Films (Definition of ““British Film””) (No. 2) Order 2006

My Lords, I thank the Minister for his speedy introduction to the order. I welcome the confirmation in yesterday’s Pre-Budget Report of the commencement of the film tax credit on 1 January. I am sure that that will be welcomed by the film industry. It has not been an altogether happy situation during the past few years, with one tax relief being terminated two years ago and a new one only now being put into place. We have had considerable uncertainty during that period, partly as a result of delay in agreeing the new culture test with the European Commission. We know that the test which was originally put forward earlier this year was not acceptable. One of the real issues is defining British culture. I suppose that that has required energy and time. The Minister set out the various categories of the British culture test. One key concern is the considerable switch that has been made from a number of economic tests towards a more cultural test. The key to the tax credit being proposed by the Government must surely be to ensure a viable, vibrant and creative UK film industry, with facilities being provided in this country. A huge number of companies are affected, as the RIA states, and there is a question whether we may not have swung the balance too far towards a pure cultural test and away from the benefits gained by the previous test. The impact of the new test is interesting. The cultural content is considerably increased, but the cultural hubs have been reduced to three points in this new system. The location of principal photography, editing and so on has become much less importantin the new test. The weight placed on cultural practitioners—that is, on the personnel making the film—is less. Then there is the whole issue of the new cultural contribution, which is included. I am exercised by the fact that the noble Lord, Lord Davies of Oldham, when he introduced the previous order which had the previous British film test in it, said: "““The fact that 15 of the points are allocated to where the film is made is a response to the overwhelming view from consultation respondees that greater weight should be given to this section than to the others, so as to incentivise the use of UK talent and facilities and to build a sustainable British infrastructure for film making. Visual effects, in particular, are eligible for more points, as this is the biggest below-the-line spend for large budget feature films, and the UK's facilities are world leading and need to be incentivised to meet increasing competition from overseas””.—[Official Report, 30/3/06;cols. 925-26.]" I do not necessarily have the answers to this, but that was a clear statement by the Minister on the benefits of the previous test, which are not included in this test, which is the one that the Government have effectively negotiated with the European Commission. Are we potentially undermining our film industry by giving too much emphasis to the current system—the current culture points—and too little to where the film is made? There is also the question of how the new system interacts with the expenditure test and how it will work when the culture test is administered by the DCMS and the expenditure test is carried out by the Treasury. The Explanatory Memorandum tries to reassure us that it will be a seamless process, but could the Minister give some indication as to how it would work? Many of those in the industry have welcomed the pre-certification arrangements, which is very helpful, and the post-implementation review will also be welcome. Who will carry that out when the time comes in two years from 1 January 2007? We are always reasonable when dealing with Brussels and, no doubt, these negotiations have been fairly tough but amicable, but how do our incentives actually compare to those in other EU countries? Did the Government actually undertake a comparative study? The acid test is whether our film industry will be incentivised and supported by the new credits. The Minister mentioned a couple of films that would still go ahead, and it is helpful to get that sort of indication; but in practice it is important to see whether certain films fall into those categories. Will ““Harry Potter and the Goblet of Fire”” or ““The English Patient”” fall within the culture test? The answer is probably, in the first case and perhaps, in the second case. What about ““Death in Venice””? Looking back, the answer to whether that would be included is probably not. This will boil down to what happens in practice, but I very much hope that the Government will carry out their post-implementation review rigorously. I also hope that it is carried out in co-ordination with the film industry, which has a great deal at stake with regard to the new order. These Benches wish it well.