check against delivery.

Role of creativity

When asked what qualities best sum up the British character, people usually invoke a number of common traits:

• We talk about everything from our tolerance to our respect for tradition.
• But what I think is sometimes either overlooked or its underplayed is a striking feature of British life that is vastly important both to our culture and our economy.
• And that is our creativity that embraces innovation and enables entrepreneurship.
• Our creative and cultural industries make up now over 7.3 per cent of the British economy. That’s equivalent to the financial services contribution to the economy.  And the sector is growing at teice the rate of the economy as a whole.
• Four our purposes, the Government has defined 13 sectors as belonging together under the umbrella term of the Creative Industries – ranging from music to computer games to film. And supporting them is one of the challenges of the Government’s Creative Economy Programme.

Creative Economy Programme

• James Purnell launched the programme in 2005. Government wanted to be in a better position to understand the common features of the Creative Industries, to get a better understanding of the challenges and opportunities they face and to ensure that Government played it’s part in trying to ensure that we create the conditions in which those industries would be nurtured, could prosper and could multiply and grow.
• Tessa Jowell appointed Will Hutton and the Work Foundation to set out a framework against which we and the industry could think through.the key challenges. Their report – Staying Together – was published in June. The Government will publish its own response by the end of the year in a Green Paper.  This will not be the last word from Government on these issues.  We very much see the Creative Economy Programme as an iterative process evolving in a constructive partnership across Government and between Government and the Creative Industries.

Film as typical creative industry

• The film industry exemplifies many of the challenges Will Hutton identified.
• Creative businesses share many common concerns – how to absorb risk, how to access finance to take but two.
• We don’t have comparable studios in the UK – as we once did in the fifties and sixties with Rank and British Lion – to carry risk and exploit private equity in the same way they do in the US.
• But what the Creative Economy Programme tells us is that small dynamic industries are in a good place here to embrace innovation. And this has been particularly true of film.
• Compare the pace of technological change the film industry continues to adapt to. Gutenberg’s printing press remained more or less standard for some 500 years. But within just one century the film industry has shot up like a prodigal child. It only learned to speak in the 1920s. Less than a century later and through many mutations it has evolved into a new digital form.
• This evolution is mirrored across the 13 creative industries and of course has brought new challenges.
• Not only is our time as individuals increasingly squeezed by ever increasing leisure opportunities. But these opportunities themselves are evolving and changing.
• A few years ago you plugged in a games consol and played against the computer. Now you can play with anyone across the globe.
• A few years ago the channels through which consumers purchased creative products - be it films, music or books were easily and highly controlled.  Today the global nature of the communications network challenges the traditional business models of the past.  A few years ago a record collection was something that sat at home. With the dawn of digital technology it now sits in your pocket.
• There are challenges here for the film industry increased opportunities mean increased uncertainty and increased competition. And I want to pay tribute to the UK film industry for the tenacity it displays in realising its creative potential in the face of ever more global competition.
• Government’s Creative Economy Programme has so far set the scene and developed a better understanding of the nature of the creative industries. It has identified the factors that shape their success and the issues that they face.
• The Green Paper  will set our thinking developed in continuing dialogue with all of you on how we can tackle these issues.

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Strength of British film industry

• In spite of the uncertainties as we move forward into the digital age; in spite of the competing pulls of different leisure opportunities, cinema continues to grow.
• We are a nation that does love film. Box office takings, as you well know have gone up by 56% in the last ten years.
• Whether wet weather or no wet weather it was a fantastic summer for cinema admissions. Overall, have shot up from an average of 78 million each year in the 1980s to 162 million each year since 2000.
• And of course, this has supported growth in other parts of the film industry.  Employment has risen steadily since the mid-1990s with a 70% increase in production sector jobs since 1996, an extra 7,700 full time jobs.
• Capital investment in the UK film industry is estimated to have been £120 million in 2006. Since 2000, fixed capital investment in infrastructure and new technology has totalled some £635 million.
• And last year, the UK film industry contributed £4.3 billion to UK GDP, up from £3.1 billion in 2004, that’s a 39% increase over two years.
• Whatever you think, well-made British films are not the rare and endangered species some people like to describe them. If this sounds glib, it is not meant to be. I’m not going to gloss over the challenges the industry faces in getting productions off the ground and into the cinemas.  But I do want to acknowledge the success we have enjoyed over the last few years.

Sustainability

• And while it is right that Government should acknowledge success where there is success. But we also need to reflect the tough realities of creative industries. This is not about Government trying to intervene, second guess or dictate how the Creative Industries adapt to changing methods and changing technologies.  It is about tailoring what we do to reflect your needs.
• And here lies Government’s role in building sustainability. I know I’m not the first Minister to talk about doing so. Some will argue that Government searching for sustainability is as futile as the Python’s quest for the Holy Grail.
• But British films are at the heart of British culture, and Government is at the heart of funding them. And it is right that that funding and support  goes back to filmmakers themselves.
• That is why two years ago the Treasury set out its policy to, and I quote, “promote the sustainable production of culturally British films” through a new tax relief framework.
• This is, I think a really important contribution by Government. It is estimated that without the tax relief we could see a drop in UK film production of 75%.

Targeting filmmakers

• Underpinned by a cultural test that was agreed in line with our international obligations, the tax relief is targeted directly at filmmakers.
• This Government doesn’t make an apology for restricting sideways loss relief and curtailing GAAP equity schemes. Government supports a sustainable industry –not one that is built on the shifting sands of tax avoidance.
• My warning to filmmakers who wish to raise finance on the back of such tax avoidance schemes is that they do so at their own risk.
• We now have, what I think a generous and competitive scheme. It is not channelled to financial institutions. It is not channelled to wealthy partnerships. Instead it is given to filmmakers themselves, providing many producers with much greater stability than they have had in the past.
• But there have been some recently who have felt a bit like the cavers in The Descent, worried about what is coming around the corner.

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Co-production

• Of course questions are emerging following the new tax relief. What about the balance of co-productions and cultural test films? Early signs show a potential downturn in co-production.
• But invariably any systemic change is followed by some elements of uncertainty. The 2005 tax review set the policy for a film relief that would benefit filmmakers directly.
• That film relief was introduced in January so – it is still new. Yes, it has shifted the landscape. But it’s simply too early to say in precisely what ways. The film industry is notoriously cyclical and a fall we lament today could become a rise we celebrate tomorrow.
• However, we do not wish to fall prey to false optimism or complacency. If we do see a fall in co-productions I and the Secretary of State want to know about it.
• That is why James Purnell has asked the UK Film Council to undertake a study which will look at the state of the industry following the new relief. Some members of the audience will already have been approached to participate and we welcome your input.

Funding the film industry

• For some, recent changes have felt like upheavals. But overall, I don’t think it is complacent to say that the film industry today is in a different scope and position than it was during the slowdown of the early seventies or when the Eady Levy was abolished in the mid eighties. 
• But there is a lot more hanging on British film than a healthy price tag.
• Last month when James Purnell spoke to the Royal Television Society he said that broadcasting gives the people in the UK a window on the world.
• Well - British films give the people of the world a window on the UK.
• I want to acknowledge the important role of particularly the public broadcasters. On the one hand they nurture talent, allowing it to flow between television and film. And on the other, they are vital for engendering success – from the BBC’s support for Notes on a Scandal to Channel 4’s backing of This Is England.
• We continue to view this support as a priority. The total audience for film on television last year was 3.3 billion. And Broadcasters will continue to play their vital role in supporting domestic film and championing home grown culture.
• It may be a cliché these days to say that Britain punches above its weight in the world, but in film as in so many of the other creative industries, I think this is absolutely true.
• In part this is because the British film industry stands on three solid pillars. I have outlined the first of these – which is a sound economic basis on which to build. But there are two more:

Talent

• Firstly, we all have a strong reputation for talent. Our best talents are - culturally speaking – frequent fliers.
• International success does not surprise us – in fact we expect it.  And whether its in Atonement or The Wind That Shakes The Barley it is frequently well deserved.
• Our industry is full of talent above and below the line. British directors are enormously respected – from Shane Meadows to Michael Winterbottom to Andrea Arnold. We have much to be proud of.
• But we produce a wide range of talent across the board, from composers like Michael Nyman to producers like Andrew Macdonald.
• And that isn’t name dropping for the sake of it. The point I’m making is that it is the strength of UK talent behind the camera that gives us this reputation.
• Though I must also acknowledge that UK acting talent featured in more than half of the top 200 films released worldwide since 2001.
• It is our talent and our investment that supports our domestic industry. An industry, let us not forget, that this is the third largest filmed entertainment market in the world.
• And this because of the third pillar on which our industry rests.
• For the UK exerts enormous cultural influence. From Harry Potter to James Bond to Lord of the Rings the UK provides more than talent, it provides cultural and artistic material. We have a rich cultural aquifer feeding this well of talent. This is why the Chronicles of Narnia are now into their second feature. This is why we will see The Golden Compass premier later this year.
• 31 of the top 200 films worldwide are based on stories and characters created by UK writers and more than this:
• Six of the top 10 earners worldwide are from novels by the British writers JRR Tolkien and JK Rowling.

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The world loves our films

Our films therefore are like a showreel for the UK telling the world about our diversity and our core values.

• This is more incredible when you think about the size of the businesses that typify the industry here.
• Creative industries across the board are frequently small or medium sized enterprises. You’re far more likely to come across a self-employed creative entrepreneur than you are a high street banker and that’s worth remembering.
• This is true of the film industry. High profile studios producing high price franchises are not the norm in this country.
• But it’s worth considering for a moment or so the audience patterns in the UK. Particularly when they are are increasingly moving beyond the sequels and more adventurous territory.
• Look at the success of, for example Tell No One, Amelie or Volver.
• Since 2003, 26 foreign language films have grossed more than £1 million at the UK box office.
• But let’s put that into perspective. Only seven films grossed over £1 million between 2000 and 2003. And during the whole of the 1990s only nine films grossed more than £1 million at the UK box office.
• I’m not denying the importance of mainstream filmmaking. Of course not. But neither should we overlook the appetite for diversity and the ability for our industry to feed it.

Grant funding

• So just as the British public are increasingly embracing world cinema.
• So the Government recognises the importance of home-grown filmmaking.
• Government does support British investment in culturally British films through the tax relief. And it will continue to do so.
• Grant funding is also important. I do not want to say very much about this today. But I would like to pay tribute to the important role of the UK Film Council whose results speak for themselves. First class films from Becoming Jane to the Last King of Scotland.

Supporting film for the future

• But building a sustainable fil sector is not just about supporting the production of culture for today’s cinema goers. Government also needs to consider tomorrow’s filmmakers and tomorrow’s audiences.
• That is why we gave the UK Film Council £25 million to safeguard the future of the UK’s national and regional film archives.
• This will help us to preserve and restore the BFI national collection and the regional collections, and prevent our valuable film heritage being lost.
• Almost all of the regional collections, for example, are non fiction. Film can be a vital part of education. And the preservation of these valuable archives will ensure that future generations have access to it.
• During a recent visit to the North West, I was privileged to be shown around the Yorkshire Film Archive in York and to see a very small selection of the films they preserved.
• We are also currently working with the Film Council and industry to support that education strategy which aims to foster the filmgoers and filmmakers of the future.
• Therefore, we are currently looking at setting up a network of what we have called Film Education Hubs right across the UK.
• These will deliver more opportunities for young people. More opportunities to watch films, more opportunities to talk about films, and more opportunities to learn how to make films.

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Conclusion

• These are interesting times for the creative industries. New audiences mean new markets and new technologies mean new opportunities. But in an age of global competition there are new challenges as well.
• Our Creative Economy Green paper will tackle these many challenges when it is published later this year.
• In the case of film, Government support aims to shore up the growth that we have seen over the past 25 years. We recognise the importance of supporting today’s culture, while nurturing tomorrow’s.
• But key to sustainability is supporting stability where it is needed. This is the message we hear loud and clear whenever I or James talk to industry.
• We have just introduced a new source of financial support for filmmakers. Now is the time to allow it to bed in. Now is the time to keep its impact under review.
• That what we’ll do. It is too early to gauge the effect of recent changes but we do not intend to simply sit back and watch the show.
• I continue to work with you, as I know James does as the effect of the new relief becomes known. You will be hearing more about the detail of the tax credit later on today, as well as other financing opportunities. I wish you every success.