TIGA, the trade association for the video games industry has released an updated second edition to their previous publication in relation to proposals for tax relief on the industry following on from their original submission to the Labour government in 2009.
I campaigned hard within the last government for the introduction of tax relief for the UK video games industry. It’s a sector that we can be truly proud of; that showcases the creative talents and inventiveness of our nation on a global stage.
Britain has for many years consistently occupied the 3rd place spot in world for video games; understandably behind the US and Japan.
However in 2006 this changed when spurred on by considerable tax reliefs and attracting inward investment Canada rose dramatically up the rankings.
We weren’t quick enough to react in the UK to the changing global landscape of the video games industry but I’m glad that finally in 2010 ministers acknowledged the problem and the importance this sector represents to the UK economy by bringing forth the legislation in March 2010 for the introduction of a Games Tax Relief.
Sadly, this was one of the casualties of George Osborne’s first budget when the coalition government came to power.
I have to admit that despite all the horrific measures introduced that day; that announcement really hurt. Not because I’d been working on its introduction for so long but because it was quite clearly representative of the short term false economic approach that has come to typify the coalition government.
Despite the global financial crisis that has plunged much of the world’s economies into recession over the past couple of years; between July 2008 and September 2010 global sales of video games increased 16% bucking the trend. As a country with a long heritage of producing some of the most iconic video games you might have expected that amongst all the gloom of the recession in other sectors that the UK games industry would have provided a glimpse of light but it didn’t.
In the same period, the head count of games developers in the UK industry fell 9%.
Our video games industry represents a sector of the economy that has the true potential to shine, even in difficult economic times. We’re not lacking the developers, we produce some of the best and brightest in the world but in the global economy our risk of losing these highly trained professionals, not to mention their income tax receipts is high.
I’m saddened at the approach the coalition government seems to be continuing to take to the industry.
David Gauke, Exchequer Secretary to the Treasury reiterated the Government’s view of tax relief for the UK games industry by saying:
“Games Tax Relief would not be additional to the UK economy; that it would displace investment from more productive economic sectors; that skilled developers who lost their jobs in the games industry would find work elsewhere and so Games Tax Relief was unnecessary; that Games Tax Relief was economically inefficient; that Games Tax Relief would complicate the tax system; and that Games Tax Relief represented poor value for money.”
I couldn’t disagree with him more on his comments.
He may well be right about skilled developers losing their jobs not ending up with the rising number of those unemployed; but neither are they likely to be getting jobs in other sectors in the UK or running their local libraries for Dave’s ‘Big Society’ when they’ve sacked the librarians. I’d hazard a good guess they’ll be investigating applying for a Canadian work permit and checking out apartments in downtown Montreal.
This is the real crux of the problem for the UK economy. We seriously risk giving away a sector and a highly skilled workforce that we’ve been instrumental in creating and nurturing for decades for the same sort of short-sightedness and not adapting to the global changes.
It happened to France in the middle of the last decade. France lost 60% of its developers to Canada by 2005. Since then, the French Government has introduced tax relief for their industry and it’s been successful in bringing back jobs but the industry still hasn’t recovered its position and that’s not what we should allow to happen here.
Sadly though, it’s already happening. UK Video Games producers lost 23% of their developers to foreign countries in 2009, 73% of those went to Canada.
If we’re to stop this brain-drain then the industry needs incentives right now.
David Gauke claims a tax relief system would complicate the tax system. We’re usually told red tape is the scourge of industry but here we have an industry calling for it because they recognise the benefits to the UK sector and the economy as a whole, not to mention it has seemed to work quite well in the film industry which has not had it’s tax relief abolished.
The Conservative’s were happy to crow about how reforms to non-domiciled tax status would drive some of the best and the brightest from the country, but in abolishing the introduction of a Games Tax Relief they are driving some of our brightest and best developers abroad and undermining an industry that actually does create real wealth for our economy.
There has never been a more important time than now to introduce a Games Tax Relief system in the UK. While our competitors from Canada, the US, Nordic countries, France, Germany and South Korea press ahead and hoover up our talent; our government does nothing but watch the studios close down and an industry fall into decline.
You can read the full 85 page report from TIGA here. (PDF)
Q1501 Mr Watson: Mr Crone, on the Taylor case, your advice was to settle in April 2008, I think you said?
Mr Crone: I agreed with the outside advice that was given, yes.
Q1502 Mr Watson: So you took it to the Board in June 2008?
Mr Crone: No, I did not take it to the Board; I reported to Mr Myler as editor, and at one stage we both reported it upwards together.
Q1503 Mr Watson: A £700,000 payment would be a decision taken at Board level. Is that right?
Mr Crone: I am not aware of that.
Q1504 Mr Watson: So the News International Board did not agree the payment in any way?
Mr Myler: What do you mean by the “Board”?
Q1505 Mr Watson: Your managing Board; the directors of the company.
Mr Myler: Why would they need to be involved?
Q1506 Mr Watson: Because it is a huge amount of money and they have got a responsibility to the proprietor and shareholder, I assume?
Mr Myler: Yes. As I have said, MrWatson, the sum of money that Mr Taylor first set out to receive was significantly higher than the sum he did receive.
Q1507Mr Watson: I am sorry, I thought that was the easy question. So the Board did not know about the payment—
Mr Crone: I do not know. I am sorry, I do not know. All I do is report to the next stage up.
Q1508 Mr Watson: So you could let us know afterwards; you could write to us and let us know whether the Board took the decision?
Mr Crone: I could ask the question and give you the answer, yes.
Q1509 Mr Watson: Would that be minuted? Could you let us have the Minute?
Mr Crone: If it was raised at the Board I assume it is minuted.
Q1510 Mr Watson: Could you tell us how it would appear in the accounts?
Mr Crone: No, I do not know the answer to that. It would appear against—I probably do know the answer to that. It would appear against the legal department budget.
Q1511 Mr Watson: When did you tell Rupert Murdoch?
Mr Crone: I did not tell Rupert Murdoch.
Mr Myler: The sequence of events, Mr Watson, is very simple, and this is very clear: Mr Crone advised me, as the editor, what the legal advice was and it was to settle. Myself and Mr Crone then went to see James Murdoch and told him where we were with the situation. Mr Crone then continued with our outside lawyers the negotiation with Mr Taylor. Eventually a settlement was agreed. That was it.
Q1512 Mr Watson: So James Murdoch took the ultimate decision?
Mr Myler: James Murdoch was advised of the situation and agreed with our legal advice that we should settle.
Mr Crone: What you have to understand about litigation, which I do not think you do, is that if you are in it then you are in it until it is over.You can stay in it and have a full trial and pay £3 million or you can get out at a certain stage and pay £600,000.
Q1513 Mr Watson: I am just trying to find out who took the decision to make the payment.
Mr Myler: It was an agreed, collective decision. It is how newspapers work. Indeed, Mr Watson, I think you probably know that it is good, sensible, practical business practice across most industries. Are you telling me that you have never come across an agreed payment between two companies or an individual that falls out over something that is done? Is that what you are saying?
Q1514 Mr Watson: No, I amjust trying to find out—
Mr Crone: Mr Watson, because you are on a Conditional Fee Arrangement in your litigation against us—
Q1515 Mr Watson: I do not want to get into that.
Mr Crone:—you have no knowledge of how litigation finances work?
Q1516 Mr Watson: All I am trying to find out is who took the decision to settle—
Mr Myler: Very simple, and I think we have given you the simple answer.
Q1517 Mr Watson: Could I ask about the payments to Mulcaire, just for clarity? You said that he had been working for the paper since the late-1990s.
Mr Myler: I believe that the association may have gone back that far. I think his first contract was, I believe—and, again, perhaps Mr Kuttner—
Mr Crone: The first one I have seen is 2001.
Q1518 Mr Watson: You have seen 2001.Would you be able to let us know if it goes back before that?
Mr Crone: Yes, sure.
Q1519 Mr Watson: I think the only thing in the public domain is that he was paid £100,000 in 2003 to Nine Consultancy. Is that right?
Mr Crone: I do not know.
Q1520 Mr Watson: It could be that he was paid that amount in the years before that.
Mr Crone: It was an annual contract, and the last annual contract was a touch over—it was about £104,000 a year.
Q1521 Mr Watson: That contract ended when he was convicted?
Mr Crone: Yes.
Q1522 Mr Watson: Then you said there was an employment disagreement. He, presumably, thought that because he had worked for you for more than a year he had employment rights and, therefore, you needed to aVord him the same employment just as you gave Clive Goodman. Is that what you understand?
Mr Crone: No, I was not privy; I was not part of that process, but my understanding of the employment law (as I say, I am only repeating what I have been told) is that freelancers or contractors, if they do more than a certain number of hours a week for you, then they have rights.
Q1523 Mr Watson: So when he came out of jail, was his company paid or was he paid directly?
Mr Crone: I do not know.
Q1524 Mr Watson: You could let us know that afterwards. Is that right?
Mr Crone: Yes. I hope someone is writing down what I need to let you know.
Q1525 Mr Watson: And the amount?
Mr Crone: I do not know.
Q1526 Mr Watson: You could confirm that afterwards as well?
Mr Crone: I am sure.
Q1527 Mr Watson: Mr Myler, I was going to say to you that people whose judgment I respect tell me that you are a very decent man and that if there was wrongdoing in the company when you took over you would have cleaned it up. My final question to you, on which I am trying to get light in this Inquiry, is how a newspaper decides what is in the public interest. The judge in the case said that in certain circumstances illegal activity is allowed in the public interest. Am I right to say that under your leadership that public interest test would be taken by you, having sought legal advice, and would not be taken further down the food chain?
Mr Myler: I think it is safe to say, Mr Watson, that in 40 years in this business I spend, probably, equal amounts of time and, depending on the story, more time with lawyers than I do with journalists.
Mr Watson: Thank you.