The Scottish Affairs Committee Report: 'Video Games Industry in Scotland'

February 7, 2011 -

The Scottish Affairs Committee released a 38-page report today called "Video Games Industry in Scotland," that highlights twenty key proposals it believes will improve the video game industry in the UK. Some of those proposals include tax relief similar to what is offered forto the movie industry, research & development tax relief, and adaption of the Livingstone-Hope Review, among other things designed to create a more prosperous environment for game makers and publishers.

On a related note, the UK industry trade group TIGA said in a press release today that it "welcomed" the report and said that many of the proposals it listed echoed much of what it has said in the past.

The entire list of proposals - taken from Develop - can be found below:

1: We note that much improvement has been made by the industry, particularly in relation to classification, however more needs to be done to future proof age verification for video games accessed online. The industry and universities are well placed to research how best to go about ensuring children cannot gain access to inappropriate adult content. Therefore we recommend the Government look into supporting such research, and ask the industry to see how they too can invest in such research as a part of their corporate social responsibility.

2: The video games industry is a highly mobile and relatively young industry, with predicted annual growth rates double that of the film industry. Scotland has an outstanding reputation for excellence in video games production, but in reality the sector is of great economic benefit to the whole of the UK. The UK industry, however, is currently contracting. It faces an uneven international playing field, disadvantaged by subsidies from governments overseas, notably France and Canada, and cheaper labour markets elsewhere, as well as by skills shortages, unsustainable business models a need for innovation and investment vehicles. The Government has a responsibility to help create an economic environment in which the creative industries can flourish. Impediments for growth in the UK are emerging and we believe the Government should make the future of this industry a priority.

3: A games tax relief would cost less than the tax credit currently awarded to the film industry. The Government has tried to explain away the existence of a film tax credit in contrast to the resistance to a games tax credit as a matter of politics and history. This is a poor argument for seemingly favouring a mature industry over an emerging one. Inertia is a poor justification for the status quo. We highlight the inconsistency in the Government's approach to the two industries and draw this anomaly to the Government's attention. We believe that a cost benefit analysis should be done of the video games industry and the film industry to see which gives the better value for money.

4: Prior to the general election the Conservative, Liberal Democrat, Labour and Scottish National parties supported the principle of a games tax relief. Given this consensus across the political landscape, the industry could have reasonably expected the introduction of such a tax relief, and would have planned accordingly. However, in its first budget, the Government changed its position.

5: The Minister responsible for the video games industry should make representations at the heart of Government on behalf of this economically and culturally important industry. We are surprised and disappointed that the Minister was only able to lobby the Treasury indirectly on the games tax relief. We expect the industry to be better represented in future within Government. We invite the Government to explain in its response to this Report how it will ensure that the voice of the industry is properly represented in future and give an undertaking that this experience will not be repeated.

6: The Chancellor described the proposed tax relief as "poorly targeted", prompting debate over the meaning of the phrase. The proposed tax relief was specifically targeted to the UK video games industry; in this sense, it was well-targeted. The real issue is whether the tax relief is value-for-money and would alleviate many of the structural problems in the UK sector; those being generating and retaining IP, self-publishing and aiding start-ups.

7: There are both compelling arguments for a tax relief, most notably in the lessons of the effect such a relief has had in Canada, and real concerns. The Committee is divided over the issue of tax relief for the industry and we are unlikely to come to a consensus on this issue. There is disagreement between HM Treasury and games industry representatives over the financial benefit of a games tax relief. We recognise, however, that the UK Government has ruled out a tax relief for the foreseeable future, and the current fiscal environment means this view is unlikely to change in the short-term.

8: We recommend that the possibility of introducing a tax relief be kept under review, and the health of the industry be monitored for the potentially malign effects of uneven international competition. We recommend that the Government, meanwhile, undertake a full and comprehensive assessment to determine the benefits of such a relief, as well as examining those countries whose industries continue to flourish without Government support.

9: Research and development tax credits already provide an incentive for innovation. These credits could be adapted and enhanced, at little cost to the Exchequer, but with great benefit to video games companies. We recommend that the Government set out in its response to this Report how it plans to work with NESTA on adapting the research and development tax credits as soon as possible so that video games companies can make full use of the scheme.

10: The creation and retention of intellectual property is a priority issue for the UK video games industry. We welcome the review of the taxation of IP currently being undertaken by the Government. We expect the Government to set out a timetable for the implementation of the recommendations of the taxation of IP review in its response to this Report. We will monitor its outcome.

11: The measures announced in the 2010 Budget will have a positive impact on start-ups and small and medium sized businesses, and we welcome the Government's actions. However, these proposals are not specific to the video games industry. We recommend that proposals for more targeted support be set out by the Government in its response to this Report. Those proposals should be accompanied by a clear and costed action plan.

12: The innovative practices in place at the University of Abertay, such as workplace simulation, the level support given to graduates starting their own business and the level of cooperation with local industry should be replicated across the UK. We recommend that the Government set out in its response to this Report how it will develop ways of encouraging the adoption of these practices nationwide.

13: The shortage of graduates adequately qualified to sustain the video games industry in the UK is matter of real concern, as is the unsuitability of many self-proclaimed video games courses. There needs to be more focus on the hard skills needed for the industry, such as mathematics and computer science. Other important factors necessary to ensure graduates are both trained for industry and able to find a job, are the levels of engagement between higher education institutions and industry, and the incentives for industry to take on talented graduates as trainees. The Department for Business, Innovation and Skills should be able to demonstrate that it is aware of these problems and has proposals to address them effectively. We recommend that the Government's strategy for addressing such issues is set out in its response to this Report.

14: The £5 million prototype scheme, to be run by Abertay University, is an excellent example of support targeted towards a priority issue for the video games industry. We expect the Government to monitor the progress of the scheme, and if it is successful, to explain how it intends to ensure that it can be replicated nationwide.

15: Ensuring schools and universities provide the right education and training is beneficial to graduates, businesses and the wider economy. We support the Government's decision to commission an independent review of education and training in the UK video games sector. We expect the response to this Report to set out a timetable for the Government's analysis of the review and for developing its action plan for working with the Scottish Government on the recommendations.

16: The skills shortage in the UK industry is compounded by a brain drain to countries offering more generous incentives to the video games industry. If the UK is to retain its position as a global player in the industry, efforts must be made to halt this brain drain. We recommend that the Government, in its response to this Report, outline how it will work with universities and the industry to ensure talented graduates remain in the UK.

17: The video games companies face significant challenges in accessing finance. More needs to be done to increase the understanding of the financial cycle for video games companies amongst banks and private equity funders. The Government has an important role to play in providing support to businesses in attracting finance. We invite the Government to outline in its response to our Report how this business support is being tailored to video games companies.

18: Scotland is open for business, and it is vital that this message is publicised. We see the need for a more targeted marketing strategy to attract investment to Scotland, and recommend that the Government work with the Scottish Executive and trade associations to formulate and implement such a strategy relating to the video games industry in particular. We invite it to set out in its response to this Report how it intends to do this.

19: This is a "golden age of opportunity" for the video games industry, with small businesses able to access global audiences. It is imperative that guidance and support is available for these companies. We recommend that the Minister for Culture, Communication and Creative Industries holds regular meetings with companies from the video games industry to develop and provide this support. We recommend that the Government, in its response to this Report, set out its strategy for engagement with the video games industry and its underlying criteria to enable the video games industry to secure Government support.

20: Although there are personal networks within in the video games industry, more formal representation at regional level could provide stronger support for companies. We see an argument for a trade body representing companies in Scotland, with the UK Government, trade associations and games companies all involved in its creation. We invite the Government to set out its action plan for such a body in its response to our Report.

Source: Develop


 
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