INTRODUCTION

  Governments around the world have recognised the importance of an active and vibrant film industry making films that are culturally relevant to that country and that serve as a shop window to the rest of the world. The British Government wishes to see a vibrant and growing British film industry that produces and exhibits British films about Britain in the UK and abroad. A healthy British film industry brings economic benefits to this country, as well as providing a platform to explore and showcase British culture in all its forms. To this end, the Government set up the Film Council in April 2000 to deliver a sustainable British film industry and film culture.

  The Committee has posed eight questions for the inquiry. We have addressed each of them in our evidence.

  1.  What direct and indirect contribution does the film industry make to the UK economy?

DIRECT CONTRIBUTION

  1.1  The global market for film is worth approximately $50 billion a year, and the UK market worth approximately $4 billion a year. However, the UK market, and elsewhere, is largely dominated by US companies. The US industry is dominated by distribution-led, integrated structures where the processes of development, production and distribution are financed and carried out by a single company (subject to anti-trust laws in the USA). The majority of British films are made by production companies formed specifically for that purpose, which disband on completion of the film.

  1.2  Film production spending in the UK in 2002 totalled £566.88 million. This figure comprises:

—  £267.84 million from 30 inward investment productions;

—  £165.24 million from 42 domestic film productions; and

—  £133.79 million from 43 co-productions.

  The table below sets out the numbers and value of inward investment and domestic UK productions. The table does not include co-production information.

  1.3  Inward investment from international film-makers locating their productions in the UK increased by 16% from £230.46 million in 2001 to £267.84 million in 2002. This is more than four times the £58.5 million spent in 1992. However, spending on UK productions fell from £180.12 million in 2001 to £165.25 million in 2002.

  1.4  2000 was a record year for inward investment in the UK (£539.44 million), owing to the production of films such as Lara Croft: Tomb Raider, Spy Game, Band of Brothers, and Harry Potter and the Philosopher's Stone. Such investment is, however, dependent on a wide range of factors, including exchange rates, but, more particularly, factors over which we have no control. The events of 11 September 2001 and the foot and mouth epidemic both had a significant effect on the level of investment in the UK.

  1.5  Cut backs at Film Four, Granada and Sky Pictures have contributed to a fall in production levels in 2002. Some in the industry have commented that the production levels of the last three years were unsustainable, and that this year's figures represent a more sustainable level in line with production levels of 1997/8.

  1.6  In 2002, British made films (including co-productions) took 24% of gross box office earnings (compared to 30% in 2001), and represented 21% of all cinema releases (compared to 25% in 2001). While the number of domestic feature films made was down from 51 in 2001 to 42 in 2002, the Government supports the Film Council's view that year on year increases in the number of productions is not a goal in itself, and that, taken in isolation, production levels are not an indicator of quality or the basis for a sustainable UK film industry. The Government wishes to see the production of high quality films, which are distributed and exhibited in the UK and abroad.

  1.7  Film and video revenues in the UK are estimated to be £3.6 billion (1998). UK film and video UK exports are estimated to be £653 million (1999).

  1.8  Between 1991 and 2001, the number of cinema screens rose to 3,164, an increase of 78.3%. Cinema admissions in the UK are rising: over 142 million admissions in 2000 and almost 156 million in 2001. In 2002, there were approximately 176 million admissions, the highest number since 1971.

  1.9  Skillset, the Sector Skills Council for the audio-visual industries, carries out an annual census of employment in the industries. There are approximately 250,000 people employed across the audio-visual industries. According to the 2002 Census, there were about 1,500 people recorded as working on film productions on Census Day, reflecting the small number of films actually in production at that point. In 2001, the Census indicated that there were 2,300 people employed in the film production sector.

  1.10  Skillset recognises that the snapshot methodology used in the Census is less appropriate for film production than other sectors where the vast majority of those working in the sector are freelance, and so these figures should be treated with caution. Skillset and the Film Council are currently working together to develop a more appropriate and effective methodology.

  1.11  In 2002, the Office for National Statistics estimated there were around 33,000 employed in the motion picture and video production sector. Drawing on 2002 Census data for employment in the wider sector of commercials and corporate video, Skillset assess that a more accurate figure of employment in film production was up to 10,000 people.

  1.12  There are approximately 1,100 cinema projectionists, 11,700 working in cinema Box Offices, Kiosks and as Attendants, 500 as cinema cleaners, and 2,700 in cinema management. This is a total of 16,000 in the cinema exhibition sector.

  1.13  In the UK film distribution sector, there are approximately 250 people employed, excluding video and suppliers to the sector. Principal functions are marketing, publicity, sales (such as licensing films to exhibitors), and finance and administration.

INDIRECT CONTRIBUTION

  1.14  The indirect contribution of the UK film industry to the UK economy is very difficult to quantify. But it is clear that the film industry makes a significant contribution to:

—  tourism: images of Britain abroad; and

—  merchandising of British goods and services.

  1.15  Research undertaken and collated by the British Tourism Authority (BTA) indicates that film has the advantage of longer exposure periods than traditional travel promotion initiatives. The London Overseas Visitor Survey states that approximately 2.5% of international visitors to London cited British films and TV series as a major influence behind their decision to visit London. In Autumn 2001, the BTA launched a promotion campaign linked to the Harry Potter films. By July 2002, in the USA alone, the campaign had encouraged 634 visitors to come to Britain with an estimated total incremental spend of £926,625, and a further 40% of respondents saying that they intended to visit Britain in the next 12 months.

  1.16  The James Bond brand has also served as an advertisement for Britain and British culture. The Film Council assesses that three billion people, half the world's population, have seen a James Bond film. In 2002, Die Another Day (the 40th James Bond film), and Harry Potter and the Chamber of Secrets, both featured in the worldwide top 10, taking $317 million and $718 million respectively. Both films were still on major release at the end of the year.

  2.  Is it important to seek to preserve a capacity to make British films about Britain in the UK?

  2.1  Cinema is an accessible and immensely powerful medium, which can entertain, inspire and inform. Whether on the cinema or television screen, British films are able to reflect, explore and challenge our history, culture, beliefs and values, and help us reach a better understanding of our culture and its place in the world. Furthermore, in a multi-cultural and diverse society such as Britain, it is particularly important that we preserve the capacity to make and show films here and abroad, which deal with contemporary and historical subjects and themes. For example, recent films such as Bend it Like Beckham and East Is East play a significant role in influencing the way that cultural and ethnic diversity is viewed and debated in British society and abroad.

  2.2  Many governments around the world have recognised the importance of an active and vibrant film industry making films that are culturally relevant to that country and that serve as a shop window to the rest of the world. We wish to see a vibrant and growing industry that produces and exhibits British films about Britain in the UK and abroad, as well as building the infrastructure and skills to attract international film-makers to the UK and a healthy co-production sector that benefits Britain and the co-producing country/countries.

  2.3  To help ensure British films about Britain are being made, the Government established the Film Council in April 2000, which has spent much of its first two and a half years setting up new ways of funding film production, development and training in the UK by using lottery money. It also set up a network of regional screen agencies in England. Underpinning their establishment has been the need to ensure that there is a robust infrastructure across the country to benefit British film-makers, audiences, learners and business.

  2.4  In Scotland, Wales and Northern Ireland, the devolved authorities support their own national film agencies. Scottish Screen, Sgrin Cymru Wales and the Northern Ireland Film and Television Commission were set up to help build a vibrant and sustainable UK film industry and film culture, and work closely with the Film Council to achieve their objectives in the principal areas of supporting film production, development and training.

  2.5  The Government also recognises the need for a strengthened distribution sector in the UK. While it is unlikely that there will be a shortage of film-makers wanting to make films about Britain, there continue to be significant difficulties with getting British films distributed and shown in UK cinemas. For this reason, the Film Council aims to give greater recognition to the crucial role played by the UK distribution sector.

  2.6  Skills and training are also key issues for a sustainable British film industry. There needs to be an adequate skills base to make films in this country. The Film Council runs a Training Fund that focuses on script writing and high-end management skills.

  2.7  Skillset is the Trailblazer Sector Skills Council for the audio-visual industries including broadcasting, film, video and interactive media. SSCs are influential employer-led bodies with a strategic responsibility to identify and tackle skills, productivity and employability issues in their sectors. In 2002, Skillset was the first SSC to be licensed by the Secretary of State for Education and Skills and by the Lifelong Learning Ministers in the devolved administrations. Government has promised to contribute up to £1 million a year towards the costs of the core work required of each SSC.

  2.8  Skillset administers the Skills Investment Fund on behalf of DCMS. This collects a voluntary levy from all UK productions and co-productions to invest in four priority areas, which are:

—  new entrants training in craft, technical and production grades;

—  health and safety training for all grades;

—  qualifying the industry; and

—  training for production accountants.

  2.9  Government directly sponsors the National Film and Television School, which provides high quality post-graduate training for new and experienced film-makers. The Government also supports a whole range of media and film courses in universities and colleges across the country.

  2.10  In a global market, ensuring that British films are shown abroad for economic and cultural reasons, is important for the long-term sustainability of the industry. The Government established the Films Export Group in 2002 with representatives from the industry and Government, to look at how to maximise the export of British films and identify priority markets.

  3.  What is the relationship between the film industry and the rest of the creative industries including the broadcasters?

  3.1  The creative industries are a real success story for the UK. They are a significant contributor to the UK economy, accounting for about 7.9% of GDP (of which film contributes to approximately 0.3% of GDP) and growing significantly faster that the economy as a whole. In December 2001, employment in these industries totalled 1.95 million.

  3.2  Film is one of a number of industries dependent on the creation of content, and the convergence of technologies means that there is increasing cross-over between, for example, film, television production, games development and the communication industries. In particular, the skills required in one sector are often replicated in others. Given the large number of freelancers involved in the creative industries, there are large numbers of people who, for example, work in animation, and will be involved in film projects, commercials, television programmes etc.

  3.3  Training and technological development in many cases benefits a range of creative industries and not just one sector. The Government's role is to create the right environment for creative industries to flourish, and to make the links between the various industries to ensure that, where possible, all the creative industries benefit from developments in any one industry.

  3.4  Government encourages the development of strong links between the various industries in a number of ways:

—  It chairs Forums across the industries to support them in various ways, including the Creative Industries Higher Education Forum to ensure higher education establishments are offering the kind of education required by industry, and the Counterfeiting and Piracy Forum to help co-ordinate the industry's and Government's response to these issues.

—  It supports four industry lead export groups covering the creative industries. These are: Creative Exports (music, film, broadcasting, radio, software and publishing); Design Partners (Design consultancy, crafts and advertising); Cultural Heritage and Tourism (Built heritage, museums, tourism and architecture) and Performing Arts (Theatre, Dance, and Opera). The Groups are made up of representatives from trade associations, Government, the British Council, the Design Council and others. The Groups consider the issues affecting their industries performance overseas and make recommendations on where Government can best add value.

—  It supports the development of a Creative Industries Sector Skills Council, which might bring together a number of industries including the arts, cultural heritage, design, craft, music and libraries sectors.

—  It commissions research into cross-cutting areas, such as digital technology, of interest to many of the creative industry sectors.

  4.  What should the relationship be between British broadcasters and the film industry?

  4.1  The Government believes that it is important that there is a close and effective working relationship between the British broadcasters and the film industry. There is natural synergy between the operations of the broadcasters and film industry, for example in terms of crew, actors, studios, post-production etc. The broadcasters offer a significant outlet for British film product following its cinematic release in terms both of revenue and encouraging a wider audience for British film.

  4.2  However, their engagement with the UK film industry has decreased in recent months. For example, Channel 4 scaled back its investment in film by closing its production company FilmFour and incorporating it into its television operation. In addition, Granada Films announced last year that it was ceasing its investment in film production.

  4.3  The Communications Bill will give Ofcom the opportunity to review, and discuss with the broadcasters, the role of film in the overall public service broadcasting remit. All public service broadcasters (the BBC, Channel 4, ITV and Channel 5) will have a joint responsibility to contribute to the general public service broadcasting remit embodied in the Bill. The public service remit covers a range of issues, including education, international issues, current affairs, and cultural activity in the UK.

  4.4  Ofcom's review of public service broadcasting, to take place no less than every five years, will include consideration of whether cultural activity in the UK and its diversity are "reflected, supported and stimulated by the representation in those services (taken together) of drama, comedy and music, by the inclusion of feature film in those services, and by the treatment of other visual and performing arts." Ofcom will not, however, be empowered to establish quotas or quantitative obligations for individual broadcasters to produce or broadcast feature films.

  4.5  In recent years, Canal Plus has been one of the leading investors in and exponent of film across Europe. The pay-TV broadcaster is the largest player in feature film in France, Italy, Spain and Poland. It is a major contributor to film in Scandinavia. In France, advertising-funded broadcasters, TF1 and M6 have both developed internationally—successful film investment and sales operations. Pure public service broadcasters, France Television, La Sept and Arte, are also significant backers of feature film as are Italian broadcasters, RAI and Mediaset.

  5.  Does the film industry merit support from Government, if so, how can existing support be improved?

  5.1  The Government wants to see a flourishing and sustainable film industry. The film industry merits support from Government for economic and cultural reasons. This Government's policy towards the film industry rests largely on the major review of the industry, "A Bigger Picture", published in 1998 (see paragraphs 6.1 and 6.2 below).

  5.2  A healthy film industry means more people working in the industry, working on production, for facilities companies, marketing, distribution, exhibition etc. If more people are working, this generates revenue through taxes, and films generating revenue for those companies and the country as a whole. Successful British films, such as Billy Elliot, Gosford Park and Bend it Like Beckham generate revenues which should help to finance more film production and distribution.

  5.3  British film also acts as an advertisement for Britain and British culture. As discussed in paragraphs 1.15 and 1.16, British films and films with a strong British theme have supported inward and domestic tourism, and act as a shop window for British culture and British products.

  5.4  While the economic contribution of film is welcome, film is a relatively small industry compared to many others. The main reason for Government supporting film, therefore, is its cultural importance. Film is probably the most accessible art-form. The Government believes that it is vital that we continue to make great films in Britain and about Britain, and that a wide variety of films can be seen in British cinemas.

  5.5  Without Government support, the British film industry would struggle to grow and far fewer British films would be made and seen in the UK and abroad. This is due to the complex nature of financing film production, distribution and exhibition, and the overwhelming worldwide dominance of the US studios. Most UK producers cannot easily reduce risk or raise finance by developing a slate of films, so the majority of films are made as unique products with no track record to show how they will fare in the market place. Consequently, UK films are often under-developed, under-funded and unable to compete with heavily marketed US films. US studios dominate the market with their plentiful supply of home product with little incentive to show smaller budget, more risky, British product.

  5.6  There are three key ways Government can and does support the film industry: through fiscal means; through de-regulation; and through direct support for education and training.

  5.7  As discussed in Sir Alan Parker's speech on 5 November 2002, continued or extended tax breaks for film production are unlikely to lead directly to a sustainable film industry. While tax relief has certainly contributed to the development of the production sector, it is now apparent that there is a need to devise ways to encourage the distribution and exhibition of British films. The Film Council is currently considering future models for tax relief, which supports the distribution sector. It will be discussing these models with Government later in the year.

  5.8  Government works closely with the Film Council to identify where it can help support the industry by considering changes in legislation. For example, the Government has recently introduced secondary legislation to lower the minimum age for cinema managers from 21 to 18, which reflects standard practices in comparable sectors. Another area currently under discussion is existing legislation that makes it difficult for local authorities in London to close roads as quickly for film-makers as for organisers of other "special events".

  5.9  The Government views training and education in the film industry as key to its long-term sustainability. Government is therefore regularly reviewing its support and how it can ensure that training and education provision meets the needs of the industry.

  5.10  Government supports training and education for the film industry in a number of ways, including:

—  supporting the National Film and Television School;

—  promoting and supporting training through the Film Council, Scottish Screen, Sgrin Cymru Wales and the Northern Ireland Film and Television Commission and English regional screen agencies;

—  supporting film education through the British Film Institute (which is funded by the Film Council);

—  supporting Skillset which administers the Skills Investment Fund on behalf of Government;

—  supporting media and film departments and courses in higher education establishments; and

—  chairing the Creative Industries Higher Education Forum.

  5.11  The Film Council, Skillset, Scottish Screen, Sgrin Cymru Wales and the Northern Ireland Film and Television Commission recently undertook a joint research project to identify the skills needs of the film industry. They are currently working together to develop an action plan to take forward the recommendations of the research.

  6.  How can the production, distribution and exhibition of British films be improved in the UK? Is the right balance being struck between these elements of the industry?

  6.1  In 1997 the Government undertook a comprehensive Film Policy review to investigate and report on how Government and the film industry could work together to put the industry on a sustainable footing. A group of industry professionals and representatives from across Government and the public sector were recruited to develop a set of proposals aimed at creating a more robust, competitive and sustainable industry.

  6.2  "A Bigger Picture: The report of the Film Policy Review Group" was published in 1998. Key outcomes of the Film Policy Review were the establishment of the Film Council in April 2000 as the Government's strategic adviser on film issues, and the establishment of the Skills Investment Fund, to be administered by Skillset, to collect a voluntary levy to invest in training for the industry. As the strategic body for film, the Film Council is also responsible for the oversight of the British Film Institute.

  6.3  The Film Council, which receives approximately £20 million grant-in-aid and £30 million of lottery money annually, spent much of its first two and a half years setting up new ways of funding film production, development and training using Lottery money.

  6.4  In its first two years, the Film Council has supported production as the cornerstone of a sustainable film industry. It runs three production funds: Premiere Fund, New Cinema Fund and Development Fund, which invest in UK production. In addition, its inward investment arm, the British Film Commission, exists to promote the UK as a place to make films by publicising the wide range of locations, skills and expertise in the British film industry, as well as advocating the economic benefits of filming in the UK. A key element to attracting inward investment to the UK, and promoting the development of UK co-productions, has been the tax relief for film production.

  6.5  However, it is not simply a question of making more films in the UK. It is vital to ensure that they are distributed and exhibited at UK cinemas and abroad. The UK industry has been characterised throughout its history as driven by the number of productions, many of which do not get significant UK cinema release. (The problem of production in the UK is discussed in more detail in paragraph 5.5). The key is to create and develop a sustainable demand for British films: distribution and exhibition is therefore an essential component to this process. The Government set up and charged the Film Council with addressing such issues.

  6.6  The Film Council developed its Specialised Distribution and Exhibition Strategy to give film-goers greater access to specialised British and foreign films. There are five components to this strategy: a Cinema Screen Fund to invest in screens across the UK; a Digital Exhibition Fund to promote the use of digital cinema; a Print and Advertising Fund; a Rental Rewards Scheme; and Cinema Education Fund. Taken together, this strategy aims to give greater access to a greater range of films across the UK, and enable film distributors to acquire a greater number of specialised films and release them more widely than has been possible in the past.

  7.  How effectively has the Film Council contributed to a sustainable film industry since 2000? Does the Council have the right strategy and approach?

  7.1  Government supports the Film Council's overarching strategy and approach. It recognises that there is still much to do, and supports Sir Alan Parker's vision for the future of the British film industry. Government shares the view that key to the long term growth of the industry is: an industry led by distribution, not one that is "pushed" by the number of productions; encouraging the development of new talent, skills and creative innovation; supporting the creation and growth of state of the art studios and post-production companies; and promoting the enjoyment and understanding of cinema and its cultural heritage.

  7.2  Key to the success of this strategy is the concept of the UK as a "film hub": the UK as a supplier of high quality skills and training opportunities; the UK as the natural destination for international investment; and the UK as provider of commercially and critically successful films that are seen by audiences worldwide.

  7.3  However, significant progress has already been made. Since it was established in 2000, the Film Council has implemented effective distribution of lottery money to fund production through the Premiere Fund, the New Cinema Fund, and the Development Fund, which has delivered a significant number of commercial and critical successes in a relatively short time, including Gosford Park and The Magdalene Sisters.

  7.4  While the delivery of more international awards and greater involvement in festivals and international competitions, is welcome, Government and the Film Council recognise that the creation of a sustainable industry will not happen overnight. A sustainable industry is characterised by steady growth, increasing levels of investment, and a highly skilled and motivated workforce.

  7.5  So the Council has also worked hard to develop equally important areas of work, which do not always attract attention. Any industry is heavily reliant on the people that work in it. For this reason, training and skills is an important strand of the Film Council's strategy.

  7.6  It supports the First Light initiative to bring the art and processes of film-making to children and young people. It has also recently worked in partnership with Skillset Scottish Screen, Sgrin Cymru Wales and the Northern Ireland Film and Television Commission on a joint research project to identify the skills needs of the film industry. They are currently working together to develop an action plan to take forward the research's recommendations.

  7.7  The Film Council is also is drawing up a wide-ranging disabilities policy and providing funding in order to strengthen requirements for the provision of subtitling equipment in cinema and subtitling in Film Council funded feature films. It is working in consultation with industry, trade bodies and disability groups.

  8.  What has the Council contributed to education about, and access to, the moving image? What should the Council do with the bfi and the Museum of the Moving Image?

  8.1  The Film Council has two overarching objectives: to develop a sustainable UK film industry, and to develop film culture by improving access to, and education about, the moving image. The Film Council works to deliver the second objective through its own First Light Initiative; through funding for the English regional screen agencies; and through the British Film Institute.

  8.2  The First Light Initiative was launched in May 2001 to support film-making by children and young people. To date, almost 4,000 young people have worked with organisations and film-makers to write, act, shoot and produce over 250 films, covering a wide range of topics and genres, and making use of digital film technology.

  8.3  The Film Council's Regional Investment Fund for England supports the creation and operation of regional screen agencies for the nine English Regions. Their role is to promote all aspects of film-making, development and exhibition, as well as training and education in their regions. The agencies work closely with the Film Council, Skillset, the local authorities, the Regional Development Agencies, higher education establishments and others to deliver these goals.

  8.4  The Film Council has funded the British Film Institute since April 2000. The bfi runs the National Film and Television Archive, a National Library, the National Film Theatre (NFT) and educational and publishing ventures.

  8.5  A key component of the bfi's work centres on education. Its Education Projects department promotes and provides moving image education in schools and colleges and for lifelong learning to broaden access to moving image media and raise standards in teaching. Its main areas of activity are:

—  educational Events at the NFT and other venues in the UK for schools, colleges, families and children;

—  educational Resources to support and encourage moving image education for 5-18 year olds;

—  teacher Training for teachers of film and media studies, through distance-learning modules accredited at MA level by partner universities, as well as organising two annual conferences for post-16 Media Studies teachers in London and Bradford;

—  research into teaching and learning about the moving image in formal and informal contexts, and reports are disseminated through published reports, conferences and seminars; and

—  advocating the importance and benefits of moving image education by working with key strategic bodies in the UK.

  8.6  The National Audit Office recently examined the Film Council's efforts to increase access to, and education about, the moving image through its funding of the bfi. The final report is likely to be published in the coming weeks.

  8.7  The bfi is also responsible for the Museum of the Moving Image (MoMI) on the South Bank. It was closed in 1999 due to a combination of falling audiences and the need for costly refurbishment. The annual attendance figures had fallen from 500,000 in 1988 to less than 350,000 in 1999.

  8.8  At the time of closure, the bfi announced that the MoMI would be a key feature in the new bfi Film Centre. The Film Centre is an ambitious project intended to bring together not only the MoMI, but also the existing National Film Theatre and the bfi's current head office at Stephen Street under one roof. Two possible locations are under active consideration: at Tate Modern, and close to its existing site on the South Bank.

May 2003