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”
Matthew Taylor (MTPT)
@PhilBC: You’re still persisting in the same conflation: doing away with the UKFC is not the same as doing away with the DCMS grant, and doing away with that grant is not the same as doing away with National Lottery funding. Your comment, and original piece, simply ignores those distinctions.
Given you seem to be concentrating on funding, would you acknowledge that abolition of UKFC qua quango is a red herring – as distinct from the question of direct state funding of the film industry?
(The UKFC’s own press release on its demise certainly seems to acknowledge that it is the money disbursed by the body, not the body itself, which is the issue.)
I don’t understand what you mean by Guido and my “narrow view of value”. Yours has been an expressly economic argument, so if this intended to pull in some measure of cultural value this is a late addition. My argument has not been about whether it is possible to “spend to make” by funding the UK film industry –if you care to look back, you’ll see that I was acknowledging that possibility at the start – but rather about whether the UKFC and with direct state funding of the film industry has any causal relationship with the multipliers you’re focusing on.
As to ‘Franklyn’ (in respect of the contribution of £1M of the £6M budget), you’re arguing that this money – which unarguably did not, in this case, generate any return on investment in the form of tax revenue from profits or ticket sales – should be treated as a kind of fiscal stimulus measure, very much in the “bridge to nowhere” category: a job and demand creation scheme.
If that is what this resolves to, it is incumbent on those advancing such an argument to explain why we should expend stimulus in such an inefficient fashion. At least with a literal “bridge to nowhere” we spend capital and obtain an asset, albeit one of limited value. In the case of the contribution to Franklyn, we have in effect spent capital as revenue.
I acknowledge that it is difficult to anticipate which productions will fail to achieve their goals, but trying to defend the UKFC and the funding it disburses on such a basis invites failure: give the money instead to ITV to spend on production of “Midsomer Murders”, or the BBC on “Doctor Who”, and you will produce the same stimulus effect in the same industry, causing the same job and demand creation, but be all but guaranteed a profitable outcome.
You could also simply spend the money on tax relief – and yes, to answer you, it is analogous to subsidy. However, as I’ve noted above and nobody seems to dispute, tax relief has been causal in growing and preserving the UK Film Industry in a way which the UKFC’s existence and direct state funding has not. It is also clear that the rate of return on the “cost” of tax relief far exceeds anything that can be hypothecated for direct state funding.
As for the argument that we should maintain the UKFC and state funding on the basis that we might produce wealth creators (such as Ikea Knightley), I assume you’ve anticipated just how easily that argument gets holed below the waterline: if you wished to produce wealth creators in order to increase future revenue from taxation on their income, you wouldn’t give the money to aspiring actors or producers, but rather to trainee plumbers, lawyers and accountants.
Finally, I don’t dispute that you declared your analysis to be “unscientific” and “illustrative” upfront, but the problem is that it is so unscientific, and so divorced from the facts, that it is not illustrative of any underlying reality and so is of no value in informing or advancing a debate about abolishing the UKFC.
(Sort of the homeopathic alternative to evidence based blogging; some people argue it’s harmless, but it isn’t!)
@Michael Burke: See above.
On straw men, it was you, not me, who advanced the proposition that UKFC’s existence and budget had a direct relationship with the revenues from the UK Film Industry. You said:
“…the core film industry contributed £445mn in all taxes in 2009. Once multiplier effects are taken into account this rises to £1.21bn, compared to which the UKFC’s £60mn budget is chicken-feed.”
My response (“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.”) was not positing a straw man, it was tearing one down.
As to my alleged sleight of hand, if you go back and parse the relevant passage, you’ll see that I was pointing out that the line about every £1 of funding generating £X is misleading – because if this were genuinely true the UKFC would be self-sustaining; the return on its investment of money would fund future investments.
In reality the money “generated” refers to revenue generated for private investors, companies, and contractors, and some it then returns to the exchequer. However, this return is also attributable to the existence of tax reliefs, and – as the UKFC’s own research shows – the tax relief is by far the most important factor.
You implicitly assert that UKFC must exist for the state to provide gap funding. Unless you care to explain the basis of this assertion, I can’t see that needs rebutting. In terms of the existence of gap funding itself, we are back to the discrete question of that part of the UKFC’s current budget which is DCMS grant, rather than National Lottery (since the National Lottery funding is unaffected). As with PhilBC’s argument that money disbursed by UKFC can be treated as fiscal stimulus, it is incumbent upon you to explain why we should focus gap funding on this industry, rather than any other.
Debbie Hayes
The economic madness of abolishing the UK Film Council | Left Foot …: The abolition of the UK Film Council a cur… http://bit.ly/bSMKRf
Starting Long Films » o galerie de gânduri neclare
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Jonathan Stuart-Brown
The Government has put tax money into Uk films even under Margaret Thatcher. It was just done much better before UKFC. The nonsense in the article is 2 = 2 = 2222 economics which illustrates the writer has zero knowledge of the industry and commerce of the film industry. The UK can easily have 250 000 employed in the British Film Industry but for that you need SAVE THE BRITISH FILM INDUSTRY’s crystal clear infrastructure to be implemented. http://www.savethebritishfilmindustry.com/ The so called UKFC bunch of aristocrats had no interest in a truly UK wide film industry emerging as they just wanted a very small south-east only in-club. The fact a 760 acre studio in South Wales nearly emerged on their watch horrified them as it would have taken the Hollywood inward investment away from the south-east. This investment does not follow tax credits or Lottery subsidy (although Hollywood will take it if offered) but rather sound stages. We had in 2000 the best in the world (albeit all west London and North London) but now 34 of our 44 are in danger thanks to UKFC. Indeed UKFC have been a real gift to The Malaysian and French and German and Canadian Film Industry which have all built sound stages while UKFC got into bed with a property developer who wants to sell ours off. This happened to 80% of Elstree Studios just after it made STAR WARS and INDIANA JONES. UKFC was a poor leader.
http://www.savethebritishfilmindustry.com/2010/08/the-uk-film-council-betrayal-of-the-british-flm-industry-is-about-to-be-fully-exposed-in-the-battle-for-pinewood-shepperton-sound-stages/
UKFC was useless as it lost money in the most profitable period ever for the global film industry. It failed to get access to UK cinemas (third biggest revenue in the world) for UK films.
http://www.savethebritishfilmindustry.com/2010/09/princess-diana-the-stig-top-gear-lady-gaga-simon-cowell-and-why-the-facebook-campaign-to-save-the-uk-film-council-was-a-total-flop/
Jonathan Stuart-Brown
Just to cheer people up and inspire them as British film talent is thriving because of sheer desire and courage, Aruna Shields (London model and actress was Aruna Who ? so she got on her 150 mph motorbike and become a top Bollywood star in action pic ‘Prince’ with a follow up art house smash.
http://www.savethebritishfilmindustry.com/2010/09/aruna-shields-is-the-new-angelina-jolie-and-a-must-for-the-next-007-james-bond-movie/
Aruna Shields then starred in a French movie (a caveman flick) and is now going to Hollywood.
Furthermore Vic Armstrong has worked on over 200 big budget blockbusters and if you watch what he does for 9 minutes, you will never again question what a second unit director is. Maybe Left Foot forward will campaign for him to get a knighthood as the crew always get snubbed.
http://www.vicarmstrong.com/show-reel/