NB: this post is by Tim Hewish, my Parliamentary Assistant, and the views expressed are his own.
Jim McGovern, Labour MP for Dundee, called a Westminster Hall debate to address the growing disparity between the UK and other nations on the latter’s favourable tax credits towards the video games industry.
The UK has a long history of innovative creative industries; video games are one such platform: from Rareware and Eidos to Media Molecule and Rockstar Games. Currently, what we are witnessing is rapid global competition whereby graduates who study game design are being tempted away from the UK to nations who offer sizeable incentives to ply their trade elsewhere. The list is in fact quite long:
- Canada has been successful in poaching UK companies to relocate through tax breaks. Their industry is predicted to grow by 17% over the next two years; while between 2008 and 2010, the Canadian games industry grew by 33%; although over the same period, the UK’s games industry fell by 9%
- Pennsylvania has introduced a 25% tax break and is the 17th State to do so
- Our neighbour, Ireland, can see the tide turning and has reacted by discussing the possibility a tax break a few weeks ago
- Most recently, Australia has approved a $1.9Bn R&D tax relief scheme in support of its games development industry.
Industry heavyweights support these assertions, Andrew Wilson, the senior vice president of worldwide development at EA Sports, admitted that:
EA has many studios that take advantage of game tax breaks and EA Canada is certainly one of them.
He also acknowledged that EA employs, “lots of British developers at EA Canada.”
This begs the question: Why bother to train students in a growing industry in the UK for them only to move abroad due to poor incentives not enabling them to start up a business. Is UK PLC now closed for business?
As Mr. McGovern went on to say:
When we took evidence at Abertay University, we were told that, every day, students there who are studying the computer games industry and will graduate in that subject are receiving phone calls from France, Ireland and Canada saying that they will be offered a job there. Most of the students who study computer games do not end up employed by a company in the UK; they end up starting their own business.
In a climate where we talk about reorienting and rebalancing the economy and shift away from a London-centric model, this digital industry can provide investment in areas that would otherwise not be as competitive. The Regions are such examples.
As for job creation, TIGA, the body that represents the games industry, shows that tax breaks would help 2,500 new jobs to be created and would maintain and protect 3,000 current jobs.
Also of interest is that the film industry has an existing state aid exemption, which is an acknowledged piece of state aid that is registered with EU authorities. Why not other creative industries?
Mr. McGovern said that:
During the Scottish Affairs Committee inquiry, it was suggested that the tax breaks received by the film industry cost in the region of £110 million a year. The previous Government committed themselves to tax breaks for the computer games industry worth £55 million a year. However, the computer games industry generates more for our GDP than the film industry.
The Coalition has stated that the games industry is not an important cultural ambassador, while the Film Industry apparently fulfils this criterion. However, France views this rather differently. Former French Culture Minister, Renaud Donnedieu de Vabres, called for video games to receive a proper cultural recognition:
Video games are not a mere commercial product…They are a form of artistic expression involving creation from script writers, designers and directors.
There is a significant point to be recognised here. In the past, the greatest artists and musicians would have their work displayed on the easel of a gallery or at the music hall; while scriptwriters, directors and producers would be on Broadway or Hollywood. Now these talents can come together and be represented in video games. One only has to listen to the orchestral score of Zelda or Final Fantasy to hear the high calibre musicians. Rendered backgrounds also show off high quality artistic talent.
However, if we were to take the video game cultural stigma out of this argument, we have an industry that could provide more private sector jobs, reduce the brain drain that is taking place, and generate more start-ups while also retaining them. We could even fight back and make Britain more competitive and attract other talent to relocate to these shores.
This is a soundly conservative principle and one which should be backed by tax breaks, cutting red tape for SMEs and greater tax simplification. It is the only honest way out of the economic crisis because this industry generates real economic value.