Vaizey: Industry didn't agree on tax breaks

Minister for culture, media and sport Ed Vaizey has again distanced himself from the Treasury's decision to reverse the Labour government's plans for games industry tax relief.

Appearing before the Scottish Affairs Committee's hearing on the videogames industry last month, the Conservative MP put the decision squarely on the chancellor's head, whilst appearing evasive on whether he had been consulted beforehand.

"I am quite low down on the food chain," he claimed. "He is the Chancellor; I am not. He is perfectly entitled to reach his own conclusions for his own Budget and for his own priorities as well. I am not going to be in a position to write his Budget for him, nor would I want to be."

When repeatedly questioned as to whether the Treasury had come to him for guidance before making its decision, he offered that "I felt I had a chance to make my case" four times before offering an apparent affirmative.

He also claimed that there was significant division amongst the games industry on the matter."It is worth perhaps reminding ourselves that not everyone in the video games industry necessarily thought the tax credit was a good idea."

In regard to the reason for the Treasury's decision, he claimed that "to put it completely bluntly, as far as I am concerned, after the election all bets were off in terms of the financial situation and in terms of how the Chancellor wanted to approach his Budget.

"It may be that we can revisit a video games tax break in the future. I heard Edward Troup mention a timescale of 20 years; it might be shorter than that. I am not trying to dodge the question, but I think the Chancellor is entitled to make a decision when he is putting together his Budget."

Vaizey appeared divided on whether tax relief remained a cause worth fighting for, feeling that it would lead to an incentive contest with other territories, such as Canada.

"It could act as a stimulus to inward investment," he claimed."It wouldn't necessarily support, as it were, the indigenous British or, indeed, Scottish video games industry. It might attract foreign investment from foreign companies.

"The Treasury, I think in its written evidence, has indicated that in a sense one is in a never-ending spiral at that point, that if you introduce a tax credit then someone introduces a better one and you are under pressure to introduce even more.

"It was certainly never my view that we could ever match, as it were, the kind of generous financial support that the Canadians give to their industry.

"There is also a recognition that, for example, Germany, which has a growing and successful video games industry, doesn't rely on a tax credit and that Japan and apparently Korea as well don't."

He also addressed the requirement that UK-made games contain elements that were deemed sufficiently cultural British in order to obtain tax breaks.

"[That] is why, for example, Harry Potter can qualify as a British film even though it is made by an American studio. So whether you can translate a cultural test to a video game like Angry Birds is an interesting philosophical discussion worth having. Obviously, given that the Prime Minister plays it a lot, it probably would pass the cultural test."

The reason why the film industry continued to benefit from tax relief was, the minister claimed, simply because "an existing tax credit is in a stronger position than one that doesn't exist."

He also claimed the increasing movement towards online games may have meant the tax relief system would be less helpful than hoped. "There was... a strong feeling among some elements of the video games industry... to say, "Well, actually, are you simply going to put in place a system that supports an old model of making games and doesn't actually stimulate the new model?"

"Which is why, for example, if one can tweak the R&D tax credit and also look at investment schemes to encourage investment into the games industry, one might actually bizarrely end up with a better result by supporting, as it were, the future of the games industry rather than what some people would characterise as the past."

The MP also suggested that the incumbent government had perhaps rushed through its promise of tax breaks, which had in turn afforded little time for the new Treasury to investigate the scheme ahead of the Budget.

"If they had been serious about the video games industry and the video games tax credit they would have been putting this through two or three years beforehand, rather than in a last-minute Budget before a May election."

He once highlighted the likes of Abertay University, the Skills Review and R&D tax credits as helping the industry, and stated that "I do feel pretty confident that we can continue to support this industry and continue to compete with Canada. Britain will become a very good place to do business, regardless of what business you are in."

However, the undercurrent of his comments appeared to be that it was time for the industry to move on from the pursuit of tax breaks. "I remain of the view that we will continue to debate a video games tax credit, that it doesn't have universal support in the industry and that there are a whole range of other options that we can and should look at in order to support the video games industry.

"So I do not take the view that the fact we do not have video games tax credit means the game is up and we might as well just all pack our bags and go home. I think there is a hell of a lot to play for."

Vaizey also revealed that he was aware of recent comments by THQ VP Danny Bilson that he would consider opening a UK studio were government incentives provided.