Hodge sends mixed messages to developers

Hodge sends mixed messages to developers
Michael French

By Michael French

October 26th 2007 at 11:24AM

British Government's culture minister shows contradictory stances on tax breaks during London Games Festival

The London Games Festival is nearing its closure, but those developers or games execs that attended the various industry-facing sessions during the week probably don't feel their cause has been furthered much following some confusing messages from the UK Government on its support for games firms.

The UK's Minister of State for Culture, Media and Sport Margaret Hodge appeared at the ELSPA AGM at the start of the week, saying "you are top of the league when it comes to our creative industries" and saying the Government recognized the industry’s power, but rebuffed fears that tax breaks in the likes of Canada were harming the UK market.

"From my perspective, the one word that I hear the most from the industry is ‘Canada’, but as you all know the issues are bigger than one country. While Canada may be the current challenge to the UK industry, it could just as easily move to somewhere else in the next couple of months," she said.

She then rebuffed the notion that the UK could adopt its own tax breaks, adding that the industry itself is split over the matter - ELSPA has reportedly signed up to a rejection of the approach to tax breaks which vets eligible projects based on their cultural relevance.

Said Hodge: "This will put your industry in a box which some of you don’t seem to want to be in."

But the stance on tax breaks seemed to have shifted a little just two days later, at a special UKTI session looking at the recent Playing for Keeps report - which has reinforced the point that UK studios are feeling the pinch from increasing competition globally thanks to low-cost territories like Canada. The report points out - as has been widely reported - that the UK has been superseded by that country in terms of its production power.

Hodge, who appeared briefly on a panel discussion looking at the report's analysis of the competitive market for IP creation in the UK, said: "We think it will be hugely difficult to introduce a tax relief," yet repeatedly added: "but I'm looking at it."

Even so, she reiterated her point that the industry, while clamouring for the correct support is divided on the issue, saying: "Your representative organisations aren't talking to me with one voice".

Hodge added that the industry itself was sending her “mixed messages” on its economic pressures – but eventually seemed equally guilty of confusing messages back the industry.

And the Government's now seemingly unsure (and, as some attending the seminar said later on, uninformed) stance on the development tax credits topic grated with the many development bosses in attendance, especially when she argued that in the short-term Quebec's own generous tax environment will disappear. Famously, Quebecois authorities have guaranteed such credits, including highly-publicised deals cut with Ubisoft, for the coming years.

The stance didn't convince those in attendance yet Hodge remained adamant it was a short-term threat, eventually telling fellow panelist David Braben, who admitted that two Canadian organisations had pitched the idea of him setting up a studio in the country, to "take your studio to Canada, then - because you'll be back in a few years" during a heated panel discussion.

So whether the Government really will look into the matter of possible tax breaks remains to be seen - while Hodge says the potential is being examined, she also added that it would take a few years to get through government if viable and not against EU policy, potentially a moot point if, as she insists, by that time the pressure will have eased off from the likes of Canada.

Of course, while she did however try pointing developers towards potential aids already in place in the meantime, such as the R&D tax credits, this might miss the point: the pressure may well have eased off in the next few years because other territories might have stolen away the UK development sector’s talent, investment and power – which is exactly what the some of industry’s senior execs claim will and has happened.