Budget watchers amongst you will now know the UK games industry tax break proposal has been cancelled as part of today’s budget. I use the word cancelled loosely as it wasn’t actually part of the Conservative pre-election manifesto and it isn’t part of the coalition Government’s post-election manifesto, but it was part of the outgoing Government’s proposals.
With most gaming websites seemingly going ballistic and gamers following suit, we’ll just have a recap at how such a pledge came about in the first place, before focusing on today’s budget fallout.
As most people know, the UK videogame industry has a long and proud history, being present for as long as it has been possible to make a game on a computer and still plays a large part today with studios like Media Molecule, Criterion, Lionhead, Codemasters and many others contributing to helping the UK maintain its place amongst the world’s videogame development elite.
In recent times it has been far from a bed of roses, as worldwide videogame sales have plummeted around 20% from 2008 to 2009, with a similar rate of decline repeated through to 2010. To some degree this is partly due to the videogame industry being mid-cycle resulting in no new hardware to stimulate purchases, but the main reason is because of the worldwide recession. This has contributed to the closure of several studios, including the likes of Free Radical, and a reported ‘brain drain’ as big international publishers and studios move production abroad where they may receive more favourable trading conditions to do business.
More favourable conditions include consolidating studios and offices under a single building therefore vastly reducing overheads, lower wages, lower taxation and even tax breaks. It’s obviously these tax breaks which form today’s controversy.
The subject of tax breaks came about in Parliament because of Conservative MP Ed Vaizey’s voracious campaigning on the issue; and with the help of a few other tech-friendly MPs, the subject of tax breaks made its way into Labour and Liberal Democrat policy. However, despite Ed Vaizey being the instigator of the debate, the Conservatives remained quiet on the issue and instead said they’ll formulate their plans in the coming weeks.
Well, here we are after those weeks and the news on the face of it is negative for the gaming industry, with the Conservative led coalition scrapping plans for the tax concession claiming it was “poorly targeted.”
So, all bad news right? Not necessarily, as instead of (some might say unfairly) targeting a single industry to be on the receiving end of taxpayers’ money, the Government has ushered in a range of changes which not only could benefit the videogame industry, but all industries. These changes include cutting Corporation Tax (tax on a company’s profits) to amongst the lowest in the developed world over the course of the parliament. There is also a cut for employer contributions to National Insurance and as studios are employers, they’ll be able to benefit from this as well as the lower tax on profits. Also, if anyone’s thinking of starting out in the videogame industry then all small business start-ups won’t have to pay National Insurance at all on the first ten employees they take on.
Basically this all can be summed up as a kind of glass half empty/half full debate; yes, the gaming industry in the UK needs a shot in the arm, but so do all industries, and today’s proposals might just do that.
webby_15-0
i dont get it :(
BIGAL-1992
Basically, they tied the games industry with all the other industries in the budget and gave them all similar cuts in taxes. I can see that working. Mind you, this http://www.computerandvideogames.com/article.php?id=252935 is why I prefer to avaoid these people like the plague.
Octaeder
I think part of the problem is more about status than the actual benefits. Tax breaks are afforded to other arts and cultural industries, like the UK film industry, so why shouldn’t the game industry also be included? It would have been another move into gaming’s accepted status as a cultural product.
Of course, given some of the cuts that were made today it’s hard to get too worked up about. There are plenty of more important services and financial benefits facing cuts.
bunimomike
All makes sense. The budget is critical to continued growth as we leave the recession. There’s simply no slack for individual cases (give or take a pinch) so it’s been removed from the table as an option. Bit of a git but I’m happy for the government to focus on getting the country back to its best as oppose to dividing itself across multiple smaller problems.
The only correction in the article is that you mention the UK gaming industry having a long history. Let’s be fair, it’s one of the youngest (and sizeable) industries on the planet. Although I’d like to think it’s age had nothing to do with the pulling of said tax breaks.
YOURMUMANDME
Couldnt have put it better big man. We are all up shit creek right now and as much as I would disagree with most of the Tories policies, if they pull this six year plan off then it does mean we can start anew the next election ! :D
Kovacs
Relative to the overall history of the medium, the UK has been there since the beginning. Hence, the UK’s long history. It’s not insinuating the industry itself has a long history, just the UK’s involvemet with it comparatively.
cc_star
Meant, the UK’s longevity within this industry, not the industry overall
bunimomike
Duly noted, guys. In absolute terms the UK gaming industry was there from the start but in relation to other industries (manufacturing, pharmaceuticals, technology, etc) it’s quite the fledgling.
Either way, it doesn’t impact the article and it’s great to see level-headedness being applied to a sensitive issue. Top stuff. :-)
shifty360
to be onist in the short time the game industry has been around compared to the british film industry games probably create greater bang for your buck but its not seen as furthering the economy because it is seen as a unnessacery medium unlike film which is seen as a art form which i feel is bollocks due to some of the trash that is produced (granted games can be trash but still) games have will have a more powerful role with the industry by 2020 and i feel it will be bigger than the movie industry due to the many new ways to play the medium.
TheSabreman
Simply put if you are a Tory then will put a positive spin on it others maybe be concerned that the UK is not doing enough to support a massive industry.
This article makes Ed Vaizey to be the champion of the gaming industry but the only place he seems to be is on C5’s The Wright Show talking about tabloid fodder.
I’d be surprised if the 20% VAT increase will do anything to help sales in the UK.
cc_star
you’re right it is a massive industry, but is it any more deserving than other industries, what about x, y, z industries, surely every industry is in need of handouts – that’s the nature of a recession, isn’t it?
Why not just have lower taxation across all industries so that they compete internationally without being on the receiving end of taxpayers money?
Grey_Ghost13
I just don’t like the way they said it was “poorly targeted”, seems a bit of a kick to the teeth
project84music
I don’t think that’s meant as an attack on the industry, more a statement as others here have suggested that the focus needs to be on the economy as a whole right now than individually targeting individual industries.
As discussed in the article, some of the other changes will benefit the industry as they benefit all industries – I’m hoping that once there has been some recovery that maybe the gaming industry will again be considered for its individual merits.
JamesF
Excellent analysis there, CC_star.
Roynaldo
While gaming is one of my passions and i want to see it “live long and prosper” there are far more needy causes for the taxpayer to be concerned about right now.
When/if the economic climate finds its feet again it would be nice to see the government look in gamings direction but for now it is a bit silly if people feel hard done by by not directing their attention this time around.
BrendanCalls
Totally agree with this Roy, well said!
On another note I am staunch Labour fan so was not looking forward to this budget a while ago, however I’m pretty pleased with it. I think its focused pretty well and about as well balanced as it could be.
Im starting to think coalition governements may actually be the way forward
cc_star
Well, we have the weaker part of the coalition to thank for the increase in tax allowance at the low end and probably the increase in childtax credits, again at the low end, without which the other changes may have been too bitter a pill to swallow… So, yeah coalition ftw
Charmed_Fanatic
20% VAT is not good :<
cc_star
Nope it’s not :( It’s pretty far from ideal
but at least there is raising of tax allowances at the low end, child tax credits & pension so those that need help with the rises will get a contribution.