I thought this Select Committee and the decision to hold an inquiry into video games was a great opportunity for the video games industry, because I think that one of the issues and problems has been that the games industry has not been taken as seriously by politicians as it should have been. One of my regrets about the industry has been that the only time it has featured in Parliament is when individual members of Parliament have wanted to use it as an example to pick on violent video games. So while I absolutely accept that it is possible to have a view on a particular game and whether or not it is tasteful or appropriate, what I would strongly argue back at you, Mr Chairman, is that these seem to be the only way that some politicians think that you can get headlines for the video games industry when, in fact, what this inquiry will show is that you have got a fantastically successful industry with a huge range of applications.
There is a ratings system for video games. They are subject to the same kind of controls that film is. So why is it that in terms of our cultural climate we tend to celebrate the success of British film? We stay up for the BAFTAs; we stay up for the Oscars; we love looking at pictures of our film stars in the newspapers and celebrate in their success. Yet, we seem again and again only able to come back to the violent nature of video games.
Obviously, we know and we could all name films we have been to where we have found the violence to be very much pushing the envelope. What I object to is that we don't then come out and say, "The film industry is coarsening our children." We say, "That was a violent film and I certainly want to make sure my kids don't see it." You can certainly take that attitude about the video games industry. You can say, "That is a violent video game and I don't want my children to play it." But you shouldn't say, "That is a violent video game and the video games industry is coarsening our children." I just don't agree with that observation.
Q220 Chair: That
is something for us to report. Can I just clarify as well whether
or not, in terms of supporting the industry, the Department is
involved in any way in providing support to what seems to me to
be a novel suggestion of some sort of collaborative publishing?
We met people in Dundee, we were discussing routes into marketing
and so on and the difficulty that sometimes people developing
their games had about finding somebody who was willing to undertake
all the marketing. One of the suggestions was that various people
involved in the industry would try and collaborate and almost
have a mutual of some sort to try and access markets in a more
constructive way than they have been up to now. Is that something
that you would see as being your role, to help that sort of thing,
or would that just simply be seen as a business problem that was
passed on to BIS?
Mr Vaizey: It would certainly be something that I would be interested in knowing more about. But, again, it would be something where I would regard somewhere like Abertay University or the Technology Strategy Board or NESTA—the National Endowment for Science, Technology and the Arts—having an opportunity to research that area, promote it and perhaps make it more widely known.
Q221 Chair: Two
final points if I could, just to get clarification. Arising from
the points that were made by Mrs Jamieson, is it correct
that you were not consulted before the Chancellor abandoned the
manifesto commitments to introduce games tax relief?
Mr Vaizey: I had a chance to put my point of view across, so I felt that I had had a chance—
Q222 Chair:
So you were consulted?
Mr Vaizey: I felt I had a chance to make my case.
Q223 Chair:
Sorry, is that yes? Yes, you were consulted?
Mr Vaizey MP: I felt I had a chance to make my case.
Q224 Chair:
Sorry, is that a "yes"? Yes, you were consulted?
Mr Vaizey: I felt I had a chance to make my case.
Q225 Chair: So
that is a "yes" then, is it?
Mr Vaizey: Yes.
Q226 Chair: Fine.
I wasn't quite sure why you were phrasing it in that way. Can
I just clarify? I understand that the guns in the tanks of the
Chancellor are greater than yours, but can I just clarify whether
or not in principle you remain in favour, if the economic situation
was different, of a games tax relief, or do you take the view
that it is so badly targeted that it is not actually worth supporting
and that we ought to be pursuing other routes entirely?
Mr Vaizey: I remain of the view that we will continue to debate a video games tax credit, that it doesn't have universal support in the industry and that there are a whole range of other options that we can and should look at in order to support the video games industry. So I do not take the view that the fact we do not have video games tax credit means the game is up and we might as well just all pack our bags and go home. I think there is a hell of a lot to play for.
Q227 Chair: The
thing that strikes me on that is that the focus of the lobbying
and the views expressed by the games industry has tended to focus
on a video tax relief. I must confess I am not entirely sure
whether or not they have hung their hat on that because it is
the peg that is available in order to raise the profile or whether
or not there is a genuine conviction that that is the way to go.
That is why I am just trying to clarify with you whether, given
your functions now and having had the opportunity to see more
and do more with the industry, you are now of the view that there
are a number of other things that would achieve the same objective
in a better and more targeted way, or whether or not you still
think, "Yes, notwithstanding some difficulties with tax relief,
it is still better than any other proposal."
Mr Vaizey: I think, Mr Chairman, one understands how these things work and that a particular policy proposal gets a certain element of momentum. I think the industry can be in danger of seeing it as the panacea and I just don't think it is a panacea.
I would never rule out potentially looking again at a tax credit or returning to the issue, as I say, as a potential option. I personally feel that if it was to come back on table it would be an inward investment vehicle, as I have said in my opening remarks, not necessarily a vehicle that would see the size of the indigenous in British industry grow significantly so there will always be that controversy. I am now focused on looking at other options to how we support the video games industry.
Chair: Fine. Thanks.
Jim, you had another point you wanted to make?
Q228 Jim McGovern: Yes.
First of all, Ed, I look forward to meeting you and David in
Dundee, and my earlier remark was flippant, obviously. I would
just like to ask you if you would take this thought away with
you. It is a quote that was just given to me yesterday and it
is from a man named Danny Bilson, who is the chief executive of
a global video games publisher called THQ. He had just announced
that they were investing in Quebec.
In response to a question about whether a global publisher would invest in the UK Danny Bilson said, "Well, it's all about money. The talent in the UK is extraordinary…. I got to know a lot of teams in the UK—it's one of the greatest talent centres in the world. So there's no issue with talent; it's just economics—and if the Government finds subsidies there, absolutely we would build out….but I'm sorry, it's all about money". I don't think you should sell yourself short. I am sure you have got the ear of the Chancellor and possibly the Prime Minister. I could forward this to you if you want?
Mr Vaizey: No, I have seen it already.
Q229 Jim McGovern: Have
you? Were you keeping it a secret?
Mr Vaizey: I read all the websites.
Q230 Jim McGovern: Okay.
I am sure you will take that back to the Chancellor.
Mr Vaizey: THQ do have a UK investment, as you know the interview makes clear. But, obviously, that is why I have made the point about the tax credit as an inward investment vehicle.
Jim McGovern: Yes.
Chair: Thank you very
much for coming along. That has been very useful. Again, as
with the colleague that came before you, if, upon reflection,
there is anything that you want to let us have in a written form
that you think would illustrate the points that you made we would
be grateful to have that.
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