Monday, 30 August 2010

How to Fund Film in the UK? The Tax Credit System

The longstanding debate about film policy in the UK seems to have been reignited by the closure of the UK Film Council.  The latest addition has been producer Matthew Vaughn's call for changes to the Tax Credit system.  Under Vaughn's proposal, Tax Credit would be treated as capital investment and used to leverage a share of Hollywood profits back into the British industry.

The Tax Credit system was one of, if not the, central plank of New Labour's film policy, giving a 20% cash rebate to outside films (which in practice means Hollywood) that chose to spend money in the UK.  The rationale was that Hollywood is a global industry that will outsource production to countries with the most favourable conditions and therefore the strength of the British industry was dependent on getting a slice of this action.  This essentially sought to characterise the British film industry as a cheap service provider, particularly of post-production facilities but also of studio space, for runaway Hollywood productions.  In order to qualify films must be official British films or official co-productions (what qualifies as officially British deserves a post of its own) which encouraged Hollywood into linking up with British production companies.

It is this that allowed the UK Film Council to claim films like Harry Potter, The Dark Knight and Mama Mia! as successes of the British cinema, despite their obvious orientation to the international Hollywood-dominated market place and the fact that the primary beneficiaries of their profits are foreign-based companies.  It's the cinematic equivalent of the Chinese government claiming that its ability to provide cheap shoe-stitchers makes Nike a success story of the Chinese sports industry.

What Vaughn proposes is that the Credit system be treated as investment which can recoup a return to the Treasury which can then be channelled into independent British productions.  Vaughn argues that:

"the point is that the studios need capital and will pay for it, so the tax credit does not have to be free.  The studios will argue that asking for any kind of return will undermine the UK’s appeal as a location.  We disagree.  Certainly there are other jurisdictions with attractive incentives, but every incentive programme has its limits.  Looking at the UK’s position as a production centre, the country has a strong hand and should play to it.  In today’s cash-strapped world, 'soft equity' is a valuable commodity for studios and producers alike."

So could this work?  The first problem is that Hollywood will be loathe to accept even the principle that it should share its profits.  The Hollywood studios are well organised and quite capable of acting together when their collective interests are threatened.  The relative size of Hollywood productions means that shifting even a couple of them away from Britain will have serious consequences for the sections of the British industry which are dependent on such investment.  I expect Prague and Canada are waiting with bated breathe.  So it is a risky strategy.

Secondly, this does nothing to challenge the system through which Hollywood controls the international market, which is distribution.  That is where the real money lies.

Finally, even if it could be successfully applied, this plan would mean a change of policy.  It would require the political will to base film policy on the principle that the successful sections of the industry (Hollywood) should subsidise the less successful (independent British companies), essentially redistributing wealth from massive organisations like Fox and Disney to smaller organisations like Vaughn's company, Marv Films.  While Vaughn's proposals are relatively modest - he does not, for example, suggest that the money recouped would be channelled into non-commercial films - they still require interfering with what is a nice set-up for Hollywood.

Under the current policy-makers I just can't see it.

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