Christopher Chope
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Richard Harrington
My hon. Friend makes a good point, as ever. Given the importance of the industry to this country, I had hoped that Opposition Members would be present. However, avid readers of Hansard they may be, so I am sure that they will be able to catch up in the morning.
Mr Christopher Chope (in the Chair)
Order. It is important to point out that this is a half-hour Adjournment debate, and it is not normally possible for Members other than the Member who secured the debate and the Minister responding to participate without having gained the consent of those people. Therefore, saying that Mr X or Mr Y is not present is not really a good point, because in a half-hour Adjournment debate people who could not participate would not normally be expected to attend.
Richard Harrington
Thank you, Mr Chope, but I ought to explain that I mentioned to the Minister whom I thought would be present—my hon. Friend the Member for Faversham and Mid Kent (Hugh Robertson), who told me that he would be here—the fact that I thought there would be one or two interventions. I hope that has not caused offence to the Chair, and thank you for the clarification.
The first item of which people should be aware is the current taxation, which is a producer film relief for companies making films that qualify in the UK as British films. The relief is in place, and the industry supports it and hopes that the Government will leave it in place. My understanding is that the industry has made suitable representations to the Secretary of State and that that will be the case, although I hope for clarification.
The taxation position, however, has been complex. In 1997, when the Labour Government came to power, they decided to reward what some would say was the electoral help of media “luvvies”—but I am not one of those. Some would say that there was a lax film taxation regime, allowing high-net-worth individuals to get 100% tax credits for investing in films. That situation was, I think it is fair to say, abused by the tax avoidance industry, rather than by the film investment industry. To quote Charles Fry of Pinder Fry, a legendary accountant in this field:
“The fact that we’re investing in films is irrelevant. If we could get the same tax relief investing in cauliflowers, we’d do it.”
To mix my metaphors, there was a chink of light and that industry drove coach and horses through it. The end product was that in 2006 the previous Government pulled down the drawbridge—to use another cinematic analogy—and cut off the tax break for investor funding for high-net-worth individuals.
The vehicle left was the enterprise investment scheme, which is quite well used but very much on a small scale. The average investment through the EIS is between £5,000 and £10,000, so it is a good way to get small investors. However, small films are the type that tends to be funded. While they are very useful, the fact is that, while we have amazing facilities in this country and all the infrastructure, we are providing a vehicle mainly for foreign investors to do their production here while the profit, quite understandably, returns to the investors, who are abroad. Today, I am speaking to the Government about how we need to achieve a situation in which British investors can invest in British films tax efficiently.
What we need to understand about the British film industry is that the budget for a film is now about £1.5 million—the average, median cost of a British film. It was £2.9 million in 1993. With due respect to some fantastic operators, we have gone down to a kind of cottage industry.
To give an example, Mr Martin Carr, who has given me some excellent evidence from his company Formosa Films, explained to me that it is a question of finding many investors to do one film. Films have 600 or 700 investors putting in small amounts of money. While that is obviously useful in employment terms and in benefit to the economy, we have the facilities and capabilities to do much more.