Conclusions and recommendations
1. We
note that much improvement has been made by the industry, particularly
in relation to classification, however more needs to be done to
future proof age verification for video games accessed online.
The industry and universities are well placed to research how
best to go about ensuring children cannot gain access to inappropriate
adult content. Therefore we recommend the Government look into
supporting such research, and ask the industry to see how they
too can invest in such research as a part of their corporate social
responsibility. (Paragraph 20)
2. The video games
industry is a highly mobile and relatively young industry, with
predicted annual growth rates double that of the film industry.
Scotland has an outstanding reputation for excellence in video
games production, but in reality the sector is of great economic
benefit to the whole of the UK. The UK industry, however, is currently
contracting. It faces an uneven international playing field, disadvantaged
by subsidies from governments overseas, notably France and Canada,
and cheaper labour markets elsewhere, as well as by skills shortages,
unsustainable business models a need for innovation and investment
vehicles. The Government has a responsibility to help create an
economic environment in which the creative industries can flourish.
Impediments for growth in the UK are emerging and we believe the
Government should make the future of this industry a priority.
(Paragraph 30)
3. A games tax relief
would cost less than the tax credit currently awarded to the film
industry. The Government has tried to explain away the existence
of a film tax credit in contrast to the resistance to a games
tax credit as a matter of politics and history. This is a poor
argument for seemingly favouring a mature industry over an emerging
one. Inertia is a poor justification for the status quo. We highlight
the inconsistency in the Government's approach to the two industries
and draw this anomaly to the Government's attention. We believe
that a cost benefit analysis should be done of the video games
industry and the film industry to see which gives the better value
for money. (Paragraph 50)
4. Prior to the general
election the Conservative, Liberal Democrat, Labour and Scottish
National parties supported the principle of a games tax relief.
Given this consensus across the political landscape, the industry
could have reasonably expected the introduction of such a tax
relief, and would have planned accordingly. However, in its first
budget, the Government changed its position. (Paragraph 53)
5. The Minister responsible
for the video games industry should make representations at the
heart of Government on behalf of this economically and culturally
important industry. We are surprised and disappointed that the
Minister was only able to lobby the Treasury indirectly on the
games tax relief. We expect the industry to be better represented
in future within Government. We invite the Government to explain
in its response to this Report how it will ensure that the voice
of the industry is properly represented in future and give an
undertaking that this experience will not be repeated. (Paragraph
54)
6. The Chancellor
described the proposed tax relief as "poorly targeted",
prompting debate over the meaning of the phrase. The proposed
tax relief was specifically targeted to the UK video games industry;
in this sense, it was well-targeted. The real issue is whether
the tax relief is value-for-money and would alleviate many of
the structural problems in the UK sector; those being generating
and retaining IP, self-publishing and aiding start-ups. (Paragraph
55)
7. There are both
compelling arguments for a tax relief, most notably in the lessons
of the effect such a relief has had in Canada, and real concerns.
The Committee is divided over the issue of tax relief for the
industry and we are unlikely to come to a consensus on this issue.
There is disagreement between HM Treasury and games industry representatives
over the financial benefit of a games tax relief. We recognise,
however, that the UK Government has ruled out a tax relief for
the foreseeable future, and the current fiscal environment means
this view is unlikely to change in the short-term. (Paragraph
56)
8. We recommend that
the possibility of introducing a tax relief be kept under review,
and the health of the industry be monitored for the potentially
malign effects of uneven international competition. We recommend
that the Government, meanwhile, undertake a full and comprehensive
assessment to determine the benefits of such a relief, as well
as examining those countries whose industries continue to flourish
without Government support. (Paragraph 57)
9. Research and development
tax credits already provide an incentive for innovation. These
credits could be adapted and enhanced, at little cost to the Exchequer,
but with great benefit to video games companies. We recommend
that the Government set out in its response to this Report how
it plans to work with NESTA on adapting the research and development
tax credits as soon as possible so that video games companies
can make full use of the scheme. (Paragraph 63)
10. The creation and
retention of intellectual property is a priority issue for the
UK video games industry. We welcome the review of the taxation
of IP currently being undertaken by the Government. We expect
the Government to set out a timetable for the implementation of
the recommendations of the taxation of IP review in its response
to this Report. We will monitor its outcome. (Paragraph 66)
11. The measures announced
in the 2010 Budget will have a positive impact on start-ups and
small and medium sized businesses, and we welcome the Government's
actions. However, these proposals are not specific to the video
games industry. We recommend that proposals for more targeted
support be set out by the Government in its response to this Report.
Those proposals should be accompanied by a clear and costed action
plan. (Paragraph 68)
12. The innovative
practices in place at the University of Abertay, such as workplace
simulation, the level support given to graduates starting their
own business and the level of cooperation with local industry
should be replicated across the UK. We recommend that the Government
set out in its response to this Report how it will develop ways
of encouraging the adoption of these practices nationwide. (Paragraph
72)
13. The shortage of
graduates adequately qualified to sustain the video games industry
in the UK is matter of real concern, as is the unsuitability of
many self-proclaimed video games courses. There needs to be more
focus on the hard skills needed for the industry, such as mathematics
and computer science. Other important factors necessary to ensure
graduates are both trained for industry and able to find a job,
are the levels of engagement between higher education institutions
and industry, and the incentives for industry to take on talented
graduates as trainees. The Department for Business, Innovation
and Skills should be able to demonstrate that it is aware of these
problems and has proposals to address them effectively. We recommend
that the Government's strategy for addressing such issues is set
out in its response to this Report. (Paragraph 73)
14. The £5 million
prototype scheme, to be run by Abertay University, is an excellent
example of support targeted towards a priority issue for the video
games industry. We expect the Government to monitor the progress
of the scheme, and if it is successful, to explain how it intends
to ensure that it can be replicated nationwide. (Paragraph 74)
15. Ensuring schools
and universities provide the right education and training is beneficial
to graduates, businesses and the wider economy. We support the
Government's decision to commission an independent review of education
and training in the UK video games sector. We expect the response
to this Report to set out a timetable for the Government's analysis
of the review and for developing its action plan for working with
the Scottish Government on the recommendations. (Paragraph 76)
16. The skills shortage
in the UK industry is compounded by a brain drain to countries
offering more generous incentives to the video games industry.
If the UK is to retain its position as a global player in the
industry, efforts must be made to halt this brain drain. We recommend
that the Government, in its response to this Report, outline how
it will work with universities and the industry to ensure talented
graduates remain in the UK. (Paragraph 78)
17. The video games
companies face significant challenges in accessing finance. More
needs to be done to increase the understanding of the financial
cycle for video games companies amongst banks and private equity
funders. The Government has an important role to play in providing
support to businesses in attracting finance. We invite the Government
to outline in its response to our Report how this business support
is being tailored to video games companies. (Paragraph 81)
18. Scotland is open
for business, and it is vital that this message is publicised.
We see the need for a more targeted marketing strategy to attract
investment to Scotland, and recommend that the Government work
with the Scottish Executive and trade associations to formulate
and implement such a strategy relating to the video games industry
in particular. We invite it to set out in its response to this
Report how it intends to do this. (Paragraph 85)
19. This is a "golden
age of opportunity" for the video games industry, with small
businesses able to access global audiences. It is imperative that
guidance and support is available for these companies. We recommend
that the Minister for Culture, Communication and Creative Industries
holds regular meetings with companies from the video games industry
to develop and provide this support. We recommend that the Government,
in its response to this Report, set out its strategy for engagement
with the video games industry and its underlying criteria to enable
the video games industry to secure Government support. (Paragraph
87)
20. Although there
are personal networks within in the video games industry, more
formal representation at regional level could provide stronger
support for companies. We see an argument for a trade body representing
companies in Scotland, with the UK Government, trade associations
and games companies all involved in its creation. We invite the
Government to set out its action plan for such a body in its response
to our Report. (Paragraph 88)
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