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British Film and Television Industries (Communications Committee Report)

My Lords, I, too, start by welcoming the noble Prelate the Bishop of Gloucester, whom I thank for his excellent maiden speech. Our committee has held six inquiries in a little less than three years. This is the fifth. The total weight of written and oral evidence will amount to quite a few kilograms. This is in no small part due to the drive and energy of our excellent chairman, my noble friend Lord Fowler. He has led us at some pace through a series of fascinating inquiries. I should like to echo the noble Baronesses, Lady Howe and Lady McIntosh, by saying how much we have enjoyed his chairmanship and admired it. It has been an especially interesting committee to be part of. I should also like to say that we have been extremely well supported by our clerk and specialist advisers and by all those who have done so much for us in the office. Thanks to them, too. Our report includes the history—a very brief history—of the British film and television industries in two separate sections. Cinema for public entertainment emerged more than 100 years ago, mostly in the United States, France and Great Britain. The world’s first regular television service was launched by the BBC in 1936 but was suspended throughout the war and resumed in 1946. It has been helpful to our inquiry to be able to understand how and where these two industries started and have their roots and to have some idea of how they evolved. While working on the committee’s earlier reports, we became very aware of the effect of the digital age, long term, and the recession, hopefully short term, on the film and television industries. As this report considers in more depth the actual making of film and of television programmes, we continued to find out how penetrating these two influences are. On the digital front, one example is the need for cinemas to be adapted so that digital projection takes over from analogue. This is particularly serious for small cinemas, where the investment is disproportionate to their income—a point that has been referred to by the noble Baroness, Lady Howe. The more small cinemas are able to project digitally, the more opportunity there will be for low-budget films to be screened. Added to which, it costs less to prepare a film for digital transmission. Because of the recession, there has been reluctance on the part of the banks to provide the essential start-up funding for new films and programmes. Alternative sources have to be found. I shall touch briefly on two subjects, one of which, tax credits, has already been mentioned by the noble Lord, Lord McNally. The other has not been discussed but I think that it is important: the proposed merger of the UK Film Council and the British Film Institute. On the first subject, the answer to the question posed in the title of this report—decline or opportunity? —has a core message, which is funding, so it is not a bit surprising that many of our recommendations consider the effect of pressures on funding and what can be done to alleviate them. One theme that occurred again and again in the evidence was tax credits or, as the Government call them, film tax relief. These were revised in 2007 and, although the previous scheme provided important funding for the film industry, it was drawn so widely that some of the benefit went where it was not needed. Some witnesses told us that the revised scheme was drawn too tightly and that this has affected the funding of lower-budget films. At present, as I am sure most noble Lords already know, if a British film is shot partly overseas using a British crew, there is a financial penalty. This problem could be alleviated by extending relief to British filming that is carried out overseas. In addition, that would recognise the creative and commercial needs of film-makers to film outside the UK. Oxford Economics carried out a study on the impact of increasing tax relief on low-budget films; a hopeful message for the Treasury is that the results suggest that an increase would be close to fiscally neutral. An adjustment would also sustain the UK as an attractive venue for international film-makers. For instance, the industry here in the UK is renowned for its post-production expertise. Other countries have caught up and are challenging the UK’s position—they know that generous tax credits attract inward investment. However, the Government do not believe that any adjustment is necessary at present. In response to our recommendations, they quoted some impressive numbers, but they did not indicate how much greater the benefit to the industry could have been if the scheme had been more sensitive to the needs of low-budget films, nor did they reflect the risk of international film-makers finding more attractive venues than the UK. However, they said that, ""the film tax relief will be kept under review to ensure that it is meeting the policy objective of promoting the sustainable production of culturally British films"." While looking further into the film industry, we took evidence from the United Kingdom Film Council in March last year and from the British Film Institute in June. At that stage, the question of a merger was not being openly discussed. The subject came up during our last session in November when we took evidence from the Secretary of State at the DCMS, Ben Bradshaw. The UKFC is a non-departmental government body established in 2000. Its funds are provided by grant in aid and the lottery. The BFI is a charity founded in 1933, which was granted the royal charter on its 50th anniversary. A little under half its funds are grant-aided through the UKFC and the remainder is self-generated income. The UKFC, principally a funding body, provides finance for the production of new films. The BFI provides cultural support for the industry through distributing films that might otherwise never reach the public, through the national film archive, through annual festivals and through other activities. The merger between two such apparently disparate organisations gave us some cause for concern. We were concerned that any savings on administration would be too small to warrant the upheaval. We were also concerned that the BFI’s cultural role would not be maintained and that its charitable status could be affected. However, the Minister assured us that the charitable status would be retained and we understood from the Government’s response that the boards of both organisations were in support of the proposed merger, which is an important factor. As we speak, four months later, things have moved on. Agreement has been reached in principle with the Charity Commission that the new body formed by the merger can have charitable status and it is assumed that that will include retaining the royal charter. However, the merger could cause complications when it comes to good governance and board membership. The existing board of the UKFC consists mainly of directors from larger commercial organisations and so represents the commercial interests of the body. The BFI’s objectives are firmly embedded in film’s cultural interests. Therefore, if good governance is to be maintained by the merged body, a number of the directors need to represent the cultural remit of the BFI. In order to make sure that their respective responsibilities are properly recognised, it is proposed that an interim board should include both directors from the predecessor boards and some new blood. The two organisations agree that the proposal to merge is in the public interest. They have much to offer each other—the UKFC’s ability to fund new productions and the BFI’s cultural support to the industry through distribution, exhibition and the national film archive—so we must wish them well and hope that the merger goes through and succeeds. In conclusion, this report should continue to be considered seriously. The digital age is proceeding at a galloping pace and the interests of the film and television industries are deeply affected. Our report and evidence contain valuable opinions and information from leading experts in the field. We hope that it will be useful to the Government when they are formulating policy for the industry in the future.