Support for the creative economy

Written evidence submitted by the Musicians’ Union [SCE 006]

1. The Musicians’ Union (MU) represent s over 30,000 musicians working in all genres of music. As well as negotiating on behalf of our members with all the major employers in the industry, we also offer a range of services tailored for the self-employed by providing assistance for professional and student musicians of all ages.

How best to develop the legacy from the Olympics and Paralympics of the display of UK talent in the creative industries in both Opening and Closing ceremonies and more generally in the design of the Games;

2. Although the MU welcomes the success of the recent Olympics and Paralympics, we would also like to highlight some serious problems that our members faced.

3. Despite the agreement between LOCOG and the TUC regarding fair terms and cond itions and undertakings from LOC OG to the MU that professional musicians would be paid for their services, the MU uncovered countless examples of its members being asked to perform for no payment at events connected with the Games.

4. We would be happy to provide detailed examples if we are called to give oral evidence to the Committee.

5. Of course, we all praised the contribution of the volunteers this summer - but professional workers were supposed to be paid a fair rate for their work.

6. The argument used was that it would be good exposure - but this just wasn’t the case. Most of the ‘free work’ was taking place in the Olympics Village or at gigs to celebrate the Olympics. Managers and record companies weren’t going to be walking by and signing people on the spot. It was just a way of getting free labour. By that rationale, shouldn’t the police, politicians and construction workers also have been working for free, for good exposure?

7. For headline artists who are already well known, the offer of exposure can often be a good enough reason to accept free live work as they can promote a new album or tour.  In addition, very well off artists may well choose to do charity gigs for free and we would not argue against this. It is important to remember though that there are only very few well off artists at the top of the profession.  Most of the musicians we are talking about are gigging musicians who absolutely rely on income from live work.

8. We believe that too many people seem to think that music and entertainment are a hobby rather than a career, and are unaware of the years of training and hard work that it takes to become a professional performer. This leads to performers being asked or expected to work for free in far too many instances.

9. Music is already a difficult career to sustain because, unless you make it to the very top, it is so poorly paid. Most of the MU’s 30,000 members already have to do other jobs alongside m usic in order to make ends meet, and 76% of musicians in the UK earn less than £30,000 per year. If the situation continues to get worse then a career in music will only be a possibility for those from wealthier backgrounds.

Barriers to growth in the creative industries-such as difficulties in accessing private finance-and the ways in which Government policy should address them. Whether lack of co-ordination between government departments inhibits this sector

10. It has become common for people to argue that intellectual property (IP) is a barrier to growth, but this is totally untrue when it comes to growth in the creative industries.

11. IP rights are intended to protect creators and performers and help to make their careers viable - and the Government’s IP policy should reflect this first and foremost. The MU is disappointed that copyright is increasingly being referred to as an impediment to business and growth and we believe that the focus must be brought back to how performers’ rights protect musicians and artists, who would be unable to maintain a career without them.

12. Only a small number of MU members have regular salaries. Most are Small and Medium Enterprises (SMEs), whether they are sole traders or members of a band, and they therefore rely on their copyright and performers’ rights to make a significant part of their income. In essence, their copyright and related rights are an important part of their ‘product’ and of the diverse income streams that make up their income, and, like any SME they have to protect their product.

13. The MU has lobbied for the rights of performers ever since the 1920s. In all this time, we have never once seen a legitimate example of copyright creating a barrier to business and innovation.

14. During the final stages of the term extension campaign in 2008-2010, we managed to convince the Government that copyright was of benefit to ordinary musicians as well as to big stars and record labels. It is disheartening that this appears to be being questioned again in recent IP policy reviews.

15. We would like all Government Departments to be aware of the needs of creators and performers, and for them to work with the British Copyright Council (BCC) to adopt a more pro-IP approach across Government. This is only likely to be achieved if the IPO itself moves away from its often negative attitude to IP and becomes a champion for these important rights and for UK innovators and creators.

16. We do not believe that the IPO is as effective as it should be, because it currently has the wrong priorities. In the recent Copyright Consultation, for example, the consultation focussed on assisting the deliverers of content rather than on protecting the creators of content. Although there was one passing reference to creators in paragraph 7.87 - ‘The Government is committed to maintaining the incentives that copyright offers to authors and publishers’ - there was no reference to performers at all. This attitude does not befit a department that should have the needs of creators and performers at its core.

17. The MU also believes that there have been too many reviews into IP over the past few years - the Gower’s Review of Intellectual Property in 2005, the DBERR and DCMS report on Digital Britain, SABIP’s review of copyright, the IPO’s Developing a Copyright Agenda for the 21st Century in 2009, David Lammy’s review of moral rights in 2009, Taking Forward the Gowers Review of Intellectual Property in 2010, the Hargreaves review in 2011 and this year’s consultation on proposals to change the UK's copyright system. The overlap and repetition that this engenders can only hamper the efficiency of the IPO.

18. Despite the large number of reviews, we feel that the IPO has not taken sufficient notice of the improvements that we have said are needed to the related rights regime . We would be happy to give further information if required.

The impact on the creative industries of the independent Hargreaves Review of Intellectual Property and Growth, and the Government’s Response to it. The impact of the failure, as yet, to implement the Digital Economy Act, which was intended to strengthen copyright enforcement. The impact of proposals to change copyright law without recourse to primary legislation (under the Enterprise and Regulatory Reform Bill currently before Parliament);

Hargreaves

19. The MU welcomed the Hargreaves recommendation to introduce a limited private copying exception which ‘corresponds to what consumers are already doing’ and we believe that it is sensible that acts of private copying should no longer be considered illicit acts. We do, however, object to the multi-national companies who have made enormous amounts of money through the selling of iPods, mp3 players and other devices that enable format shifting not paying fair compensation to the performers.

20. The MU does not agree with Professor Hargreaves that the benefit of format shifting ‘is already factored into the price that rights holders are charging’ - the principle of fair compensation for performers and creators in return for a private copying exception is enshrined in Directive 2001/29/EC of the European Parliament.

21. Hargreaves seems to suggest that any fair compensation should be factored in to the price of the CD. This is wholly impractical in view of the fact that piracy and the buying power of the supermarkets has driven the price of CDs down to a record low and the market would not be able to sustain any increase.

22. To date, 22 out of 27 EU member countries have introduced private copying exceptions and corresponding levy schemes on copying devices. French performers in particular receive respectable payments (around €200pa for a regional orchestral player) from their country’s audio and audio visual levies.

23. The MU feels strongly that UK composers and performers should be allowed access to the same income stream as their European counterparts, particularly since the European Commission has recently been putting a lot of effort into attempting to harmonise the methodology used to impose these schemes and is about to appoint a high level independent mediator whose task will ultimately be to help arrive at an acceptable pan-European stakeholder agreement.

24. The Government’s response suggests that it opposes a levy system on the basis that ‘it is likely to have adverse impacts on growth and inconsistent with its wider policy on tax’. In its desire to provide an environment of simplicity and speed for the clearance of Intellectual Property rights for technological innovators in this country, however, the Government should also bear in mind that, while such innovators are applauded for their ability to receive remuneration through a network of licensing systems and micro payments, it is not always appreciated that performers and composers are very much in the same boat.

25. Even those at the top of the profession are now increasingly dependent on micro payments from collective licensing agreements and this is likely to increase in the future. A few hundred extra pounds generated under a fair compensation scheme for format shifting would be of real significance to an individual musician in that context.

26. It is not just in comparison to Europe that the UK risks being seen as behind the times - we are now seeing developing countries introducing fair compensation schemes. The device manufacturers are already paying for patents to software developers and the like on each device sold and yet the act of copying onto these devices the "software" the consumer is most concerned with (music) is not currently generating any income for the music industry.

27. The MU has no issue with private copying, as long as it doesn’t put UK artists and composers at a disadvantage to the rest of Europe. Consumers should be free to transfer CDs that they have bought onto their mp3 devices. The MU would therefore support a new exception to copyright law as long as it complies with EU legislation.

28. We would therefore like the Government to recognise the principle of fair compensation as laid out in EU Directive 2001/29. As already stated, almost all EU countries operate a form of private copy levy system.

29. If a private copying exception were to be introduced in the UK without accompanying fair compensation, it would leave UK artists and creators worse off than their counterparts in 22 other EU countries.

Digital Economy Act

30. The MU fully supported the Digital Economy Bill and the subsequent Digital Economy Act. The creative industries lose around 20% of their revenues every year because of piracy, and this has a knock-on effect on the future work opportunities available to our members.

31. Without strong and effective measures to tackle illegal file-sharing, it will be impossible for performers and creators to continue to provide the content that will drive the digital economy.

32. A report by TERA Consultants, published in 2010, predicts that by 2015, losses due to piracy across the EU could reach as much as 1.2m jobs and €240bn in retail revenue. The report explores the impact of piracy in the EU’s five biggest markets (Germany, UK, France, Italy and Spain) and has found that the UK’s creative industries experienced retail revenue losses of €1.41bn and losses of 39,000 jobs due to piracy in 2008. The Europe-wide figures total nearly €10bn in revenue (€9.881bn) and 186,400 jobs.

33. The sectors most impacted by continuing piracy activity are expected to be film, TV series, recorded music and software (based on current piracy trends and assuming no significant policy changes). Losses in the UK alone could be up to 254,000 jobs and €7.8bn in retail revenue if measures, such as those outlined in the Digital Economy Act are not fully implemented.

34. We believe that the framework set out in the Digital Economy Act provides the right balance between supporting creative work online and the rights of subscribers and Internet Service Providers (ISPs).

35. The notification process set out is fair and proportionate, and we believe that the graduated response, particularly the first stage letters, could be a very effective tool to educate the general public about the importance of copyright to musicians and other creators and also a useful means of whittling down the total number of illegal file-sharers.

36. The MU looks forward to the implementation of the Digital Economy Act as soon as possible.

The extent to which taxation supports the growth of the creative economy, including whether it would be desirable to extend the tax reliefs targeted at certain sectors in the 2012 Budget;

· The MU has been advised by Her Majesty’s Revenue & Customs’ ("HMRC") that, based on an Upper Tier Tribunal appeal hearing in the case of ITV Services Ltd v HMRC, they now consider self-employed musicians fall within the regulations for Class 1 National Insurance ("NI") contributions.

· Previously, HMRC’s Guidelines On The Special NIC Rules For Entertainers (issued in April 2005) provided a specific exemption for session musicians. HMRC are currently reviewing these guidelines in light of the Tribunal decision.

· This decision widened the scope of the Social Security (Categorisation of Earners) Regulations, and could mean that musicians are now caught within these regulations, depending on the terms of their contract of engagement.

· Where performing musicians’ fees are computed by reference to time (e.g. for a recording session or live gig) this may now mean the employer has to deduct from the fee and pay HMRC 12% Class 1 NI (the employees contribution). Additionally, the employer may also be liable to pay the 13.8% employers NI contribution.

· This is potentially a huge problem both for our members and for the employers in the music industry, and could lead to the closure of up to 13 orchestras. In addition, many overseas producers bringing lucrative inward investment into the UK’s creative economy by way of recording soundtracks for films may take this work elsewhere as a result of having to pay employers’ NI.

· The MU believes that self-employed musicians (self-employed for tax purposes) and those who engage them should not be subject to employees’/employers’ Class 1 National Insurance deductions.

· Complete compliance with this ruling is completely unworkable and would, for example, require a pub landlord to deduct National Insurance and to know whether to pay an employer’s contribution. This would wipe away any progress made by the Live Music Act to encourage live music in small venues.

· In addition, there are few or no earnings related contributory benefits available to the musicians paying the Class 1 National Insurance payments due to the way in which they work.

· We would welcome the chance to give further detail of this to the committee and start a dialogue with the government and HMRC about how this situation can be resolved so that it doesn’t destroy much of the creative economy.

Ways to establish a strong skills base to support the creative economy, including the role of further and higher education in this

37. A good music education system is essential to ensure the development of a new generation of musicians.

38. For music education to be the best it can be, it has to be a statutory responsibility with long term Government funding. Music must remain integral to the national educational strategy and remain part of the national curriculum. If not, each individual head teacher is free to make it more or less of a priority.

39. There needs to be a combination of classroom and instrumental tuition delivered by peripatetic music teachers with professional musicians and the music industry in and out of the classroom. Music education needs to be funded so it is inclusive, with progression routes built in at all levels and a well trained and rewarded workforce.

40. Following recommendations in Darren Henley’s review of music education in England (the ‘Importance of Music’), Arts Council England has awarded funding to 122 Music Hubs. In most cases the Hubs are led by existing Local Authority music services. However, many local authorities are reducing their contributions to the new Hubs and this, combined with a significant reduction in central government funding is inevitably leading to cuts in specialist music education.

41. The MU is working closely with the Hubs to ensure that music instrumental teachers and music education in general does not suffer during this transition period. It is also calling for every Hub Advisory Board to include an instrumental teacher.

42. It is of great concern that many Hubs are now revising terms and conditions which will mean that, in many cases, instrumental teachers who were previously employed will be forced to become self-employed and will consequently suffer a reduced income as well as a total lack of employment protection.

43. We agree with the principle of the National Plan that all children and young people should have access to high quality music education. For this to be achieved music instrument tuition must be delivered by a skilled and well resourced workforce.

44. The MU would therefore like the Government to ensure that terms and conditions are standardised a cross the Music Hubs so that instrumental music teachers are fairly treated during this time of transition.

Conclusion

45. The MU would welcome the opportunity to give further evidence to the Committee, as we have numerous examples relating to the Olympics and the potentially damaging effect of HMRC regulations on self-employed musicians, as well as information on the effect of the Hargreaves recommendations.

October 2012

Prepared 28th November 2012