The Scottish Affairs Committee today published its second lengthy report on the steps it believes must be taken to support and improve the games industry in the UK and Scotland.
While the headline recommendations are perhaps the establishment of a Scottish-only trade body and angry calls for the government to more directly engage with the industry, the report settled on 20 substantial suggestions it hoped Parliament would act upon. These are reproduced below, courtesy of Parliament.uk.
The full report from which these conclusions originate may be read at the Parliament homepage.
1. We note that much improvement has been made by the industry, particularly in relation to classification, however more needs to be done to future proof age verification for video games accessed online. The industry and universities are well placed to research how best to go about ensuring children cannot gain access to inappropriate adult content. Therefore we recommend the Government look into supporting such research, and ask the industry to see how they too can invest in such research as a part of their corporate social responsibility.
2. The video games industry is a highly mobile and relatively young industry, with predicted annual growth rates double that of the film industry. Scotland has an outstanding reputation for excellence in video games production, but in reality the sector is of great economic benefit to the whole of the UK. The UK industry, however, is currently contracting. It faces an uneven international playing field, disadvantaged by subsidies from governments overseas, notably France and Canada, and cheaper labour markets elsewhere, as well as by skills shortages, unsustainable business models a need for innovation and investment vehicles. The Government has a responsibility to help create an economic environment in which the creative industries can flourish. Impediments for growth in the UK are emerging and we believe the Government should make the future of this industry a priority.
3. A games tax relief would cost less than the tax credit currently awarded to the film industry. The Government has tried to explain away the existence of a film tax credit in contrast to the resistance to a games tax credit as a matter of politics and history. This is a poor argument for seemingly favouring a mature industry over an emerging one. Inertia is a poor justification for the status quo. We highlight the inconsistency in the Government's approach to the two industries and draw this anomaly to the Government's attention. We believe that a cost benefit analysis should be done of the video games industry and the film industry to see which gives the better value for money.
4. Prior to the general election the Conservative, Liberal Democrat, Labour and Scottish National parties supported the principle of a games tax relief. Given this consensus across the political landscape, the industry could have reasonably expected the introduction of such a tax relief, and would have planned accordingly. However, in its first budget, the Government changed its position.
5. The Minister responsible for the video games industry should make representations at the heart of Government on behalf of this economically and culturally important industry. We are surprised and disappointed that the Minister was only able to lobby the Treasury indirectly on the games tax relief. We expect the industry to be better represented in future within Government. We invite the Government to explain in its response to this Report how it will ensure that the voice of the industry is properly represented in future and give an undertaking that this experience will not be repeated.
6. The Chancellor described the proposed tax relief as "poorly targeted", prompting debate over the meaning of the phrase. The proposed tax relief was specifically targeted to the UK video games industry; in this sense, it was well-targeted. The real issue is whether the tax relief is value-for-money and would alleviate many of the structural problems in the UK sector; those being generating and retaining IP, self-publishing and aiding start-ups.
7. There are both compelling arguments for a tax relief, most notably in the lessons of the effect such a relief has had in Canada, and real concerns. The Committee is divided over the issue of tax relief for the industry and we are unlikely to come to a consensus on this issue. There is disagreement between HM Treasury and games industry representatives over the financial benefit of a games tax relief. We recognise, however, that the UK Government has ruled out a tax relief for the foreseeable future, and the current fiscal environment means this view is unlikely to change in the short-term.
8. We recommend that the possibility of introducing a tax relief be kept under review, and the health of the industry be monitored for the potentially malign effects of uneven international competition. We recommend that the Government, meanwhile, undertake a full and comprehensive assessment to determine the benefits of such a relief, as well as examining those countries whose industries continue to flourish without Government support.
9. Research and development tax credits already provide an incentive for innovation. These credits could be adapted and enhanced, at little cost to the Exchequer, but with great benefit to video games companies. We recommend that the Government set out in its response to this Report how it plans to work with NESTA on adapting the research and development tax credits as soon as possible so that video games companies can make full use of the scheme.
10. The creation and retention of intellectual property is a priority issue for the UK video games industry. We welcome the review of the taxation of IP currently being undertaken by the Government. We expect the Government to set out a timetable for the implementation of the recommendations of the taxation of IP review in its response to this Report. We will monitor its outcome.