A Declined Opportunity?

Finance expert Dave Morrison examined the recent House of Lords report, The British Film and TV Industries–Decline or Opportunity?

The House of Lords Select Committee on Communications report on UK film and TV should be recommended reading for all film students. It is a shining example of an academic dissertation, and also offers a well-written history of the UK film industry. Whether or not Their Lordships’ efforts ever lead to material progress for the film industry is another matter altogether.

The Select Committee was made up of seven lords, five baronesses and the Bishop of Manchester. Baroness Bonham-Carter (TV), Baroness McIntosh (theatre), Lord Gordon (radio) and Lord MacDonald (TV) have all had careers in the worlds of art and entertainment, the rest, of course, representing the ‘great and the good’ of the peer world. The commissioning of the report in February 2009 was timed to review, in particular, the first couple of years of the UK Film Tax Credit (aka Producers’ Tax Credit). It also looked at UK-originated content in film and TV. Over 600 pages of written and oral evidence are available, or alternatively try the 100-plus page report, available at www.publications.parliament.uk.

Their Lordships broadly listened to industry lobbyists and have regurgitated the best bits, offering a balanced and uncontroversial conclusion, rather than choosing to oversee a ‘think tank’ bursting with lateral thinking. The government may, or may not, enact any of the recommendations it likes, justifying these along the lines of ‘that’s what the industry wanted’. For example, it was announced in the recent Budget that the video games industry should be offered tax incentives, as recommended in the report.

So what about film and TV? Well, there has not been much action so far. Nevertheless, the Lords’ conclusions are still of interest.

Despite industry lobbying, it has been recommended that the film tax credit rate remains unchanged for larger films, but kept under review so that the UK does not risk becoming non-competitive. For films with budgets under £5m, however, it recommends raising the rate to 30 percent (this would realistically be limited to 24 percent due to the 80 percent expenditure cap) to aid financing. Unfortunately, Alistair Darling did not appear to pick this recommendation up when putting his Budget together. Also sadly absent from the Budget was the recommendation that, when calculating tax credits, the costs of employees (paid on a UK payroll) should fully count as qualifying UK production expenditure, even when on location abroad.

Yet one cannot blame Darling for overlooking the vague assertion that, ‘The government should look at ways of facilitating greater British private investment in film production.’ This is hugely disappointing from an intellectual committee, and is about as proactive as an onlooker saying ‘Why doesn’t somebody do something?’ while offering little help or guidance themselves.

The Lords may have declined the opportunity to be radically innovative.

Referring to the UK Film Council, the report questions why it is funded through the Lottery and not central government, which suggests that the poor souls had been working so hard, they were unaware of the budget deficit. Nevertheless, they boldly recommended that Lottery funding of the UK Film Council is restored to previous levels after the 2012 Olympics. They also question the UK Film Council and BFI merger idea, suggesting that any savings would be small and that it should not be allowed to affect the BFI’s ability to benefit from private donations.

There is a clear recommendation that specific legislation should be introduced to make the use of
camcorders in cinemas a criminal offence. There are also a number of statements that refer to Their Lordships supporting various current initiatives, including those on curtailing peer-to-peer file sharing, urging the government to help digitalise cinemas and welcoming filmmaking becoming part of Channel 4’s remit.

Despite a lot of the report being devoted to recognising that there is a problem with getting UK content distributed, the conclusion offers very little in the way of groundbreaking solutions. If raising finance is the Holy Grail, then getting distribution is the sequel. The Lords make the point that the UK does not really have a big player in the distribution field, and suggest that the part privatisation of BBC Worldwide would enable the UK to develop a world-class player in this area. They also lament the fact that American companies dominate the distribution market.

While it may be true that the partial privatisation of BBC Worldwide would enable it to raise funds in order to expand by acquisition, a case much championed by Lord Fowler, the Committee chairman, over time it could end up being half owned by yet another American company. If so, rather than offering competition, the move could end up with the US controlling even more of the UK market! There are also other long-term concerns, such as could the BBC end up with too strong a hold over UK producers? Might it benefit the BBC but few others? The idea may prove to be a masterstroke, but needs to be considered very carefully before being implemented, and the BBC are apparently lukewarm about it themselves.

The lack of other recommendations in this area is concerning. One train of thought that does not seem to have been considered is the idea of a cultural test for showing British films in UK cinemas. Although the EU does not generally approve of economic state aid, the reason tax credits are available to producers is due to the reliance on the UK Cultural Test, meaning it can be seen as cultural, rather than economic, aid. If one can receive a tax credit for producing such a film, then why not for showing it? If cinemas were offered tax credits for showing UK films, perhaps they would want to show more British product. In turn, if the prospects of distribution were greater then presumably more people would be willing to invest in independent films. If British films then achieved more exposure, they would then probably have a greater chance of being sold abroad. There may be obstacles, but this idea surely merits some discussion, consideration and exploration? Rather more proactively, the idea of extending tax credits to childrens’ TV programmes was floated, as well as a number of other conclusions which are probably of more relevance to broadcasters than movieScope readers. There are also a number of points made about industry training. Sadly, they tend to be limited to urging ‘somebody to do something’, although in fairness it is recognised that we are heading into tough economic times. Ultimately, the construction of the report is certainly impressive. Unfortunately, the Lords may have declined the opportunity to be radically innovative, and it is far from certain at this stage that any conclusions will transform into much tangible action.

…

This article was taken from movieScope Magazine, Issue 17 (May/ June 2010)