Subsidies Get A Good Laugh In The UK

This video is classic. Related story here.

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52 Responses to Subsidies Get A Good Laugh In The UK

  1. fizz says:

    The bottom line is that they will pass the subsidies. The pudgy guy speaking is the head of the British economy. If he says it’s happening then it will – they have an overwhelming majority in the House of Commons and the Upper House is unlikely to offer any resistance to the bill. You can expect to see that in place by next month.

    The other thing to understand is that applause is forbidden in the House of Commons. A cheer like that is the equivalent of a standing ovation – it was coming from both sides of the House. The Wallace and Gromit comment might have raised a smile, but that’s Britain for you. It’s a vote-winner.

  2. David Rand says:

    “one if by land, two if by sea”
    ….looks like we need another lantern,

    • They will have to get clearance through the EU, which will could take up to a year. It will likely be tailored to meet the cultural exemption, meaning the incentive is meant to protect and expand British content. In other words, it should not cause a US project to relocate.

      • fizz says:

        France and Germany already have state support for their animation industries. The UK gov will argue that they are losing productions to places where subsidies for animation exist such as Canada and the USA. It’s unlikely that the cultural exemption would be applied – that’s for movies with budgets in excess of US$26million – but nobody in the UK TV animation industry is especially interested in working on Spongebob Squarepants, they just want to be able to keep making shows like Shawn The Sheep and Grandpa In My Pocket in towns like Bristol and Cardiff.

        As for the videogames – Canada is openly courting talent from the UK, placing “visas” on videogame conference delegates seats and the like. The Conservative-lead government is clueless about videogame culture, but they recognize an important business sector leaving the country when they see it.

      • VFX Soldier says:

        Its clear acknowledgement that there is a subsidy race. This is why the eu is interested in putting a stop to it. It’s a detriment.

      • Agreed Fizz. Check out this link:

        http://www.gamerlaw.co.uk/2012/03/uk-games-tax-break-opportunities-and.html

        Many US states are going for the video games biz. It’s a much smarter use of money than film and tv incentives. I did a post about Texas’ bang for the buck:

        http://www.stop-runaway-production.com/2011/01/07/texas-comptroller-report-re-incentives-show-video-games-not-filmtv-real-winners-for-state/

      • fizz says:

        @VFXSoldier – I think you’re misreading the intent of the EU Commission’s statement on subsidies. It’s not about eliminating them with regard to the global economy, it’s all about leveling things out within the EU itself and developing regions that aren’t currently doing so well. If it pulls work in from outside the EU and there’s a net-gain in economic activity in the sector then they get more tax revenues and protect their jobs. They’re never going to unilaterally kill the European tax incentives/subsidies.

        Nor do they care that their actions help to support American movie studios – in fact John Carter is a total win in this case, $250million+ dumped into UK film biz for a government outlay of around $30million and Disney gets considerably less than nothing back. Remember that most of Disney’s spend in the UK goes on salaries for higher-rate tax payers who are hit up for anything between 40% and 50% of their pay (particularly true of the VFX spend), so the UK gov is pulling in at least $100million of that spend in tax revenues.

      • Ok, I fairly certain John Carter did not shoot in the UK for the credit, but rather for the facilities. The US does not have a co-production treaty with the UK (or anyone) and I do not see how it could qualify as “British” under the cultural test. I could not get it to 4 points, much less 16.

        http://industry.bfi.org.uk/culturaltestpoints

      • fizz says:

        @Adrian McDonald. I’m pretty certain they passed the cultural test. Remember the scene set in the Orkneys? That would be enough to get them past A1 (set in the British Isles) and probably past B2 (diverse British cultural heritage).

        If they didn’t get the tax rebate then what does that tell us? It suggests that the UK production and VFX industry was strong enough on its own – and competitive enough – to attract the show, regardless of the location.

        It should also be borne in mind that the pound was at an historic low against the dollar when the project got its greenlight – around $1.42. If they bought their pounds at that point – or even just hedged against currency fluctuations – they would have been laughing.

      • Yeah, pretty sure its not passing for culturally British. It did get the incentive in Utah. As for if it didn’t get UK credit? It probably needed the massive stages at Sheperdon. Star Trek, Spiderman and Batman all shot in LA this year or last with no incentive. Its not unheard of.

    • Fizz,

      John Carter spent at least $20 million in Utah. If England gave them $30 million, the impact for the UK is now reduced to $200 million in new spending. Typically, 40% of the budget is for above-the-line labor costs (the stars, director, writers etc.). In this case, that means roughly $80 million. Andrew Stanton, and most of the major stars are American or Canadian. The UK tax rate on visiting talent is only 20% of all wages paid. England’s take on that pay, and I am rounding up, is around $20 million. It’s not clear what portion of those taxes will go to local governments (who do not fund the credit).

      Since that leaves just $120 million in budget on the film, it’s not possible for them to get $100 million in new tax revenue from the film. Add in leakages and other loopholes that can be used, I would be shocked if the UK breaks even. That said, are you certain the film qualified for an incentive in the UK?

      • fizz says:

        The film did qualify for the UK tax incentive and corporation tax shelter. It also spent at least $80million on VFX in the UK (split between three major houses and a couple of smaller ones) – just Cinesite and Double Negative had well over a 1000 people between them working on the show. It’s also worth bearing in mind that the actual budget was almost certainly considerably more than the declared $250million.

        I’d be very surprised if the ABL spend amounted to 40% of the total budget. Stanton’s fee would have been substantial both for directing and writing the movie, but the cast wouldn’t have cost that much in the grand scheme of things. Disney are notorious tight-wads when it comes to talent.

      • VFX Soldier says:

        How much of those subsidies did double negative and cine site receive?

      • jez says:

        The uk/eu “FILM” tax credit is quiet complicated, and does get reviewed about every three years. It is not as simple as things have been mentioned on this blog. It has actual existed on and off for about 80 years in different forms. Surprisingly one report blames the uk tax credit in the 40’s as creating hollywood dominance in the case of distribution and helped destroy the uk film industry as a global market.

        http://www.mansfieldwb.com/filmreportnov09.pdf

        Now with regards to money there’s this report:

        http://industry.bfi.org.uk/media/pdf/j/i/The_Economic_Impact_of_the_UK_Film_Industry_-_June_2010.pdf

        I would take some of it with a pinch of salt. Though the interesting thing is the pure income tax numbers generated. There is a tax office that just deals with film income/vat tax so those numbers are pretty accurate (though always 3 years out of date). If you work in the uk and pay PAYE check your payslips and you will see. (there’s rubbish about tourism via film etc adding to GPD which is hard to prove and is subjective)

        Anyway the film tax credits in Europe will never disappear, they’ve been around too long and film is seen as having cultural significance. Cineworld a cinema chain in the uk is actually tax payer owned.

        So what does this all mean; it still effects everyone working in vfx. We have a relationship like it or not with people that have the money to make the films and distribute them. There has been much talk about vfx having a bad business model. At the moment we are living in an age where Hollywood itself is creating a bad business model:

        http://latimesblogs.latimes.com/movies/2012/03/hollywood-flop-sweat-what-caused-the-latest-box-office-duds-1.html

        Personally this is why they are chasing tax breaks in countries to help consolidate their investment. This still doesn’t help the people working in vfx. We get old and like it or not we get ill, and at the moment there is no true provision for these basics needs in the vfx industry, and we only have ourselves to blame (not tax credits).

      • VFX Soldier says:

        I called that uk film council report for being pretty bogus 2 years ago:

        http://vfxsoldier.wordpress.com/2010/06/09/uk-vfx-houses-behind-bogus-study/

        For example batman begins was able to say it was culturally British because the butler was British. Nice.

      • fizz says:

        Dneg, Cinesite, MPC and the others would have received nothing from the subsidy. The payment and corporation tax shelter accrues to the production company. Unless the post houses were participating directly in the production they wouldn’t have been eligible (Framestore and Lipsync have recently been getting involved in production so they may well be benefiting from the rebates/shelters).

        From what I know, the UK companies had to bid directly against international VFX vendors including Californian companies and – I’m lead to believe, though this could be wrong – Weta. Disney pushed very hard and the work went to the lowest actual bid. Disney spent a lot of money on UK VFX, but it would also appear that it was stretched very far indeed.

      • Stanton is part of the above the line.

      • But on Batman Begins, Nolan is a Brit. So is Oldman and Bale. I think them, the filming portion in England and other British crew easliy put it over 16 points. Like i said, i cant get John Carter to 16 points.

      • fizz says:

        Batman Beings: Nolan is British (he also wrote it and produced the next two in the series), so is Emma Thomas (producer and wife of Nolan). Bale, Oldman, Michael Caine, Liam Neeson and a chunk of the supporting cast. Most of the HODs were British too. Caine’s character of Alfred is British so that qualifies too.

        I’ll do some digging on John Carter. It would be good to settle it. It’s a bit puzzling otherwise. Sure there are some big stages around London – JC was shot at Long Cross, an old military base – as well as old architecture used for stately homes, old buildings etc, but there are plenty of huge stage spaces in the US.

      • Maybe the big stages in the US were booked. Sometimes films are made based on creative needs, not artistic.

      • Artistic not economic. My had.

  3. greg says:

    Just so everyone knows, they are all laughing and jeering because the leader of the opposition, Ed Milliband, is often likened to Wallace, and the line “we want Wallace and Gromit to stay exactly where they are” i.e not in power was a dig at them.

    http://blogs.telegraph.co.uk/news/tomchiversscience/100145718/budget-2012-that-wallace-and-gromit-was-a-low-blow-but-it-will-probably-stick/

    • fizz says:

      Yep, that makes sense. He does look a bit like Wallace, it must be said. Then again, Osborne looks like 150 pounds of unbaked dough stuffed into a Jermaine Street suit.

  4. HA! says:

    Amusingly, Aardman who creates Wallace and Gromit is owned by Sony Pictures in Culver City, California. Tax breaks go straight back into the pockets of an American studio.

    • fizz says:

      Aardman is independently held by Peter Lord and David Sproxton who are the sole shareholders and have been since the early 1970s – even Nick Park is just a director for hire. They have a production deal with Sony for five pictures.

      • fizz says:

        Wallace and Gromit themselves are owned by Nick Park – who created them for a student film in the 1980s – and licensed to Aardman.

  5. vfx captain says:

    long live subsidies !

    vfx soldier you are great, i respect your passion, but you’re just fighting in the wrong direction!!! you are losing supporters!

    sometimes (most of time) it feels like you do not care at all about your brothers and sisters working in canada, uk and australia. you do not care about their families.
    the only thing you do care is how to bring more work back to usa! closer to you and your family.

    you know, there is probably more vfx artist working outside of usa than in usa. if you really want to make a change in vfx industry, if you really want to fix the problems – start talking to artists who is outside usa. not the one who went to work there, the one that live there.

    laughing, commenting, joking, crying about subsidies is not a solution to vfx problem. if subsidies really bugs you start writing letters to your government to bring subsidies to california. americans are great to support they industries, look at american automobile industry or agricultural subsidy.
    if you will continue write about how bad the subsidies, you will just proof my point that you are not true vfx soldier, you are usa soldier.

    want to prove me wrong? send visitors, lets try to vote:

    http://vfxcaptain.wordpress.com/2012/03/22/vfx-soldier-is-great-do-you-agree-with-everything-he-says/

    keep fighting if you care about all of us, you can raise people, we will support you, just do it globally.

    start signing:
    soldier on, globally

    • VFX Soldier says:

      Thanks for the opinion but you are mistaken. I’ve written numerous posts criticizing the subsidy programs in New Mexico, Florida, Michigan, and even here in California.

      I suggest you search my blog before making that accusation as you lose credibility. I’m flattered by your imitation of me but in order to imitate me you need to debate me on facts, not opinion.

      I implore you to do a search on my blog on those states and you will see posts that I have written over the years criticizing state subsidies. Will you acknowledge that fact? If not, your effort to defeat me has failed.

    • skaplan839 says:

      How can you say that VFX Soldier isn’t fighting for all vfx artists BY opposing subsidies? To defend subsidies, and live in an area that is subsidizing Hollywood to play in your sandbox, is ludicrous. It goes to show you either have no concept as to how subsidies work, or you’re blinded by the fact that work as bloated in your area and don’t want to “bite the hand that feeds you”.

      Solder has stated many times he’s for work returning to Los Angeles, as well as a level playing field for global visual effects. Read the blog in its entirety before knee-jerking your opinions.

    • As someone who has debated with Soldier about supporting the necessary evil that is the California film incentive, I can vouch better than most that his opposition to film incentives does not stem from any sort of pro-American or pro-California jingoism. He is ideologically opposed to film incentives because they are, in fact, poor public policy. He would be saying the same thing if he were based in the UK, Vancouver, India or the frikkin moon. No one’s job, career or industry should depend on a massive government subsidy.

      • VFX Soldier says:

        Adrian and I agree on alot of things but one of the biggest disagreements is on the film subsidies in California.

        Myy position on the issue isn’t really about ideology though. I’m all for subsidies for education, health insurance, an other essentials.

        The film subsidies are just free cash given to the very rich us studios. They are the last group of people that need help.

        I can understand Adrian’s support for subsidies in California but my broader interest is in seeing a subsidy war end.

      • Sorry I overstated your position Soldier. I support credits for the things you mentioned as well. I am reluctant backer of the California incentive. It is much smaller (the rate and what it covers) and the cost-benefit ROI is pretty damn close to breaking even. It is also the only incentive that IS an actual reduction in tax liabilities (at least for the majors). The majors cannot sell the credits to anyone for cash and they do not get a refund if they have more than they can use. Unlike the typical GOP philosophy which advocates that lowering taxes will spur spending and create jobs, the theory is based on the hope this will happen. . But with the CA film incentive, the lower taxes is predicated on the desired goal: keep spending and jobs in California. Its not lowering taxes with the hope they will hire people and spend money locally, its lower taxes that REQUIRE jobs and local spending.

        Anyways, I do share your desire to end the subsidy war. Because you are right, the studios do not need the help.

    • JTJR says:

      Give me a break! Being upset that governments use their own citizens’ money in order to distort the natural right of other people to capitalize on their skills and experience is not wrong.

      People that work hard and learn a craft do not deserve their jobs being stolen from them because some government is willing to spend other people’s money to subsidize their workers in their area.

      ALL government subsidies are immoral in this way including those in Florida (that’s part of the USA)

      You just probably feel entitled to a subsidy because your government has made you dependent on handouts.

  6. xfv says:

    I have a feeling that if California had subsidies that matched Vancouver/London, there wouldn’t be such a big deal made about subsidies.
    California is broke, and the foreign subsidies aren’t going anywhere soon.
    imo vfx is a niche market, too small for the US government to care about such a small group.
    I’d focus on creating a Union, so that for the (quite substantial) work that is left in LA, you aren’t being taken advantage of.
    Get portable healthcare and get all the studios to pay proper OT.
    imo vfx is a niche market, too small for the US government to care about such a small group.

  7. VFX fluffer says:

    Standing up for Subsidies is like standing up for handouts…I felt the same way VFX Captain did after our state (NM) gave incentives to studios and I would have defended them to the bitter end…Well, that bitter end came and guess what? A lot of those who bought into bribing studios to move from where they got their start are now well aware that it was all a sham…Both politicians and the studio owners both think they are pulling a quick one on the other side…And thats how they work/think.

    So politicians says-We sure have those Hollywood studios coming here in droves…Haha…Lets see how much we can profit from this industry and do all we can to keep the money and jobs they bring in…Lets make friends with the executives and “get in” on this bizz…

    Then the executives laugh it all off.- We are going to make a killing here off these fools! They’ll hand over their hard earned money and we will relocate all the jobs to that state. None of the locals will get to play becasue none of them are qualified. We will loot the incentives, pocket the profits and meanwhile the states voters will bend over backwards to accept the DREAM of this lucrative industry in their backyards…Occasionally we will let them be extras and if their lucky we might even sleep with their wives.

    Its a game for both sides in the incentives fiasco. The public and our industry looses and a few Studio executives are the ONLY ones to come out ahead…Disgusting.

    • jonavark says:

      hmmm. I (don’t) wonder who the guys on the left are with the empty pockets!

    • fizz says:

      Just because some of the subsidy programs in the US are run by idiots with no economic sense it doesn’t necessarily follow that all subsidy programs are the same. The UK program in particular is targeted at leveling up the tax environment which – corporation and other taxes are significantly lower in California than they are in the UK. The UK program, and those of some of the other EU countries, also serve the goal of “re-balancing” national economies in the promotion of technically skilled export sector. But if you’re in an area where the government doesn’t take the industry seriously – or indeed collects much in the way of tax revenue in the first place – then it’s understandable that you might view all subsidies as evil/stupid/criminal.

      • VFX Soldier says:

        The reason why we are able to verify the subsidy programs in the us are run by idiots is because we have independent audits that show they are money losers.

        The uk does not. The only studies available was the one by the defunct uk film council which was paid for by the big uk vfx facilities. Do you think they would have released a report that showed those subsidies are money losers? Of course not.

        Secondly, your argument that the uk must have subsidies to countervail low us taxes is a contradiction. First, the us studios don’t pay taxes in the uk. The so-called return from the uk subsidies lies in the high taxes paid by the laborers who work on the projects.

        So workers who probably pay lower taxes in the us are forced to chase their jobs to a location where they pay higher taxes so the rich us studios get free money which ultimately gets taxed in California.

        This is why I have argued why the state of California is reluctant to offer massive subsidies: the is studios are based in california and pay taxes there. So if they are able to leverage free subsidies in the uk, it will feed into the studio bottom line and ultimately higher taxe revenue for california.

      • fizz says:

        The US studios absolutely do pay taxes on their productions in the UK. If they didn’t then they wouldn’t be able to claim the relief on them to get their subsidy money would they? Part of the UK rebate is paid against taxed expenditure in the UK, the rest of it is a shelter from a portion of UK corporation tax which is levied against all UK businesses (currently at a rate of 25% as opposed to around 8% in California). For a large production (one spending around $150million in the UK) the corporation tax shelter is by far the biggest proportion of the saving they get by placing the production in the UK. Given that the tax environment is so much more favorable to business in California it puzzles me as to why US VFX companies aren’t more competitive on shows that don’t get any tax rebate – Man of Steel comes to mind, as does John Carter (if it indeed did not get the rebate).

        The UKFC/UKScreen Association report was a lobbyist’s document and is neither here nor there – it certainly wouldn’t have been the only basis for the UK government extending the tax shelters (which have survived through several administrations). Unlike the US government which is still borrowing like there’s no tomorrow the UK has imposed severe austerity measures, closing schools, libraries and selling the country’s infrastructure to anyone with enough money. It seems unlikely that they’ve been bamboozled into lining the pockets of US studios without any benefit to the economy.

        Despite your suggestion that the UK facilities are staffed by lots of economic refugees from California, they actually only account for around 5% of the workforce at most. The majority of non-UK staff are from the other EU countries. Even the really big facilities can only hire a handful of non-EU citizens every financial quarter – this is as a result of changes to immigration laws in the last few years which is also the key driver pushing UK VFX facilities to open up shops in places like Singapore and Canada where immigration laws are more relaxed.

      • Fizz,

        The UK tax credit, like those in Canada and the US are essentially cash. A mere fraction are used to cover any tax liabilities and the rest are paid as cash to the production company. That’s why it’s a “payable tax credit”. For a $100 million film, the UK is effectively paying for $25 million of the budget. In the end, it cost the studio $75 million to make a $100 million film. I am still amazed so many people think these tax credits function a tax break rather than being seen for what they actually are: free cash. Right or wrong, support or oppose….that’s just how they work.

      • fizz says:

        There’s certainly a cash element involved – though it’s 20% of qualifying costs for the kind of films we’re talking about, not 25% which is for lower-budgeted shows. And that’s 20% of 80% of the total qualifying UK spend, so a $100million spend in the UK would get a rebate of $16million, or 16% of the total UK spend.

        However, the “enhanced deduction” allows the production company to claim relief of up to 19% of the total spend if it is taken as an actual tax shelter. I believe that this is what Warners have been doing with the Harry Potter productions, ultimately reinvesting a portion of it in UK production facilities – for example, the $200million purchase and rebuild of Leavesden Studios.

        There’s a guide to how the UK rebate/tax shelter works here. Check out the pdf that gives and example of how it would work for a hypothetical £100million UK production.

        http://industry.bfi.org.uk/taxrelief

      • Understood. I just wanted to clarify. It looked like you were framing it as merely a tax break/deduction. I hope WB does use the money to reinvest in the UK. That almost never, ever, happens.

      • JTJR says:

        Wow. “in an area that doesn’t take the industry seriously”.

        Really? Why should the government have a say at all? What right do they have in forcing regular people to pay high taxes so they can then give it to hollywood studios?

        Seems like you have a typical statist attitude toward work and life. Your government taxes you so much that now you need to make exceptions for your pet industries. Is that fair to less ‘sexy’ jobs in the UK that don’t get this special treatment?

  8. Dave Rand says:

    Pages 196-200 contain some interesting reading. Exporting and Importing the VFX product…. the vagueness seems to be the loophole. Soldier posted a piece I can seem to locate right now that deals with the specifics. Perhaps you could re-post?

    http://www.wto.org/english/res_e/booksp_e/anrep_e/wtr06-2f_e.pdf

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