Finance (No.2) Bill

Jim McGovern Excerpts

Monday 8th November 2010 Commons Chamber

[Mr Hanson]

We are happy to consider on a case-by-case basis whether tax relief helps to generate employment and earn business and crucially—I think that this is the right hon. Gentleman’s point—to maintain that business in the United Kingdom rather than transferring it overseas. The film tax credit has proved that that can be the case, and I suggest in the new clause that we consider it for the video games industry.

[Jim McGovern (Dundee West) (Lab)]

My right hon. Friend mentioned the British film industry. Is he aware that figures provided by TIGA, which represents the computer games industry, suggest that the cost of a tax break for computer games would be £55 million, whereas the film industry already gets a £110 million break, even though the revenue generated by both is much the same?

[Mr Hanson]

Indeed, and TIGA—my hon. Friend says “tiger”; I say “teega”, but we both mean the same thing—has estimated that we can make savings to the Treasury by investing in a tax relief up front and keeping jobs in this country. That is the crucial point.

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[Mr Field]

I accept that. There is also little doubt that we have some tremendously high-quality people working in this business. I must say, in parenthesis, that one difficulty is that hitherto we have had to import far too many such people from beyond these shores. I know that our university media studies industry is much discredited, but those media studies courses that are linked to the video games industry in particular often ensure that we get some of the brightest and best of the home-grown talent in our universities entering the industry.

I take on board the concerns of the right hon. Member for Delyn (Mr Hanson), given that the issue before us has been in the ether for years. I would prefer not to rush into anything, although I hope that my hon. Friend the Minister will take on board the deep concerns expressed today so that we can come back, perhaps during next year’s Finance Bill, with a workable model based on the proposals before us.

I would like to put in a word not just for the video games industry, unique though its interests are in the minds of those who run and work in those businesses, but for the animation industry. It is a related industry within the media sphere, and faces many of the problems expressed by the hon. Member for Dundee East and businesses in the industry. The animation industry is deeply concerned that it is losing some of its brightest talent, and feels that—this is felt not just in the animation sector—it is facing unfair competition not only from the Canadian and French models, but from Ireland and, dare I say it, Scotland. It feels that it is losing out to a large degree. I would therefore like to see a clause that brings the video games industry, the animation industry and all these other industries under a single protocol. Such a protocol could operate well and effectively, so I hope that the Treasury will consider one in next year’s Finance Bill.

[Jim McGovern]

The hon. Gentleman has indicated that part of the computer games industry is based in his constituency—in fact, he seemed to indicate that the industry originated there. Does he agree that a change of name or title is required? When people hear “computer games industry”, they think of young lads between 15 and 30 sitting in front of a computer screen playing “APB” or “Grand Theft Auto”, when in fact, as people who have visited Abertay university in Dundee will have seen, it is used in medical research, construction and architecture. Perhaps we need a change of focus, rather than continuing to call it the “video games industry”.

[Mr Field]

The hon. Gentleman is right to make that important point, although it also raises the question of how we couch such a new clause and schedule in a future Finance Bill to ensure that it takes on board an industry that we want to encourage rather than see go much further afield. I am not a young lad of 15 or 30—or even of 46—so the industry has passed me by, but there is no doubt about the enthusiasm of the companies operating in this sphere. One of my biggest concerns is that all too often those companies have to employ programmers from eastern Europe and other parts of the world in order to get the relevant level of expertise. That is a regrettable state of affairs. None the less it is undoubtedly a thriving and enormous industry, in which we are cheek by jowl with the Japanese in terms of our expertise and export potential.

I implore the Minister to take our concerns seriously. Now would not be the time to accept a proposal such as the one before us, but I hope that he will give sufficient comfort to Opposition Members to ensure that they do not press the matter to a vote. However, the issue is worth discussing at length today.

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[The Exchequer Secretary to the Treasury (Mr David Gauke)]

New clause 1 and new schedule 2 seek to provide additional tax relief for companies producing video games. The measure was announced, but not implemented, by the previous Administration. As the Chancellor said in the emergency Budget statement, this tax relief for the video games industry is poorly targeted, which is why we have decided not to introduce it.

The United Kingdom’s video games industry is recognised as a world leader, having produced hugely successful games such as the “Grand Theft Auto” series, and has led to innovations in industries as diverse as defence and health care, as the hon. Member for Dundee West (Jim McGovern) pointed out. All that has been achieved without specific Government intervention for the sector through the tax system.

We estimate that the relief proposed by the Opposition would cost some £40 million to £50 million a year—that was the costing for the previous Administration’s proposal—and we believe that without strong evidence of a market failure in the games industry, it is difficult to justify spending that amount of money on such an intervention, particularly given the state of public finances.

[Jim McGovern]

At a recent meeting with the Minister, I told him that before the Budget that announced the intention to promote tax breaks, there were at least six ministerial visits to Dundee, which included the then Secretary of State for Scotland, Ministers from the Departments for Business, Innovation and Skills and for Culture, Media and Sport, and the Chancellor. There was a lot of consultation before the then Chancellor eventually announced the decision on tax breaks. Will the Minister tell the House how many visits were made to Dundee before this Government’s decision to withdraw them?

[Mr Gauke]

The circumstances facing us in the run-up to the June Budget were such that we wanted to introduce a more fundamental reform of corporation tax. In that Budget on 22 June, we announced a reduction in the main corporation tax rate from 28% to 24% over the next four years. In doing that, we wanted to show a sense of direction, to ensure that Britain was open for business, and that we were providing lower rates. Our approach is to have a broader base but lower rates rather than targeted intervention, unless there is clear evidence that intervention is the right approach.

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[Mr Gauke]

We have also reduced the small profits rate of corporation tax from 21% to 20%, when it was set to go up to 22%, and we have effectively reversed the jobs tax—the increase in national insurance contributions that would have hurt start-ups. We are also offering start-ups, including those in the hon. Gentleman’s constituency, a national insurance contributions holiday for the first 10 employees, so there were plenty of positive policies for start-ups announced at the time of the Budget. Indeed, given the state of the public finances, it was a very pro-business, pro-growth Budget in the way that it set up proposals for lower taxes.

On tax simplification, the Office of Tax Simplification earlier today announced the list of reliefs and exemptions within the tax system. When its work began in the summer, the general expectation was that there would be about 400 reliefs and exemptions; the total reached is 1,042 such reliefs and exemptions. Many play an important role within our tax system—I do not wish to decry that—but we have to think carefully about introducing new areas of complexity and new reliefs and exemptions, unless there is a strong case for doing so. Members have already made the case for video games, but the Government remain unconvinced.

[Jim McGovern]

Will the Minister give way?

[Mr Gauke]

I certainly will give way to the hon. Gentleman, who has been very active on this issue.

[Jim McGovern]

I thank the Minister for giving way again. He talks about hearing what has been said in the Chamber, but as far as I am aware he has not yet met Richard Wilson of TIGA. Like everyone else who mentions the organisation, I originally referred to it as “teega” but Mr Wilson continually refers to it as “tiger”, and I assume that he knows better than I do. I believe the logo resembles a tiger, so there is a connection with the pronunciation there. Will the Minister agree to come to Dundee and I will arrange for Richard Wilson to be there? If figures are to be bandied about, with the Minister saying they are erroneous and Richard Wilson saying they are correct, it would be better if those two were in the same room at the same time to discuss the issue.

[Mr Gauke]

I am grateful for that invitation. I am sure it will be small comfort to the hon. Gentleman, but I will accept the pronunciation “tiger” and concede that point. I am not sure that it would be terribly helpful if we were all in the same room to discuss these particular numbers. As I say, we are not convinced by the case made on these numbers. Of course, Members with constituencies that have a concentration of video game companies will want to make that case, but it is right for the Government to look at the economy as a whole and to bring forward policies that benefit all parts of the country and all sectors, including the video game sector. As I said in the meetings I have had with the hon. Member for Dundee West, there is no sense in which the Government are in any way anti-video games or think it is an antisocial issue or anything like that. It is a question of economic efficiency and where we believe the role of Government can be best used—and that is in providing a favourable climate for businesses.

I appreciate that the new clause and new schedule proposed by the right hon. Member for Delyn (Mr Hanson) are probing measures, but I would like to touch on a point made by my hon. Friend the Member for Dover (Charlie Elphicke). This relief is targeted at a specific sector and it would be considered to be state aid; as such, it would require notification to and approval from the European Commission. The new clause and new schedule would be effective from Royal Assent. As the Government would not be able to secure approval in such a short period, the provisions would create an illegal state aid. As I said, I understand that the amending provisions are probing, but the same issue applies to the previous Government’s proposals—and they, too, would have required state aid approval, which is worth putting on the record.

The new clause would create unjustified distortion and complexity in the corporate tax system. We do not think that such an intervention would represent good value for money for the Exchequer or be conducive to providing a simple and competitive tax system. The UK needs a tax system that supports all businesses, because it is the private sector across the board that will drive the recovery. I therefore ask the right hon. Gentleman to withdraw the new clause and new schedule.