[Martin Caton in the Chair] — Intellectual Property
Mark Field (Cities of London and Westminster, Conservative)
I am afraid the hon. Gentleman is bursting the bubble of a man who thought of himself as a serious musician.
I want to put the issue into a broad economic context, before talking specifically about some of the intellectual property issues we have touched on. We rather easily forget that, amid all the west’s gloom and doom, economies across much of Asia, Australasia, south America and Africa are growing at a steady pace, and thank goodness, because where there is growth, there is opportunity. Unlike in the 1930s, when the global economy was shrinking, even the most pessimistic scenarios for economic growth worldwide today suggest that there will be 3.3% growth this year and that growth in 2011 was more than 4%. However, we still lack any overall strategic vision and message regarding the UK’s role in the new world that is unfolding before us. I appreciate that, in the face of such colossal difficulties, it sometimes sounds a little naive to talk just about wide-eyed optimism. All too often, however, the criticism of this country’s entire political class, going back some years, is that it seems almost to be in the business of managing decline, rather than of looking at Britain’s potential.
Over the past decade and a half, roughly three fifths of domestic expansion in the economy has arisen courtesy of the financial services, through the public sector or in the property and construction fields. The present squeeze will, of course, be most profound in those areas, and
that will be the case for some time to come. If we discount those key drivers of the last boom, it is understandably difficult to predict with any confidence the precise economic activity in which the necessary supercharged levels of growth will come. We all pay lip service to boosting traditional manufacturing, and indeed new high-tech, high-resolution manufacturing, but we will face great competition in that respect. At the core of this debate, therefore, is what our strategy will be in an area where we continue to maintain a distinct reputation and a great competitive advantage—the export of intellectual property.
Let me take an example from close to home, in my constituency. Like the previous Government, the coalition has pinpointed the creative industries as a sector that offers a great prospect for future growth. Yet, in the two years I have been trying, as patron of Animation UK, to negotiate a tax credit for the animation industry, I have faced intransigence. The televised animation sector may appear to be only a small slice of the national economic cake, but as the hon. Member for Perth and North Perthshire has said, 0.6% here or there makes quite a big difference in the entirety of our GDP. In almost every other nation, however, the animation industry deems the reward of Government subsidy well worth the initial outlay.
British animators are losing work from these shores at an alarming rate because they cannot compete with the lure of Government-backed incentives elsewhere, which make it so much easier to put together the necessary funding packages for programme-making. One local animation business in my constituency, for instance, has recently taken calls at ministerial level from the Governments of Trinidad and Tobago and South Africa, advising it of the carrots on offer if it moved to those jurisdictions. In the case of South Africa, the carrots included free office space for three years and the waiving of particular local taxes.
It is fair to say that our DCMS team understands the problem, but over the past two years, the Treasury has seen only the up-front cost, rather than the longer-term, revenue-positive outlook. I do not blame the Treasury, given the problems with film benefits unravelling almost year by year. There must also be a sense that we need to think about not only the volume of product, but the quality. I also understand that the financial constraints we are under mean it is difficult to make the case for any tax breaks. Most critically, however, we seem to be ignoring an issue that explains why I, as a believer in free and open markets, support a targeted tax credit. Naturally, it would be good if a tax credit helped to keep animation jobs on these shores, but the real golden egg is the retention in this country of intellectual property rights.
The money generated annually worldwide from unimaginably successful franchises such as “Thomas the Tank Engine”, “Wallace and Gromit” and “Peppa Pig”, especially when it comes to all the secondary branded products, massively exceeds that brought in by high-profile films such “The King’s Speech”—a massive Oscar winner last year, which was, of course, helped along by the tax credit for films. To give some perspective, “Thomas the Tank Engine” tots up worldwide sales in excess of £1 billion every year, with his tales broadcast to more than 1 billion households in 185 countries each and every day. By contrast, “The King’s Speech”, which
was hailed as the most successful British independent film ever, grossed just shy of £374 million, and that was essentially a one-off payment.
The issue is similar for the video games industry, which seeks comparable tax incentives to keep business on these shores. In addition to offering the revenue benefits that I have cited, the video games and animation industries are young industries. That is an ever more crucial factor at a time of rising youth unemployment. We need to give our brightest and best a reason to stay in this country. It is no good just offering them specialised creative university courses when the only jobs in the relevant industries are abroad.
Instead of tinkering temporarily with little pots of money here and there to boost shrinking sectors, it is time we started thinking more strategically about how we can—not just via the tax system—promote the sectors of our economy that offer potential growth. I entirely endorse what the hon. Gentleman said: intellectual property is one of the relatively few areas where we hold an historical advantage, and the market for many of our creative industries—partly because of the strength of the English language—is in the fast-growing territories outside the area of the north Atlantic economic downturn.
I want to end with a couple of important warnings for the future, which are slightly more general than my observations about particular industries in my constituency. First, there is no room for complacency about the west’s domination, as we see it, of the knowledge economy. Within the next 20 years, and perhaps rather sooner, I suspect that the IP rights that have underpinned the west’s competitive advantage—whether licensing, copyright or patents—will be due for a radical, philosophical shake-up. For example, an ever more assertive China will argue that traditional IP structures are no more than the west’s attempt to impose its own form of protectionism to suit its particular demographic. We cannot assume that the dominance of our values in determining global trade will remain unchecked. We should look out for China putting forward a more forceful argument along those lines during what might be increasingly fraught World Trade Organisation negotiations in the years ahead. With so many of our Government bonds being mopped up by sovereign wealth funds from the east, our bargaining hand may prove much weaker in the face of that apparent logic. We should look out, too, for the terms of Chinese investment in our companies. Alas, that is nothing new, but I suspect requests for technology transfer will be written into more and more deals as the price for eastern funding.
Finally, I want to highlight a concern that has been in my mind as a result of my work as a member of the Intelligence and Security Committee. Malicious cyber-activity requires much greater vigilance. Such activity can take the form of online fraud, espionage or terrorism, but of relevance to this debate are the ongoing and daily attempts to steal British-owned intellectual property—patents, ideas and designs. This occurs most obviously, but by no means exclusively, in the IT, technology, defence, engineering and energy sectors, and it is of course carried out primarily to gain competitive commercial advantage. Such attempts, I fear, are commonplace, and we must do all we can to educate businesses about the substantial risks that lie ahead.