The abolition of the UK Film Council a curious decision; indeed, the government’s decision to scrap the UKFC is not just an act of artistic philistinism - it’s a case of economic vandalism too.
Our guest writer is Phil Burton-Cartledge, a blogger and jobless academic; he writes regularly on political, social and cultural issues, and is the political education and trade union liaison officer for Stoke Central Labour Party
The abolition of the UK Film Council a curious decision. This particular move will save the treasury all of £15 million a year, and was probably chosen because ‘it’s the arts’ and apart from liberal/luvvy-types, no one will give a toss. But this is a stupid decision from the standpoint of building on the economic recovery and securing tax receipts.
Since the UK Film Council was set up in 2000, some £160m of government money has been invested in film production. This money has been unevenly spread across approximately 900 pictures, which, according to the UKFC, has generated £700m in worldwide box office receipts.
Of course, the total number of receipts cannot be considered the return on the government’s outlay. The UKFC oversees the distribution of lottery money too, and it is very rare to find a film funded solely by this and tax monies. To borrow a phrase from another area of government, UKFC-funded films are public/private partnerships to varying degrees.
Permit me this small unscientific exercise; suppose all 900 films received an equal slice of public money. Of the £160m, each receives approximately £177,778 as a subsidy. If we treat this as capital, the economic criteria from the state’s point of view would be to receive a profit on that in terms of tax revenue generated.
The table below lists 11 well-known films that have received UKFC financial backing of some sort, with their budgets, worldwide box office takings, and gross profits:
|
Film |
Budget |
Box office |
Gross profit |
|
St. Trinian’s |
£7.11m |
£12.89m |
£5.78m |
| Happy-Go-Lucky | £1.41m | £8.77m | £6.22m |
| Man on Wire | £1.20m | £9.00m | £7.80m |
| The Wind That Shakes the Barley | £4.20m | £12.05m | £7.85m |
| Bend It Like Beckham | £6.00m | £50.00m | £44.00m |
| The Last King of Scotland | £3.16m | £25.45m | £22.29m |
| In the Loop | £0.61m | £1.50m | £0.88m |
| Streetdance 3D | £4.50m | £11.59m | £7.09m |
| This is England | £0.79m | £4.30m | £3.51m |
| The Constant Gardener | £13.90m | £45.81m | £31.91m |
| Gosford Park | £14.14m | £62.68m | £48.54m |
This yields a total gross of £185.87m.
Calculating the tax payable on this is a difficult business. The government taxes the companies that own the films, not the individual pictures themselves – but for illustrative reasons, let us suppose each film is equivalent to a firm taxable at the 28 per cent corporation tax rate.
Applying a corporation tax rate of 28 per cent gives us £52.04m that goes to the Treasury. That works out as an average of £4.34m per film, or a return of £24 for every pound of taxpayers’ money the UKFC invested.
Further, let us estimate the wage bill of these films account for 70 per cent of their budget. The total budget was £57.02m, of which £39.91m went out in wages. Assuming all staff were basic income tax rate payers (which, of course they’re not, but some actors and production staff are foreign nationals and/or not domiciled in Britain, they do not pay tax on earnings here – it serves as a rough equaliser), a further £7.98m makes its way back to the treasury.
That’s £60m off just 12 films. And that’s without counting the multiplier effects this has had in terms of their supply chain, VAT take, cast and crew’s spending, etc.
Nor does it account for future multipliers. Take Kiera Knightley, for example. Bend it Like Beckham catapulted her into the A-List and helped her become a big box office draw. Not only does the treasury benefit from the large fees she’s able to command, but also the cut it gets from monsters like Pride and Prejudice, Atonement, and Love Actually.
Her case shows the return on the UKFC’s initial Bend It investment will pay dividends for as long as Kiera makes films, and beyond. The same is true of other actors, directors, crews and studios whose pictures have received tax payers’ assistance, whether they meet the short-term criteria of returning a profit to the treasury or not – and returning to the short term, even if all the other 888 films were commercial failures they too had their multiplier effects.
The government’s decision to scrap the UKFC is not just an act of artistic philistinism. It’s a case of economic vandalism too.
33 Responses to “The economic madness of abolishing the UK Film Council”
Neil Hughes
On the #UKFC closure – economic madness as well as just bad decision making http://bit.ly/avKVNH
Vinny
RT @politicsofuk The economic madness of abolishing the UK Film Council . #ukpolitics http://bit.ly/drJXo2 < pls signup to save ukfc
Matthew Taylor (MTPT)
@MichaelBurke: I have read the report, unlike – on appearances – you or the author of the original piece.
The Oxford Economics report does not causally link the tax revenues you quote to the existence of the UKFC. If you have read and understood the report, you know this – so you are presumably making the same deliberate error most of those publicly decrying UKFC’s closure have made to date – conflating and confusing government funding, lottery funding, and the existence of UKFC itself.
At the core of this debate is a question as to whether the tax revenues produced by the film industry, and indeed the multiplier effects arising from it, have any direct causal relationship with the existence of the UKFC, or the funding it disburses.
What the report makes clear is that the real engine of growth for the UK film industry is tax relief, not UKFC or the funds it disburses.
It is undeniably the case that if the funding UKFC disburses is removed – and remember that half of that £60M you referred to is money from the National Lottery, not DCMS – a small number of productions which are not economically viable would not take place. To leap from this to claiming that all of the tax revenue and multiplier effects would be put at risk is empty hyperbole.
Phil BC
What is tax relief if it isn’t a subsidy by another name?
The UKFC is not perfect by any means, but what it has been able to do by directing public and lottery money is ensure a wide range of films have been made than would otherwise be the case. Yours and Guido’s ideologically narrow view of value *does* blind you to the real benefits of multiplier effects.
Let’s take a UKFC funded bomb like Franklyn. It cost six million quid to make and barely did £100k worth of business in UK cinemas. A turkey for the studio? Yes. But bad for the economy and a waste of the DCMS contribution? No. The budget was six million spent on wages, goods and services. A proportion of this would make its way back to the treasury, but more importantly it kept people and businesses in productive economic activity.
Another point, not answered by the critics, is the potential of further multipliers. A small bit of tax payers cash now can ensure future big names get their break or at least a foot on the ladder.
As I stated in the opening paragraph, this post was an *unscientific* and *illustrative* exercise of the dangers abolishing the UKFC could have for the film industry because it is driven by a narrow penny-pinching exercise. Getting rid of the UKFC won’t destroy the British film industry, but there will be pictures that won’t get made, actors and directors who won’t get their breaks, and so on.
PS Given all the nit-picking going on, I’m surprised no one’s noticed I’ve misspelled Keira Knightley’s name.
Michael Burke
Matthew
setting up staw men to knock them over doesn’t really advance the debate. No-one claimed that the UKFC is directly responsible for all film output nor the tax revenues that derive from it. It often doe play a decisive seed-corn element in film financing.
The sleight-of-hand was your own, using the UKFC’s inability to be ‘self-financing’ as supposed evidence of its redundancy. To repeat, the revenues go to the Exchequer.
The UKFC plays an important role in financing (and in training, see p.38 of the Oxford Economics Report). This can be decisive. As the House of Lords 2009 Communications Comittee report put it, ‘An independent British film producer has to build up a patchwork of financing in order for a film to be made. He (sic) is likely to be eligible for film tax relief and can approach the UK Film Council, and BBC Film and Film4, the film investment arms of the BBC and Channel 4, who may be prepared to invest in the film. Beyond this, the producer may have to seek equity investment and pre-sale of the film to one or more distributors, against which he can obtain funding. This may still fall short of the finance required. Until the recession, banks might have been prepared to provide “gap funding”, but the Committee was told that they had virtually withdrawn from film finance.’
This latter point is decisive, with banks having withdrawn from film financing (as so many other areas) the hope that the private sector will fill the hole left by the UKFC is just wishful thinking