Film Industry (Hansard, 8 March 2004)

§ 4. John Barrett (Edinburgh, West) (LD)
If she will make a statement on the level of support for the British film industry. [158919]

§ The Minister for the Arts (Estelle Morris)
In 2003–04, the Department provided grant-in-aid funding of £24.11 million to the UK Film Council. By the end of January, the council had also received £21.53 million of lottery funding this financial year. In addition, the Government continue to make available significant tax relief for film makers, in practice providing them with up to 15 per cent. of the budget of individual films.

§ John Barrett
I thank the Minister for that answer, but what can be done to encourage film production in this country, especially following the announcement on 10 February that threw into confusion the funding of several films in the pipeline? Will she put pressure on the Treasury to introduce transitional arrangements to ensure that those films are funded in the UK and not abroad?

§ Estelle Morris
Significant help—up to 15 per cent. of the cost of the film—remains available through the tax system for people producing films in this country. That represents a significant investment of taxpayers' money, and it will continue. I am grateful for the opportunity to clarify that, because much has been written about the demise of support through the tax system, but that is not the case. The Treasury is absolutely right to close tax loopholes. It sends a message to film makers that, as the Chancellor made clear, the Government will continue to support them, but that we will act in the interest of taxpayers and ensure that tax loopholes are closed.

§ Mr. Tom Clarke (Coatbridge and Chryston) (Lab)
The film industry accepts what my right hon. Friend says about the Treasury closing loopholes and about the exploitation that was occurring when it took the decision on 10 February. Notwithstanding that, does she agree that it is important that she shows every support for film production studios and post-production infrastructure—before any statement that the Chancellor might make next week—to confirm the Government's commitment to the renaissance of the British film industry, which has been such a success so far?

§ Estelle Morris
I acknowledge the part played by my right hon. Friend in the Government's contribution to the film industry since 1997. He is right to say what he does. I have not met one person in the industry who has said that the Government were wrong to close that loophole. There is widespread approval of that. I accept that, if contracts had not been signed and filming had not begun, some people were put in a difficult position, but it was right to close the loophole.
The investment that the UK Film Council is making to ensure that we have the necessary range of skills, to which my right hon. Friend referred, is also important for the future of the British film industry. Record investment was made in UK films last year. I believe that that will continue, and the Government are taking action to ensure that it does.

§ Mr. Mark Field (Cities of London and Westminster) (Con)
Members have referred to the tax loophole closed 1230 on 10 February. The concern of the film business is the suddenness of the change. What representations did the Minister make to the Treasury in advance of 10 February, or can we assume that it was as much of a surprise for her as it was for everyone in the British film business?

§ Estelle Morris
The minute a Government start giving notice that they are about to close a tax loophole is the minute everyone who wants to shelter income takes advantage of the loophole. There is nothing unusual about the way in which the Inland Revenue acted. If there is a tax loophole, it closes it without warning to safeguard British taxpayers' money. More than £100 million was saved by closing that tax loophole. Hon. Members should congratulate the Government on ensuring that that money was saved. Some people at the edges got hurt, but film makers who had signed contracts and films that had started filming were allowed to continue, receiving the money from the UK taxpayer. Indeed, the legitimate tax breaks in sections 42 and 48 apply and they will continue to do so.

§ Miss Julie Kirkbride (Bromsgrove) (Con)
The Minister is well aware of the tax reliefs available to the film industry, not least section 42, introduced by the last Conservative Government, which has been enormously successful in boosting the British film industry. She is also aware of the tax reliefs introduced by her Government, which were withdrawn overnight on 10 February in a Treasury press release. Does she recognise the crisis of confidence that has been created for international investors in the British film industry by the overnight withdrawal of those tax reliefs? What representations is she making to the Treasury to ensure that new tax reliefs will be introduced in next week's Budget that are stable, long term and do something to boost investor confidence in the great British success story of the British film industry?

§ Estelle Morris
That was the most disgraceful statement I have heard from anyone who claims to have an interest in the UK film industry. There was no overnight closure of the tax support to films. Both sections 42 and 48 apply and they will continue to do so. Some £300 million a year is given as relief through section 48. The tax relief that her Government introduced is worth £70 million: good though it is, it is nothing like the section 48 relief, which supports UK film to the tune of £300 million a year.
For the hon. Lady to stand at the Dispatch Box and criticise the Inland Revenue for closing a tax loophole overnight shows a total disregard for taxpayers' money. Again, I make it clear that the tax relief continues and, again, I make it clear that the Government will continue to act to ensure that money is preserved. The hon. Lady is shadow spokesman for a party that has promised to freeze my Department's budget. Were it to gain power and implement its £78 million cut in the Department of Culture, Media and Sport budget, I wonder how long the film industry would continue to be supported.