Clause 40

Finance (No. 2) Bill – in a Public Bill Committee at 2:00 pm on 18 May 2006.

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Conditions of relief: British Film

Question proposed, That the clause stand part of the Bill.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

Clause 40 focuses on the requirement that a film be culturally British. I can see the merits of focusing film tax relief on culturally British films and of the indirect benefits of the promotion of UK plc around the world by the film industry. Those benefits would be more direct and stronger with films of particular cultural Britishness.

I shall flag up one concern, however: there could be room for debate on what is sufficiently British. For example, would “The Chronicles of Narnia” have been sufficiently British? Will the “Red Dwarf” movie—currently in production—be sufficiently British? There is a lot of involvement in that film by the British film production industry. Would that pass the test?

The points-scoring system, whereby it is possible to take diverse factors into account such as a film’s cultural content and setting, the nationality of its characters and its use of UK cultural hubs, seems to be broadly workable. I welcome the fact that the test makes provision for a UK cultural hub for visual and special effects because those are some of the strongest aspects of the UK film industry; our visual and special effects industry is one of the most successful in the world. Encouraging film makers to use those facilities is desirable.

My principal concern is the same as that which I raised during deliberation on another part of the Bill: is the EU state aid regime the principal concern motivating clause 40? Or did the Government form the view that we need a test of Britishness?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

As the clause makes clear, and as I think that we discussed on Tuesday, in order to be eligible for film tax relief, a film is required to be British and to be certified as such by the Secretary of State for Culture, Media and Sport under schedule 1 to the Films Act 1985. That was the previous requirement for film tax reliefs. However, my right hon. Friend has developed and introduced a new film tax regime designed to be simpler to operate and more geared towards a film’s British cultural status.

I had the pleasure to serve on the Committee that debated the details of that cultural test. Certainly, the conditions set out are extensive, but it will not surprise the Committee that that is the responsibility of my right hon. Friend, not the Treasury. Obviously, it would  be inappropriate for a Treasury Minister to comment on any matters outside the direct purview of the Treasury, so that is really a matter for my right hon. Friend’s Department.

On European Commission state aids, we discussed the procedure for state aids clearance during consideration of the clauses on tax reform. The state aids rules require that support be directed towards films that are cultural products, which is why the Department for Culture, Media and Sport has been in dialogue with the Commission over compatibility with the state aids rules and its responsibilities. That Department, like the Treasury, has notified the Commission of the test, but that is for it to pursue.

I can reassure the hon. Member for Chipping Barnet that this is not being done because of a requirement from the Commission, but because we want a test of Britishness that will allow us to say with hand on heart that we are supporting the production of British films.

Question put and agreed to.

Clause 40 ordered to stand part of the Bill.

Clauses 41 and 42 ordered to stand part of the Bill.