Treasury MD questions "poorly-targeted" tax breaks claim

The MD of Budget, Tax and Welfare for the treasury, Edward Troup, has explained yet challenged Chancellor of the Exchequer George Osborne's dismissal of tax relief for the games industry as "poorly-targeted."

"I am not sure I would say it was poorly targeted," Troup told the Scottish Affairs Committee recently. "It was targeted at the video games industry."

"The current Government, having looked at this and having looked at its overall approach to how best to support the economy and growth, has taken the approach that, actually, the best way to support growth is through stimulating the economy as a whole by not picking particular sectors but by reducing the cost of taxation."

Troup cast further light on why Osborne had used the 'poorly targeted' line, claiming it was about the details of the proposed relief rather than its concept.

"Generally, what has happened with all of the reliefs that we have introduced over the years is that at the boundary the people who are just outside come back and say, "It is not very well targeted. You have overtargeted it. You have missed me out." I am sure exactly the same thing will happen here.

"But this would be possible. We could do this if we wanted to. There would be issues; there would be boundary issues, but it would work."

However, Troup was clear that bringing about tax relief can be a long game, as the treasury had experienced from previous support lent to the UK film industry.

"We ended up giving huge amounts of tax relief to people who invested in television series and television programmes, and it took about 30 years until we actually got back to the reforms in... the film tax industry three or four years ago.

"Obviously we learnt a lot from that but I can't say exactly how those problems would be replicated in the video games industry. Video games have some similarities to films in its production and development techniques, but it is not... just a matter of taking the film tax credit and crossing out 'film' and putting 'video games' in."

Troup also confirmed that "There were conversations with Treasury officials [and games industry representatives] after the election but there were no actual meetings" ahead of the Budget.

The decision appeared to have been made without significant discussion with the games industry. "[Exchequer secretary] David Gauke, when you saw him last week, said the Government wasn't keen to extend the number of reliefs in the tax system unless there was strong evidence of market failure."

The Treasury man also disputed claims that tax relief was necessary to prevent a talent drain to Canada. "We can't, in a sense, start adjusting our forecasts because we say, 'Oh well, we think this might keep 50 people or 100 people from leaving the country.'

"It is the aggregate level of employment in the UK and migration to and from the UK which ultimately drives our view on tax revenue."

He later observed that "The evidence is there has not been mass emigration of graduates. They have found jobs. I don't have any evidence on internal migration."

Troup went on to question the accuracy of figures provided by Richard Wilson, boss of trade association TIGA in regard to the potential return on games industry investment.

"Let's be clear. I am not saying his calculations are arithmetically wrong. I am saying that the assumptions on which they are predicated we would disagree with.

"I have not checked it myself but I am sure the arithmetic is fine, but the assumption about the creation of a job actually being an addition to the UK economy and hence an addition to our revenues we just do not accept."

Troup's hearing at the Committee (available in full here) was a long one. "I will need the Domino's Pizza's number if you are going to go on that long," he quipped.

Also interrogated was Minister for Culture, Media and Sport Ed Vaizey, who talked of ongoing plans to pursue incentives for the games industry. A full report will follow.