Support for the creative economy

Written evidence submitted by the Department for Culture, Media and Sport [SCE 024]

The Department is pleased to respond to the Select Committee’s call for evidence requesting views on support for the creative economy. We look forward to seeing the Committee’s findings and responding to their recommendations.

The UK has less than 1% of the world’s population, but a creative sector that exports almost £9 billion of services. We have probably the largest creative sector in the world, measured on a per capita basis. The creative industries bring in vital inward investment.

Foreign visitors spend around £4.5 billion a year exploring British culture and heritage. In the seven years up to 2010 London attracted almost twice as many creative industry FDI projects as any other European city.

According to industry figures, the creative industries such as film, music and fashion account for around £1 in every £10 of the UK’s service exports. In fact exports from creative industries are now just as valuable as traditional export sectors such as construction, crucial in a time when the UK is determined to rebalance our economy and increase trade abroad.

Industry figures indicate that the UK is Europe’s leading exporter of TV programmes and second only to US globally. We are the world’s No.1 in sales of TV format shows. Domestically the multichannel sector contributes £4.2 billion in Gross Value Added (GVA) to the UK economy through expenditure in employment, advertising and marketing, distribution and support services, as well as content investment.

In film, the aggregate UK spend of features that commenced principal photography in 2011 was £1.2bn, the highest figure recorded1 whilst inward investment films contributed over £1bn, also the highest total recorded.

Our publishing sector is the second largest in Europe, with combined turnover of £19bn, employing around 244,000 in almost 9,700 companies. The value of the advertising industry estimated at £15.6bn with over 16,000 advertising companies employ over 268,000 nationwide.

UK is the world’s fourth largest music market, and one of only two net exporters of music globally. Adele was the best selling in the world in 2011-the fourth time in five years that a UK artist has held this position.

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;

The success of the 2012 London Olympic and Paralympic Games has focused the world’s attention on the UK’s creativity. UK Trade & Investment (UKTI) plan to build on this by helping UK companies, including those involved in the delivery of the London Games, to access opportunities in key markets which will be hosting major international events in the next few years. The first missions (covering architecture, advertising, branding and design) are planned for February and March 2013, visiting Brazil, South Korea/Taiwan and Qatar.

The creative industries were also showcased in the programme of the British Business Embassy, which ran at Lancaster House during the Olympics. Lancaster House was transformed by contemporary UK designers, photographers, furniture makers and artists to provide a world class venue for the conference series and key industry figures such as Jonathan Ive, Stella McCartney, Sir Peter Bazalgette and Sir Howard Stringer spoke. This concept will be extended, where possible, to future British Business Embassies alongside major international events in the UK.

UKTI is establishing a new creative industries Sector Advisory Group and an executive delivery group to lead work in this area. These groups will include many of the key representatives from the sector who helped to make the London Games a creative success.

Government has created 'Great Britain Delivers', a digital showcase to tell the story of the delivery of the Games which will highlight to an international audience UK products, services, expertise and talent which helped stage and deliver the Games

Barriers to growth in the creative industries-such as difficulties in accessing private finance-and the ways in which Government policy should address them.

We have established the Creative Industries Council, jointly with the Department for Business, Innovation and Skills (BIS). One of the key issues it is addressing is the sector’s ability to access finance. The Government does provide generic help to business, and the creative industries will benefit as much as any other part of the economy from utilising such assistance to the full. For example, the Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies.

The Access to Finance working group, headed by Ian Livingstone OBE (Life President of Eidos) presented their report to the CiC earlier in the summer. The report made six recommendations to be taken forward by both government and industry. The report suggested that Government and industry work together to establish new funding solutions and to champion investment opportunities in this sector. The report identified potential gaps in the understanding of investors of how creative businesses work and recommended that the sector and Government worked together to improve existing business financing interventions and make the most of new ones.

On the supply side the report recommended that sector experts, Higher Education Institutions, research bodies and financiers worked together to improve investor readiness and understanding of the sector. On the demand side the recommendation was that the sector work together to improve investment readiness and understanding of finance among creative industries businesses, enabling them to think beyond the banks, and beyond credit.

The access to finance report reaffirmed a wider Creative Industry Council concern about the use and understanding of data, knowledge and frameworks, recommending that government and the sector work together to improve the data collection and data availability on this sector, with both top down and bottom up measures. This is already being taken forward as outlined below. Finally the report recommended that in order for UK creative businesses to remain competitive and grow globally there was a need for government to help the UK’s creative content businesses build assets and scale so that they can leverage existing success and attract a larger share of the international market to the UK.

Whether lack of co-ordination between government departments inhibits this sector;

The creative economy, and support for it, crosses a number of departmental lines. This is so both in terms of direct relationships with the various sectors that make up this slice of the UK economy, as well as in terms of policy responsibility. DCMS are the lead department for the creative industries but we work across government to address specific issues. For example, we work with BIS on intellectual property and industrial strategy, and with the Department for Education, BIS, Sector Skills Councils and NESTA to address education and skills issues.

The Creative Industries Council provides an important link between Departments. It is chaired by the Secretaries of State for DCMS and BIS, and ministers and representatives have attended from across government. Nicola Mendelsohn, President of the IPA, has also agreed to share the chairing responsibilities, bringing direct involvement from a senior figure from the creative industries. The Creative Industries Council addresses strategic issues concerning the creative economy, from skills to access to finance to Intellectual Property – and it pulls in those with policy responsibility from across Government to participate and support any specialist groups set up as a consequence. Likewise, BIS launched their New Industrial Strategy in September which include the creative industries. DCMS and business leaders will play a key role in helping to shape this to strategically benefit the sector.

The impact on the creative industries of the independent Hargreaves Review of Intellectual Property and Growth, and the Government's Response to it.

The Hargreaves Review was an independent review of the UK’s Intellectual Property framework, to establish if it was as well-equipped as it could be for the digital world. The Review recommended a number of changes that could be made to support growth.

There are real opportunities for the creative industries in recommendations such as the Digital Copyright Exchange, and the Government is pleased that industry is engaging with the process of making Richard Hooper’s concept of a Copyright Hub work. Similarly, the provisions for orphan works is a sensible step forward, and is a pragmatic extension to the European Directive.

Most concern expressed by the creative industries has been in the area of copyright exceptions. Government has spent a lot of time ensuring that the views of copyright owners are properly heard and taken into account. We are looking carefully at what they and others have said in response to the consultation and will announce how we intend to proceed shortly.

The impact of the failure, as yet, to implement the Digital Economy Act, which was intended to strengthen copyright enforcement.

The implementation of the online infringement of copyright provisions within the Digital Economy Act 2010 (DEA) has taken longer than was originally planned. There are a number of reasons for this, including a judicial challenge launched by BT and TalkTalk which, although it failed, still required the Government to amend the supporting secondary legislation on which implementation of the DEA relies. This has delayed putting the cost-sharing SI before both Houses for debate.

The implementation of the DEA should not be seen in isolation. Government has worked closely with industry and enforcement authorities to ensure there is an effective response to online infringement. For example, we are working with copyright owners, online payment facilitators and the City of London Police to make it more difficult for sites offering other people’s creative content illegally to receive payment. Copyright owners are now beginning to make full use of s97A of the Copyright Designs and Patents Act 1988 to obtain injunctions obliging ISPs to block sites of particular concern, such as Pirate Bay. These and other measures looking at online advertising and search, will have a cumulative effect, and even without the DEA represent a comprehensive response to the problem posed by online infringement.

The impact of proposals to change copyright law without recourse to primary legislation (under the Enterprise and Regulatory Reform Bill currently before Parliament);

The Government welcomes this opportunity to clarify the purpose and effect of clause 66 [previously clause 57] of the ERR Bill. The Government already has the ability to make changes to exceptions to copyright (up to the strict limits allowed by European legislation) via the European Communities Act1972. Clause 66 is a proposed power to allow criminal sanctions to be maintained when changes are made via secondary legislation. This interpretation is now understood by most creative industry representatives.

It is important for copyright owners to have the reassurance that effective and strong enforcement of copyright will not be undermined because of changes in secondary legislation. The clause would allow Government to maintain existing penalties for the most serious cases of copyright infringement. It will protect the interests of copyright owners, not undermine them.

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 Department is working with HM Treasury, HM Revenue & Customs and industry representatives on the detailed design of the corporation tax reliefs for animation, high-end television and video games that will be introduced from April 2013, subject to State aid approval. The HM Treasury consultation on the design of these tax reliefs was published on 18 June 2012 and closed on 10 September 2012 and a Government response document will be published by HM Treasury in December.    

As with the existing Film Tax Relief, which has helped raise more than £1 billion in inward investment into British films, the new creative sector reliefs require State aid approval from the European Commission on cultural grounds and so to qualify for one of the new reliefs, a production will need to pass a cultural test. The Department’s consultation on cultural tests for British animation, high-end television and video games was published on 01 October 2012 and closed on 29 October 2012.  The Government is considering the response to this consultation and discussing the proposals with the European Commission.

The UK excels in innovative high-tech industries like high-end television, animation and video games production and the Government is determined to support them as part of its efforts to grow the economy whilst promoting British cultural content. The Film Tax Relief demonstrates the positive effect that a targeted incentive can have in promoting production within a sector- for example, the value of exports for services within film increasing 43% from 2009 to 2010 and UK production spent in 2011 being higher than ever before at £1.26 billion. Any decision on the introduction or extension of such tax reliefs is a matter for HM Treasury.       

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

The Creative Industries Council’s Skills group, led by Creative Skillset, produced a report which made 17 recommendations  to boost skills and talent in the creative industries. Key recommendations, welcomed by both industry and Government included reform of the ICT syllabus in schools; a promotional campaign to raise the profile of Apprenticeships ; and a call to improve the q uality of industry internships.

The work of Sector Skills Councils Creative Skillset and Creative and Cultural Skills has been instrumental in identifying the common ground within the creative industries which enable us to identify skills that would be of real value to the creative industries’ workforce.   

Government has also committed - in light of Ian Livingstone and Alex Hope’s Next Gen report - to look at how ICT and computer science is taught at all levels in order to nurture creativity in this area and drive hi-tech growth. T he Department for Education announced in June 2012 the disapplication of the existing National Curriculum ICT Programmes of Study, Attainment Targets and statutory assessment arrangements.  ICT remains a compulsory subject for pupils from age 5-16, but schools now have more freedom to develop their own ICT curricula that best meet the needs of their pupils.  It is hoped many will adopt more rigorous and ambitious approaches to the subject - for example, focusing on aspects of computer science and practical programming.  Work to develop new ICT Programmes of Study is being led by key IT sector stakeholders, including representatives from the creative industries, and the Department for Education will hold a public consultation on the proposed new ICT curriculum in early 2013.

The Department for Education has more recently announced prestigious £20,000 scholarships for top graduates to train as Computer Science specialist teachers and introduced new Computer Science initial teacher training courses to replace existing ones in ICT.  It is also part-funding the British Computer Society Network of Excellence that will upskill current teachers as experts in Computer Science through partnering schools with university computer science departments

The importance of "clusters" and "hubs" in facilitating innovation and growth in the creative sector.

The Nesta analysis of co-location between creative sectors (Creative clusters and innovation (2010) ) found that there were two groups of creative sectors that tended to be co-l ocated . O ne group compris ed of software, games and electronic publishing ; the other group music, film radio and TV. It also found co-location between creative sectors and other highly innovative parts of the economy , such as high tech manufacturing. These interactions delivered a number of beneficial spillovers, such as knowledge transfer, where new ideas developed in the creative industries are applied in other sectors ; and product development, where creative products increase demand for complementary products in other sectors and network - where creative companies attract other sectors.

The work done on East London Tech City is proof of Government’s commitment to support existing clusters rather than trying to instigate them. Its ambition is to build on the existing cluster of technology companies in East London to create a world-leading technology centre by providing it with the right physical and (increasingly) technological infrastructure.

Whether there is too much focus on hubs at the expense of encouraging a greater geographical spread of companies through effective universal communication;

Academic studies on creative clusters or hubs suggest that geographical proximity is a necessary but not sufficient prerequisite for the existence of the hub or cluster. Some sort of network or ecosystem is also required to ensure communication and collaboration between companies and sectors within the cluster.

Universal communication is at the very heart of Government support to all businesses and the Government is committed to providing, by 2015:

· Universal broadband at a minimum speed of 2mbps, and

· Access to superfast broadband (of >24 mbps) for 90% of the population

In addition to these commitments, the Secretary of State for Culture, media and sport announced in September a £150 million investment (the Urban Broadband Fund) in ‘super-connected cities’ across the UK, with the aim of supporting economic growth and to raise the attractiveness of UK cities globally. It will encourage new businesses to flourish in the key creative industries that require super-connectivity and enable home-grown businesses to grow and compete on the international stage.

BDUK is working in partnership with Go ON UK to promote the benefits that the network will bring for local people and businesses. We are working closely with Martha Lane Fox, the UK Digital Champion, to encourage local projects to develop Go ON campaigns that focus exclusively on the benefits the network will enable rather than on speed, technology or infrastructure.

The work of the Creative Industries Council and other public bodies responsible for supporting the sector.

The Creative industries Council has delivered key reports on Skills and Access to finance , as noted above. We believe that the work of the Council has benefitted greatly from the varied membership of leaders in the creative industries and it is encouraging to note the willingness of all those involved to work collectively.

The Council will continue to play a major role in supporting the creative industries. It is well placed to provide a link between industry and government and across various public bodies, being jointly chaired by the Secretaries of State for Culture Media and Sport and for Business, Innovation and Skills and Nicola Mendelsohn, Chair of the IPA.

November 2012

Prepared 17th November 2012