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.
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 different view than me about the benefits that flow from the European Community, but let us pass over that.
The reason for the anecdote is that as 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 of films in British cinemas at the time we went to see her were 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.
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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
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, 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
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.