Tax breaks and a streamer levy should be on the table as part of an urgent package of support for the UK’s crisis-hit high quality drama sector, MPs have said, in a wide-ranging report which urges the Government to step up the assistance it provides for all elements of British film and high-end television.

“The report – from the Culture, Media and Sport Committee of the House of Commons – welcomes the Government’s stated ambition to make the UK the best place to make film and high-end television, but warns that there must be no complacency over its status as a global production hub and calls for a regular assessment of tax incentives to maintain investment from overseas.”

At the same time, the report recommends a series of measures to halt the decline of domestic production of culturally distinct British film and programmes, which has failed to keep pace with the headline-grabbing growth of big box office productions financed and controlled from outside the UK.

While the introduction in 2024 of the Independent Film Tax Credit – as called for by the previous committee in the last Parliament – was a welcome first step for the film industry, the report says the Government should go further, or producers will continue to struggle to develop and raise finance for films, and those that are made will not be seen by audiences. The Committee calls for a tax credit to support the distribution of lower-budget films, among other measures to support independent film.

The Committee further warns that without urgent intervention, the problems seen in independent film will extend to the domestic high-end TV sector, where competition from high-budget overseas production is driving up costs, revenue models are changing due to the terms offered by streamers and commissioning budgets of public service broadcasters are being squeezed by a fall in the licence fee and drop in advertising revenue.

The report outlines evidence that this has put distinctly British content, which is vital to the UK’s identity, national conversations and talent pipeline, under threat.

Evidence to the inquiry from Wolf Hall director Peter Kominsky warned that recent hit The Mirror and the Light would not have been made nowadays because of funding challenges, while Black Doves and Kaos producer Jane Featherstone told the Committee that the business models of streamers dictate that shows need to have global appeal to be made.

The Committee’s report therefore calls for enhanced tax incentives for domestic high-end TV, and for streamers, such as Netflix, Prime Video, Apple TV+ and Disney+, which benefit from the creativity of British producers, to put their money where their mouth is by committing to pay 5 per cent of their UK subscriber revenue into a cultural fund to help finance drama with a specific interest to British audiences.

Sources within the streamers pushed back hard pointing out they have invested billions in UK production – including co-pro funding for shows that have come to FTA PSBs, such as Peaky Blinders. They warn any levy cost would be passed onto consumers who would not accept the unfairness of paying a licence fee and then paying again to subsidise the organisation they had already paid for. While accepting streamer purchasing has increased demand, and therefore cost, in the production sector, they are adamant that tax and other incentives the way to underpin production, not a levy, voluntary or otherwise.

The report also makes a range of recommendations on how to bolster skills and worker rights in the industry, citing the many hardworking and talented people who work in the sector as a key reason for its success. It reinforces the recommendation of the last committee for the Government to appoint a Freelancers’ Commissioner.

On support for cinemas, the Committee says the Government should introduce a core funding model for culturally significant independent cinemas to mitigate the cost pressures, changing audience behaviours and under-investment in people and infrastructure that have threatened many communities’ cinemas.

The report also says that the Government should require licensing of creative works in all cases where they are used to train AI models.

“Big box-office blockbusters made in Britain have showcased the UK’s world-class film and high-end television industry like never before,” commented Dame Caroline Dinenage MP, Chair of the CMS Committee. “But the boom in inward investment of recent years now risks crowding out our many talented independent British producers. While streamers like Netflix and Amazon have proved a valuable addition for the industry and economy, unless the Government urgently intervenes to rebalance the playing field, for every Adolescence adding to the national conversation, there will be countless distinctly British stories that never make it to our screens.”

“From independent production through to cinemas, all parts of our film and high-end TV sector, and the talented people that make it such a success, are going through a turbulent time. To neglect just one part puts the entire ecosystem at risk, so it’s therefore vital that the Government goes further and faster across the board to support an industry that is so important to both our economy and our soft power overseas. Today’s report sets out a way forward for the Government to put the name of the UK film and television industry up in lights around the world as the very best place to do business and to work, by offering the right tax incentives, tackling skills shortages, improving worker rights and making sure the rise of AI is a positive force, not a disincentive to investment,” she concluded.

Among the key findings and recommendations:

The future of British film

• The Independent Film Tax Credit is a gamechanger for domestic production and a welcome sign of continued Government commitment to the sector. But it is not a silver bullet for all the problems facing independent British film. Without further intervention, producers will still struggle to develop and raise finance for films, and the films that are made will not be seen by audiences.

• On tax changes, the report makes recommendations on amending the definition of R&D for tax relief purposes for the creative industries and introducing tax relief for the print and advertising costs of films to support distribution and exhibition.

• On funding, there should also be a review of the impact of changes to the Enterprise Investment Scheme and Seed Enterprise Investment Scheme and an increase in the budget for the UK Global Screen Fund, with the UK looking to rejoin Creative Europe as an associate member.

The crisis in domestic high-end television

• Domestic HETV needs to be supported through enhanced tax incentives just as independent film has been. The BFI should urgently conduct analysis on the potential design and return on investment of a targeted uplift to HETV AVEC for domestic productions with budgets of £1 million to £3 million per hour. The Government should commit to introducing the measure at the next fiscal event if the projected return on investment and impact on domestic production is found to be positive.

• The dynamic between independent producers and streamers is not sustainable, and successful production companies are being gutted by deals that deny them the ability to fully monetise their intellectual property. The Government should consider ways that British producers can retain a greater share of IP rights when working with streaming platforms.

• Streamers laud the UK’s mixed production ecology, with public service broadcasters and independent producers at its heart, but their business practices are putting that at risk. They need to step up their support for the making of culturally British content, and not just reap the cultural and training benefits it provides. All streaming platforms that operate in the UK should pay a 5 per cent levy on their UK subscriber revenue into a cultural fund administered by the BFI to support domestic production. If the industry does not voluntarily establish the fund within a year, the Government should introduce a statutory levy.

“I hugely welcome the fact that the CMS select committee has endorsed the call for a 5 per cent levy on streamers’ revenue to support public service broadcasting high-end television,” commented Kominsky. “This is a brave thing to do in the current political climate and absolutely the right solution. However, I do think it is important to stipulate that the fund created by this levy should only be available to productions which are either commissioned or co-commissioned by a public service broadcaster. As far as I can see, this isn’t made clear in the report and it is an essential aspect of the 5 per cent levy solution to the problems our industry faces.”

Responding to the Report, Adrian Wootton OBE, Chief Executive of the British Film Commission, said: “There’s a lot to welcome in today’s report, not least the recommendation to increase funding for the UK Global Screen Fund and support for the BFI Certification Unit. But it is essential that the importance of inward investment – to which the SVoDs are a key contributor – is not underestimated.

“Inward investment – which reached £4.7 billion last year – is the single biggest thing that has boosted growth in our industry and spread those benefits across the UK. Productions like Outlander in Scotland, Young Sherlock in Wales, Game of Thrones in Northern Ireland or Adolescence in Yorkshire have brought jobs to local crews, and spending to local areas. That investment in film and HETV is vital to keep our film and TV industry not just alive but kicking, in an increasingly competitive market. Of course, it should be one component amongst many in a wider UK production ecosystem, but our focus shouldn’t be at the expense of inward investment, and we remain extremely cautious of any measures that risk making us anti-competitive, especially given the current global market turbulence.”

PRODUCTION SUPPORT SERVICES

“The report is also surprisingly silent on the vital importance of production support provided by the BFC and our national and regional partners, truly making the UK the best place in the world in which to produce film and television.”

SKILLS

“In particular, we question the report’s tone regarding streamers’ and studios’ investment into skills training throughout the UK. Far from ‘hiding’ or shirking the need to invest in UK skills, they have been proactive and willing partners in skills training. For example, collectively, the members of the UK Screen Sector Skills Task Force invested over £100m in skills development in 2022 – more than the 1 per cent of production budgets recommended by the BFI Skills Review.

“That’s not to mention substantial additional investments in sustainability measures across productions, and initiatives to broaden inclusivity in our sector.”

Stephen Bristow, partner in the film and TV team at accounting and advisory firm Saffery, said:

“This report, and set of recommendations, published by the Committee today is a welcome intervention. The Committee has shone a spotlight on the huge contribution the film and TV sector makes to the UK economy, but there is still much untapped potential and a need to move quickly to ensure the UK retains its competitive edge on the world stage.”

A supportive tax system is a key driver of investment in the UK market, and having worked with the Film Distributors Association to make the case for incentives that support the wider distribution of UK independent productions, something the industry has been calling for for some time, it is hugely pleasing to see the Committee take forward the proposal for the creation of a new prints and advertising tax credit. If this new tax credit is taken forwards by the government it will benefit all parts of the industry.

“The government has shown a willingness to continue investing in the film and TV industry as a real driver of economic growth – including with the expanded VFX tax credit which was announced in the 2024 Budget – and so it is to be hoped that a similar appetite is shown for the Committee’s recommendations.”

Patrick Holland, Executive Chairman of Banijay UK, said: “We are pleased that the Committee is recognising the need for intervention in the scripted sector, however, we aren’t convinced the levy is the way forward. Banijay UK has long called for an increase in tax credits to support the mid-range UK production programming sector, which is at the most risk. Shows like Peaky Blinders, SAS Rogue Heroes, Richard Gadd’s new series Half Man, and Jack Thorne’s new C4 drama Falling required far more funding than the Public Service Broadcasting licence can provide to get into production. These types of shows, developed by brilliant British writers that speak directly to UK audiences, sit in the £2.5 million to £3.5 million bracket and are at real risk of not being made going forward if, as an industry, we can’t guarantee the funding they need. We need more help to be able to bridge the gap, and an increase in tax credit provides a suitable and practical option, derisking for distribution investors, while allowing the very best home-grown content to be made for UK audiences.”

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Categories: AI, Articles, Business, Content, Funding, Policy, Production, Regulation

Tags: Adolescence, Culture Media and Sport Committee, Jane Featherstone, Peter Kosminsky