§ 1.1 p.m.
§ Lord McIntosh of Haringey rose to move, That the draft order laid before the House on 18th January be approved [7th Report front the Joint Committee].
§ The noble Lord said: My Lords, the purpose of this order is to supplement the amendment to Schedule 1 to the Films Act 1985 which was agreed in this House in July 1999 and came into force in August. That schedule sets out the criteria which a film must meet in order to be certified as British and hence eligible for film-specific tax incentives. Compliance with the criteria is also a basic requirement for access to government production funding.
§ One of the two main criteria is that at least 70 per cent of a qualifying film's labour costs must be paid to Commonwealth or EU citizens or residents. Under the Act, the labour costs include all amounts paid or payable in respect of the labour or services of persons directly engaged in the making of the film. In the past, therefore, the labour costs have included living expenses—that is, payments made to meet food and accommodation expenses.
§ Some time after last August's amending order, we received representations from the industry arguing that the inclusion of living expenses in the labour cost calculation could rule out films shot entirely in the UK with a predominantly UK workforce. If a production involving a number of non-EU, non-Commonwealth staff requires a lengthy period of filming, the substantial accommodation costs associated with those non-qualifying employees could put the amount spent on labour costs of Commonwealth or European Union citizens or residents below the 70 per cent threshold.
§ The Government believe, however, that if a foreign star or producer working on a film stays at a London hotel, that should count in the film's favour and not against it. It seems to us anomalous that the living expenses of a few staff brought in from abroad for a production could cause that film to fail the current labour cost test, even though those living expenses were spent in the UK and contributed to the UK economy.
§ We therefore consulted industry experts and representatives of trade bodies on a minor amendment to the Films Act to remove living expenses from the calculation of labour costs. The amendment, which was welcomed and endorsed by those consulted, furthers the objective of last year's order: that is, it makes the qualifying criteria simpler and more rational. We envisage that it will have a bearing on only a small number of productions that are close to the 70 per cent labour cost threshold. Indeed it was because there had not been previous representations about this issue that it was not covered in last year's order. The change will 789 not undermine the objective of encouraging the employment of EU and Commonwealth staff, since there will continue to be a minimum requirement relating to the salaries paid to qualifying labour. I beg to move.
§ Moved, That the draft order laid before the House on 18th January be approved [7th Report from the Joint Committee].—(Lord McIntosh of Haringey.)
§ Baroness Anelay of St Johns
My Lords, I thank the Minister for explaining the provisions of the order. The House has been given the courtesy of a fuller and more detailed explanation than was accorded another place; and I am grateful for that. I make it clear that we support the making of the order today. Common sense measures to promote the success of the British film industry are, of course, always welcome. The proposed change will, I hope, do that.
The order was taken a month ago in another place where my honourable friend Mr Richard Spring asked the Minister for Tourism, Film and Broadcasting three questions for clarification which she agreed to answer in writing, and did so. I mention those three questions because the letters in answer have not been placed, quite properly perhaps, in the Library of the House; and, therefore, there is as yet no formal confirmation of the information given. I invite the Minister to provide that confirmation for the record.
The three questions asked were these. First, which items would be classified as "living expenses", and would that definition include merely food and shelter, or would it include travel expenses? Secondly, how could one calculate reasonable living expenses? Thirdly, my honourable friend asked what guidelines the Secretary of State would provide with regard to living expenses.
I quote from the letter. The answer to the first question was:Living expenses will, for the most part comprise food and accommodation costs, but may also include sums paid for basic subsistence. These could cover, for example, provision for minor travel costs, telephone calls etc. Otherwise travel expenses are not considered a living expense or a labour cost and are covered instead by the production activity cost test".The answer to the second question was:As for whether living expenses are reasonable, there are no hard or fast rules but we would look at whether they were well above average or were out of step with the other costs of the film, and would ask the applicant to justify the discrepancy".790 The third item referred to guidelines. I am grateful to the Minister for his courtesy in providing to me a copy of those guidelines prior to our discussions today. I understand that they are posted for public sight on the Internet site of the department.
I support the order. I simply ask the Minister to put on record his confirmation of the answers to my honourable friend Mr Richard Spring.
§ Viscount Falkland
My Lords, we on these Benches support the order. I congratulate the Government on taking such a sensible and pragmatic line in making the definitions appropriate to British film endeavour at this time. The Minister explained clearly this quite narrow adjustment. It is consistent with that aim. It is sensible that the adjustment should be made in order that individuals may be able to work on films without jeopardising the success of the film. I reiterate my congratulations to the Government on doing something for the British film industry which has long been needed.
I had intended to refer to the point raised by the noble Baroness as to exactly what constituted living expenses. I dare say that the Minister will take that into account and will answer in due course.
§ Lord McIntosh of Haringey
My Lords, I am grateful to both noble Lords for the welcome they have given to this small order. I am grateful in particular to the noble Baroness not only for asking three questions, but for answering them, too. I confirm that the answers she read out are our best definition of living expenses.
The reason why it is not entirely cut and dried is that some people are paid a per diem allowance, which is meant to cover accommodation, food, subsistence and sometimes travel. It is rather like the payment made to your Lordships. If that is the case, it is not always possible to sort out which element of the per diem is used for which purpose. That is why there has to be the otherwise undesirable reserve power of the Secretary of State to certify whether a particular payment is reasonable.
With that qualification, I commend the order to the House.
§ On Question, Motion agreed to.
§ House adjourned at ten minutes past one o'clock.