Tax breaks for games made in the UK are back on the agenda. So MCV spoke to Ed Vaizey, minister for the department of culture, media and sport, to find out why Westminster u-turned on subsidies for developers – and what happens next...
The industry was getting tax in 2010. Then the coalition government cancelled Labour’s plan. How did the Government come back to it?
People were very disappointed when the video games tax break didn’t go through in the coalition government’s first budget. But as I told many people at the time we were not going to give up making the case for it. The Chancellor has to look at the economy in the round – he has to look at what he can afford.
We also made the point to the industry that a games tax break is not a panacea. There are other ways to make the games industry successful including creating ways for anyone who runs a business to do business, as well as the skills issue which has moved on immensely for computer science.
But we didn’t give up on tax breaks and the case grew in strength over recent years. Not just for games themselves, but from the point of view of other companies. Some big businesses made it quite clear they would seriously consider investing heavily in the UK if there was a tax break. Big TV companies on the West Coast of the US said they would be interested, too, as did the animation companies.
So it’s been a coalition of the willing, really, that put together a convincing case to the Treasury.
But we are not out of the woods yet. We now have a consultation period ahead and need to get approval on it from the European Commission. While the Budget day was a great day it doesn’t happen overnight, it takes 12 months to implement.
So what can the industry do to help that process along?
They have to put a realistic case to Government and have to show how the tax credit can work in practical ways. The Treasury will be concerned about tax avoidance, so that must be addressed.
But the current film tax credit in place works extremely well, so the industry should look to how that works. The latest version of that is four or five years old and works incredibly well. It includes prior approval from the Treasury and also avoids those tax avoidance schemes. This means all projects that would benefit need approval from the Treasury, and there are cultural tests which stipulate production in the UK. It’s important people understand there is a cultural test element and that they can start making games with a British flavour.
That cultural element has been quite contentious, though. Do we just have to lump it?
Yes, it’s a requirement to get a tax break in Europe. The European Commission has tough rules on state aid. Governments can’t just hand money to companies they like, so you need to show that games have a cultural element promoting your domestic industry and culture. It’s been easy with film because you can easily argue that ‘a British Film’ or ‘a French Film’ clearly contributes to a cultural identity.
And within the cultural test it is important to stress that part of it is about talent, and making the game in question within the UK.
Previously the Chancellor said that games tax breaks were ‘poorly targeted’. What changed?
That was his other concern – can you give a tax break to one sector when the converged world of TV, film, games and animation is much bigger? One tax break for games – he just wasn’t convinced. But also the economic climate at the time was on his mind. The bigger win, the bigger tax break we are moving towards, is much more attractive to him.
Preliminary Treasury figures say the games tax break fund will be £15m year one and £35m in year two. Is that accurate?
That will be part of the consultation process. The Treasury and Government will want to come to grips with the definitive costs when it comes to deciding the tax credit. Those numbers are rough costs and will be honed down during the consultation period so the Treasury is confident about the cost implication. That’s an important part of why working with Government during the consultation is important.
Will the games industry be able to argue for more? Or will we just have to make do if that £50m across two years is all that’s available?
That’s a tough call. But people need to be realistic about what the Government can afford and what we can get out of the Treasury – we mustn’t ask for the Earth.
Broadly, though, a tax break can provide an overall halo effect around the games industry, right?
That’s an important point and why I’ve always supported a tax break. There are some people that argue a tax break is not fundamental to their business or it might not have an impact for online games firms, or so on. What it does definitely do over and above for all of the games industry, is prove that we have policy showing the UK Government takes the games industry seriously and wants to see investment there and is prepared to invest itself. That’s almost as important as the pounds, shillings and pence of it, even.
PRAISING GAMES’ MR GOVERNMENT
Ed Vaizey might be the man in Whitehall that understands games, but the man in games that helped Whitehall understand us deserves a round of applause, says the Minister.
“I want to pay tribute to Ian Livingstone,” Vaizey told MCV.
“He has given himself over to the Government and on behalf of the industry. He has turned around the Department of Education and its attitude to Computer Science. He has really helped the Treasury understand games. He travels the world evangelising the games industry to anyone that will listen.”
He has, Vaizey adds, been “very important in getting the games industry’s voice heard at the highest levels”.
"IN MY OPINION THERE IS ONLY ONE GAMES TRADE BODY"
Vaizey is full of praise for Ian Livingstone – and UKIE. Less so for TIGA.
Vaizey says: “Ian and UKIE have shown that you must work with government rather than carp from the sidelines, and they have been very practical in their approach to this.”
But what about TIGA, which in fairness has had lobbying for a tax break at the heart of its manifesto for a decade? Vaizey isn’t as free with compliments.
“I haven’t seen TIGA in two years. Says it all.”
You can imagine what he thinks, then, when it comes to the debate about the worth of having two UK games industry trade bodies.
“As far as I am concerned there is one games trade body. It’s called UKIE.”
MAKING BRITAIN GREAT FOR GAMES
* UK-produced games generated £1.7 billion in sales worldwide in 2009.
* As of November 2011, there were 9,000 creative staff working in almost 300 games studios.
* UK consumers buy the largest number of games in Europe. Almost 60 per cent of the UK population play video games, with an average age of 28. 48 per cent of video gamers are women.
* Over five years a games tax relief could create and protect 1,650 studio jobs and increase the games development sector’s contribution to UK GDP by £280 million.
Source: Department for Culture, Media and Sport