It appears from the Explanatory Memorandum that there are currently four microchipping databases. Indeed, the Kennel Club runs one of them, Petlog. The Minister may say that it is not up to him to prescribe the number, but I wonder whether some consolidation could take place. It could be a simple task for one organisation, such as the British Cattle Movement Service. My reason for raising this is contained in Regulation 6(1)(i) and (j). Sub-paragraph (j) states that each database must be set to,

“automatically redirect on-line requests relating to dogs whose details are recorded on other databases”.

Can the Minister satisfy me that the links will be working satisfactorily every time? There is some anxiety that there should be one central inquiry point that could direct the inquiry to the right database. What provision is there for the transfer of data should an operator go out of business?

There is a provision in the regulations that all dogs imported into the country should be microchipped within 30 days. What is the situation regarding dogs microchipped overseas? Presumably they would comply under Regulation 3(3). What links will there be to databases overseas? Would a UK citizen taking a dog overseas, that then strayed, be confident that he might be reunited with the dog through an overseas database?

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In Committee on the Deregulation Bill, the Minister, the noble and learned Lord, Lord Wallace of Tankerness, made clear that the Control of Dogs Order 1992 remains, whereby any dog on any highway or in a public place must wear a collar or badge attached to a collar with the name and address of its owner on it. He said:

“It is considered appropriate to retain that, even after compulsory microchipping is introduced”.—[Official Report, 18/11/14; col. GC 156.]

It would be a fair assumption that the public may not realise that both belt and braces will be required after the introduction of compulsory microchipping. The department must be careful not to give mixed messages. The Explanatory Memorandum states that the cost to the public purse of publicising these measures will be £400,000. Is the Minister satisfied that it is prudent, bearing in mind the connotations of that word, that these costs are contained in the maximum? The Microchipping Alliance understands that the Government intend to produce guidance to accompany the legislation. Can the Minister confirm that? It would be extremely helpful in providing clarity on many of the questions I have asked today. There is every possibility that the data on the microchip may not correspond to what is on the badge. Will the Minister consult relevant organisations on the wording of the guidance so that the precise workings of the regulations are those intended? Will the Minister consult local authorities, police and organisations on the publicity for the measures so that their messaging can complement that of the Government?

I hope I have not punctured the euphoria that these regulations may induce from their passage today. I merely hope that I pointed out several areas where clarity is needed to get the operation of these regulations correct. In this regard, I am grateful to the noble Lord, Lord Trees, for casting his professional eye for detail over these regulations. If I am right, if there is an identity badge and a microchip attached to a dog, there should be less concern to local authorities that they will be inundated with lost dogs at a considerable cost because ordinary members of the public coming across a stray do not possess scanners. We must be far from complacent. In agreeing this order today, can the Minister satisfy me that local authorities are confident that they have the resources necessary? The prize of saving some £32 million annually in dealing with some 102,000 stray dogs per year is certainly worth while, especially when considering the welfare benefits to dogs and the anxieties of their owners.

Lord De Mauley: My Lords, I am most grateful to all noble Lords for their comments and questions. Let me do my best to address them. My noble friend Lady Miller of Chilthorne Domer raised a number of questions. She started off asking which databases are approved. We will be publishing a list of the databases that inform us that they are compliant by 6 April this year, which is the date by which the microchipping database operators must comply with the requirements set down in the regulations. In answer to her second question, they will not be approved unless they can perform 24 hours a day, seven days a week. She asked a question about change of keeper. I suspect I might return to that but basically the buck stops with the

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new keeper. The new keepers are the people in whose interest it is to make sure that the dog is microchipped, because they are the ones who will suffer if the dog does not come back to them. I will return to that in a moment.

The noble Lord, Lord Grantchester, raised a number of points. He referred to the issue of dog breeding and he should be aware—I know he is—that this is not the primary purpose of these regulations, which is to allow more easy reunification of a dog and its owner when the dog has strayed. I will return to the breeders issue in a moment. The noble Lord raised issues related to the Deregulation Bill. We are looking at those issues and the record-keeping requirements on dog breeding. My colleagues dealing with the Bill are well aware of the issues, and they are considering whether any action or clarification is necessary.

Lord Grantchester: My anxiety is raised because the Minister at the time mentioned a consultation and yet the various sector bodies in the industry seem to be unaware of that consultation.

Lord De Mauley: I understand that. I will return to him in writing on that particular point.

Lord Stevenson of Balmacara: I am sorry to add to the cacophony of voices on this. It is not my topic but I am in charge of the Deregulation Bill on this side. I just point out to the noble Lord, and I am sure he is aware of this, that we will be on Report within a few days, so it is important for us to know whether we should be pursuing this issue. We would therefore be happy if the letter could come expeditiously.

Lord De Mauley: I take that point on board: expedition is the name of the game. The noble Lord, Lord Grantchester, asked whether full discussion on guidance would be taking place with a number of interest groups that he referred to. I can assure him that there is very active two-way communication with those groups. He asked about the adequacy of local authority resources. It is very clear from our discussions with both dog welfare organisations and local authorities that this is about saving them money. It is not going to involve them in more expense but will reduce the amount of time it will take to identify who the owner is, so I am pretty confident about that particular point.

The noble Lord, Lord Trees, raised a number of important questions. First, I thank him for his support for the regulations and acknowledge his point that these measures, on their own, are not a silver bullet. Indeed, we never expected them to be that, but they will, over time, enable us to tackle some of the other issues that he and I are concerned about. He and the noble Lord, Lord Grantchester, asked whether there would be a single point of contact for the six databases. Regulation 6 requires that database operators must be able to redirect online inquiries to other databases if someone comes through to a database that does not hold the details linked to the microchip. All databases will have a system whereby, if an inquirer enters the microchip number on the wrong database, a pop-up—that may be the wrong technical expression, but I think he

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and I understand what I mean by that, although perhaps “window” might be a more appropriate word—will be automatically generated on the screen which, when clicked on, will redirect the person to the correct database.

The noble Lord, Lord Grantchester, raised the important point of whether the first keeper will always be the breeder. There is also the issue of whether that is dealt with in guidance. Yes, the breeder, as defined by the regulations, is always considered the first keeper of a puppy. This is covered in the Explanatory Memorandum to the SI and will be included in the guidance.

The noble Lord, Lord Trees, asked for clarity about who is responsible for change of ownership. I have touched on that already. Regulation 8 is clear that it is the responsibility of the new keeper to update the database where there is a change of keeper. He also suggested that there is some question over the use of the word “transponder”. This is essentially a technical issue but there is not a problem. The chip must conform with the FDX-B protocol set out in ISO standards, which is referred to in the regulations. The important point is that the chip must respond to a scanner at a given frequency.

The noble Lord also asked about the term “authorised person”. To clarify, the reference to authorised person is in respect of someone enforcing the regulations. Vets are not defined as authorised persons in the regulations; there is no provision limiting the provision of information to others to aid reunification of dogs and their keepers or to deal with other matters such as faulty microchips. These relationships will not be affected by the regulations and we would expect relevant consents from keepers to be in place already in relation to disclosing personal data. We would expect vets, re-homing centres and microchip manufacturers that already have a working relationship with database operators to have some secure identifier, if they do not have one already, from the database operators to ensure that they are bona fide inquirers for data protection purposes.

The noble Lord asked about a recommended site for implantation. This will be covered by the implantation training, so we do not consider it necessary or appropriate to legislate on this point. The training also advises implanters to check that the dog does not have a chip in a different implantation site and to check for any microchip migration.

The noble Lord, Lord Grantchester, asked whether there were any conditions that database operators must meet and whether they applied to the UK only. Regulation 6 sets out the conditions to be met by the database operator. Databases do not have to be located in any particular country but the conditions apply to any database that holds itself out as being compliant with these regulations. He also asked what happens if a dog strays while it is overseas. I am afraid that that will depend on whether an analogous set of rules applies in that country.

I have done my best, although I suspect that when I go through Hansard, I may find questions that have been left unanswered. If I may, I will write on those. I think noble Lords all share with me the strong view that irresponsible dog ownership is a complex problem

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to which there is no single, simple solution. We have introduced a series of measures, of which these regulations are the latest. We believe they will help promote animal welfare and encourage responsible dog ownership. The draft regulations will help lost dogs to be reunited with their keepers more quickly, so reducing any suffering of the dogs and distress to their keepers. The increased traceability of dogs to keepers will ensure that keepers can be held to account better if their dogs are allowed to roam and cause a nuisance. They will also save local authorities and re-homing centres money, which can be better spent elsewhere to promote dog welfare and encourage responsible ownership.

Motion agreed.

Films (Definition of “British Film”) Order 2015

Motion to Consider

5.30 pm

Moved by Lord Gardiner of Kimble

That the Grand Committee do consider the Films (Definition of “British Film”) Order 2015.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments

Lord Gardiner of Kimble (Con): My Lords, as may have been seen from this month’s BAFTA nominations, the British film industry is thriving. Alongside such critical success, the UK film industry has a turnover of £7.3 billion and is worth more than £1.4 billion to the economy, employing more than 66,000 people. Production spend on films made in the UK exceeded £1 billion in 2013.

This is very much as a result of film tax relief. Since its inception in 2007—I know the noble Lord, Lord Stevenson, has a long interest and connection with this concept—film tax relief has supported 1,680 films, with total production expenditure of £7.8 billion, of which 72% was incurred in the United Kingdom. The Government are committed to building on this and safeguarding it for the future.

The order updates the statutory test that is used to assess whether a film is a British production and eligible to apply for film tax relief. Certification as such is a requirement for film production companies to claim tax relief on production costs. The revised test aims to benefit particular areas of film production, such as visual effects and post-production, in which the United Kingdom excels.

In the Budget of 2013, the Chancellor announced that the Government would consult on tax options to support visual effects industries, and that was launched in May 2013. The United Kingdom has historically been a leader in visual effects production and is currently home to a number of world-renowned and award-winning visual effects houses making a significant contribution to British culture and creativity. Recent successes include

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the Oscar-winning film “Gravity” and “Paddington”, and work is currently under way on the latest “Star Wars” film.

Nevertheless, the sector has been adversely affected by rapid changes in the global industry, and there have been reports that activity may be moving overseas. Evidence suggests that the UK’s visual effects industry saw a 23% decrease in employment during the three years to 2013. There has also been a proliferation of incentives available in non-European jurisdictions. This has been a significant contributing factor in more films undertaking their visual effects outside the UK and Europe. Without further support, British visual effects houses may be forced to reduce headcount and investment in infrastructure, resulting in a decrease in the sector’s economic contribution and ultimately fewer British films being made.

The Government have responded in two interrelated ways. First, the Government have made the UK’s film corporation tax relief regime more attractive. The rate of tax relief for films with a qualifying budget of £20 million or more has been increased from 20% to 25% on the first £20 million of UK expenditure, with any excess UK expenditure still receiving the existing 20% tax credit. The minimum spend threshold in the UK has been reduced from 25% to 10% of a film’s overall budget. It is anticipated that this will encourage more films to carry out their visual effects and post-production work in the UK. These measures are now in force, having been introduced via the Finance Act 2014.

The second action is to modernise the statutory test used to assess whether a film is a British production. This is the purpose of the draft order before the Committee. This points-based test, often referred to by the industry as the cultural test for film, ensures that relief is targeted towards qualifying British productions. These changes are straightforward and mirror elements from the existing cultural tests for high-end television, video games and animation programmes. The amendments increase the points available if certain percentages of a film’s production work, including visual effects, take place in the UK. They also increase the points awarded for the language spoken in the film. For example, if more than 75% of a film is in the English language, it will now score six points rather than four. Finally, points that are awarded for a film’s British setting, subject matter, characters and language will now equally be awarded for other European Economic Area states. These measures are designed to encourage co-operation with European film industries while still ensuring that activity takes place in the United Kingdom. The effect of these changes is that the number of points available increases from 31 to 35. The pass mark is accordingly raised from 16 to 18 points.

These measures have the strong support of the film industry, including the British Film Institute, which is the Government’s lead agency for film, the British Film Commission, which works to attract inward investment to the UK, the major film studios and the leading visual effects houses. The Government believe that this order is essential to encourage further film production work in the UK while ensuring that tax relief benefits only productions that carry out work in

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the UK and enrich our cultural perspective. In combination with the changes to the corporation tax relief regime, these measures will further growth and ensure that the UK remains at the forefront of a very competitive global film production industry. That will in turn increase the opportunities for British artists and help ensure that the British film industry remains a world leader and continues to provide so much pleasure to us all. I beg to move.

Baroness Bonham-Carter of Yarnbury (LD): My Lords, I echo what the Minister said in congratulating the previous Government on introducing tax breaks for British films. Of course, since then the coalition Government have extended that to animation, high-end TV, video games and, most recently, regional theatre and live-action children’s TV, all of which have contributed enormously to the creative industries and their success. Tax breaks for the British film industry have paved the way and brought huge inward investment into the industry: millions of pounds of private funds to the independent sector and, from the private sector, millions more pounds spent on infrastructure. I am told that next week’s British film industry figures will be very positive, so the industry is happy.

We obviously support this order, particularly the extra points for production activity undertaken in the UK as that gives even greater incentive to bring work into the country. I have what is not really a question but more an observation. It is something I have picked up from talking to people in the industry: things are working well. The Minister has probably answered this already, but too many tweaks and changes should on the whole be avoided. I think I am right in saying that there is another order in the pipeline. The observation is to leave things that are working so well as they are.

Lord Grantchester (Lab): My Lords, I enjoyed the Minister’s explanation of the order before us today. If a film that has been supported by the Government and the taxpayer in this way should be very successful—he mentioned “Paddington”—and especially profitable, is some element of the profits returned to the pot, if that is the right expression, for further use by British films to encourage the British film industry or does it escape from the system? Is it in some way self-fulfilling that the profits of a publicly supported film go back into making more British films?

Lord Stevenson of Balmacara (Lab): My Lords, I am very pleased to respond in this debate. First, I declare my interest as a former director of the British Film Institute. I thank the Minister for his kind words about my contribution in that time.

I have spent many happy hours over the last few years debating issues that come up on the DCMS brief with the Minister. I have usually been able to, I think, in his own words, “trip him up” on something and cause him difficulty. I am normally rewarded, because is it often a delight to have a two or three-page letter—indeed, the last one almost ran to four pages—in which he finally gives me the answers that I have asked for, usually to my complete satisfaction and sometimes even far beyond that.

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Today is different. I have consulted widely with my remaining friends and colleagues in the industry and have sought comments from FACT and the British Film Institute. Nobody has a word of doubt about this order. They are delighted with it, and it seems otiose for me to stand here and even question the Minister about it, so I shall give the Committee one anecdote and ask three very small questions. I do not expect a letter.

When I was director of the British Film Institute, which I was for nearly nine years, I spent most of my time trying to argue with officials and Ministers in what was then a Conservative Government that we needed a better definition of a British film. It is therefore somewhat ironic to be considering an order which not only deals with that but improves the current definition and brings it forward. There is a little irony within that irony, which is that the order does not define a British film at all; it defines a film as British if it is made in the EEA, which must have come as a bit of a shock to those who perhaps take a view different from mine about the benefits that flow from the European Community, but let us pass over that.

The reason for the anecdote is that part of the work I was doing at the British Film Institute developing a public policy issue around this stemmed from work that was initiated by the late Prime Minister Mrs Thatcher, who held a very high-profile summit in Downing Street in 1990, from which most of the policy that we are now concerned with started. Indeed, other Members of your Lordships’ House were at that meeting and could talk about it as well. It was the beginning of government interest in film, but it constantly worried us because of something within the idea that more people should be going to see films, which was Mrs Thatcher’s view. She recalled her time in Grantham when the whole village used to go to the village cinema twice a week to catch the latest films, which were, of course, largely British. In the early 1990s, it was feast or famine. There were occasional rushes of successful British films that were invested in by American studios, but that tended to fade away and we were back to the usual diet. The main diet in British cinemas at the time we went to see her was films that were often made by British people, or had British expertise in them, but were financed, often produced and almost certainly made outside Britain, and we wanted to resolve that. It has taken a very long time, but the situation is now transformed. As the Minister said, between 150 and 200 British films a year benefit. It is an extraordinary transformation of the arrangements.

5.45 pm

This is a good-news story. There was a sense that we had a natural talent here and that there was something in the water that made our people very good at film-making. The expertise and skills which were originally developed in the great studios on a ring around London, of which there are only two or three left, have now transferred into fantastic computer-based skills. The people with those skills are operating largely out of Soho. This was originally the place where all the costumes were made for the films made in Britain but it is now where, 24 hours a day, people are working on

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creating characters and animations, and making things happen that drive the world’s film industry. Long may that continue.

In my experience—I think it is still true—just about every Government in the world support the film industry in a way. I repeat: every Government, including that of the United States of America. The US system of support for film exports has been the envy of the world and it is something that we may want to come back to at some future date. It provides a guarantee against loss for those who export their films from America and, as a result, that puts the American distributor who takes films abroad in a very strong competitive position. We do not have as much support here, although that is changing. I use that as a means to simply say that there is nothing unusual about using the tax system to try to help films.

Film-making first got a tax break in the 1994 Budget. It was then changed in 1999 and again in 2005 or 2006. Since then, the situation has been transformed, and I think that these changes will help. The irony, as I mentioned, is the fact that it is now a pleasure to read about the way in which films can qualify as being British—not just in terms of whether they are made here, which was the original definition, but now in terms of set-dressing, the talent, the writing, the audio-visual work and the post-production work, which are all part of this extraordinary industry. It is a collaborative industry beyond all collaborative industries, yet it relies on individual skills of the high order that we have in Britain today. That is my anecdote in terms of what I have experienced, and I have pleasure in seeing this measure before us.

I have three questions. In the Minister’s introduction—and I see it in some of the background notes—there was a suggestion that the reason for this order, as is said in the paper Modernising Film Tax Relief, which was originally from the Treasury, was in some senses to improve the way in which a film receives its tranche of money and, to avoid a step-change between low-budget and high-budget material. I think that that is right but I am anxious to check that I am reading it correctly. A paper that accompanies the order says that the reason for doing this is to try to make sure that the film is more culturally British—or, as truth is, that it comes from the EEA states—in order to better qualify for the state aid regulations that operate in relation to this issue. I would be interested to hear the Minister’s response to that. What is driving this? Is this about better and more efficient use of the tax break or is it something that has come from outside and is there a need to make sure that we do not fall foul of the European regulatory concerns?

My second point is not unrelated to that. The cultural test for film, which is the subject of the order, is said to be aligned to the other three cultural tests relating to animation, programming, high-end television and video games; of course there is also drama as well. That is not mentioned in the order but presumably it is in the background. When the Minister comes to respond, perhaps he could sketch out how close the alignment is. Are they exactly the same or are there differences in what they do? Many of the considerations applying to film will certainly also apply to high-end drama in

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terms of post-production, talent, location and shooting. Indeed, that was the subject of a number of debates on the recent success of “Wolf Hall”, the television production which has just started.

My third point is about the money, given that 150 to 200 films a year benefit from film tax relief, and given that the Explanatory Memorandum says that one of the things that it is hoped will happen as a result of this is that there will be,

“greater investment within the UK from overseas and in international co-productions, resulting in higher levels of economic contributions from the sector, more stability for a highly skilled workforce, and the creation of culturally important products”.

I have to confess that when we tried to persuade Mrs Thatcher that it would be quite a good thing to finance the film industry with tax support in order to get more co-productions, she gave one of her handbag expressions and we soon dropped that. It did not go down very well: she did not seem to like the idea of British taxpayers’ money going on some foreign films. The truth is that European sensibility will be useful to the British film industry and that most films have to be made in English if they are going to be successful at all in the export market, so I think it is a self-solving problem.

However, my real point is that the Exchequer impact study for this—I do not think there is a separate one for the measure before us—suggests that the impact on the Exchequer will be a loss of £10 million in 2014-15; £20 million in 2015-16; and then nothing, nothing and nothing from 2016 to 19. That does not quite square: if more external productions are going to come to Britain to be made here and if there are going to be more co-productions—I hope there will be—then surely there will be a continuing drain, or is something else going on here? I would be grateful if the Minister could respond to that point.

Other than that, I want to stress again that this is a terrific move. It is going in the right direction by giving more credit to some of the things that need to be recognised. The skills we have in post-production are terrific, and the overall scheme requiring just over 50% of the points, I think, for the film to be allowed to qualify as British or, as we say, European in content is the right way to go forward. It will be a boost and a further step in fuelling the success that we have seen in the recent awards ceremonies, with hopefully more to come in the Oscars.

Lord Gardiner of Kimble: My Lords, with this cast list we have had a very agreeable debate. I am very pleased, and acknowledge the support that has come from your Lordships on this matter because it is something that is clearly in the interests of the British film industry. I would like to place on record the Government’s thanks to the British Film Institute and the industry for their assistance in developing this policy. That is the reason we are here today. It is a prime example of an industry and government working together to secure the best that we could possibly achieve.

My noble friend Lady Bonham-Carter referred to support, but also raised an element of concern for some that there are too many changes. My understanding is that no further changes are envisaged. Perhaps I

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should say that the cultural test has been amended on three occasions, in 1999 and twice in 2006. On each occasion, this was to update the test to reflect changes in policy as to what should qualify a film as a British production. Like today, those changes were all designed to ensure that we were ahead of the game and in no way disadvantaged.

The noble Lord, Lord Grantchester, asked about use of profits and the profit-returning element. Of course, although there are profit reliefs, a hugely successful film will make a contribution to the Exchequer. We obviously want to ensure that the more films we have with tax relief, the more will come into the Exchequer. Interestingly, the Government are investing £47 million of lottery funding and more than £23 million of Treasury funding to support film and audiences in the UK. The total public funding for film in 2011-12, for instance, was £366 million. From all angles, on the point that the noble Lord was making, the Exchequer gets a good return on very successful films.

The noble Lord, Lord Stevenson, continues to look very well on the handbagging he may have received from the late Lady Thatcher. There is no doubt about it: she was interested in concepts of this sort. Perhaps with someone with the reputation that she has, when one gets down to how she was in practice, she was rather different from the persona that has some currency.

The noble Lord, Lord Stevenson, asked a number of questions, which I shall endeavour to answer. If the answers are not fully sufficient—it is a Thursday—he might like a letter from me. The noble Lord alluded to a point about the changes and approval by the European Commission. Yes, these changes, along with the changes to the rates and qualifying expenditure for film tax

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relief made in the Finance Act 2014, were approved by the European Commission in a state aid notification on 17 March last year. I hope that that is also satisfactory.

As to what was driving the change, and whether it was because of the requirement of approval or to remove a tax cliff et cetera, this was very much designed to encourage more production in the UK by taking a broader definition of what qualifies as a British production. We obviously wanted to ensure that we retained the talent and skills in certain areas of production, particularly, as I emphasised in my earlier remarks, in the visual effects and post-production houses, where we excel but where we were concerned that quite a lot was going abroad. Again, that was important.

On the alignment of all the tests, the ambition is to align the cultural tests for the creative sector tax reliefs as far as possible. Given the slightly different nature of the activities, there may be an element of that, but we would certainly wish to align all of them wherever we can. The Government will be consulting on the alignment of the high-end TV cultural test with the film test shortly, so that will be work in progress.

As to the expected cost to the Exchequer, and the possibility of a decrease from 2015 onwards, this exercise is about the cultural test, but I should write to the noble Lord on this one. This may be a more intricate issue, but I promise that I will not write four pages and I hope that there will be clarity. On that basis, and following this good Thursday debate, I commend the order to the Committee.

Motion agreed.

Committee adjourned at 5.57 pm.