The games industry is undoubtedly the big media loser in this week’s emergency Budget. The Chancellor, George Osborne announced there would be no tax breaks for games developers; an idea supported by the last government.
The angry reaction from games companies in the UK was swift. Dr Richard Wilson, chief executive of the video game trade association TIGA told the BBC the decision was “a kick in the teeth” for the industry and a “betrayal” of promises made by the coalition partners before the election. The Entertainment and Leisure Software Publishers Association (ELSPA), who act as a trading body for the gaming industry, said they were both disappointed and confused by the Chancellor’s announcement. Their Director General Michael Rawlinson told the Telegraph the decision was “a terrible blow.”
This change of policy comes in striking contrast to the coalition government’s recent words of support for the UK’s media industry. In a keynote speech earlier this month Culture Secretary Jeremy Hunt described the UK’s production of digital media as being “quite simply extraordinary significance for Britain’s economic future.” He told an audience in London that he considered his responsibility for media policy to be “one of the most sacred I have.” Mr Hunt may consider his responsibility to be sacred, but if he intends to maintain practical government support for the media, he looks likely to be facing a serious challenge.
Media and the arts already facing government cuts.
The media and the arts are already proving to be prime targets in the government’s spending cuts. Funding to modernise libraries has been scrapped, along with a loss of more than £47 million for projects at the British Film Institute. Mr Osborne’s Budget annoucement of 25% real terms cuts in government spending can only be a sign of further assualts on media and the arts.
Along with cuts in direct funding, spending reductions are likely to make a significant impact on the thousands of media workers employed in the public sector; in education, video production, press and PR. With the Coalititon’s antipathy to so called “government spin” many must fear their jobs will put them in the front line for staff cuts.
More broadband – but will people be able to afford it?
The Budget does restate the Coalition’s policy on broadband rollout and confirms that the 50p “landline tax” will be scrapped; however there is still little detail about the true extent of the government’s broadband ambitions. The Budget repeats the government’s goal of universal broadband access of at least 2Mbps; however while many people may be given access to broadband, fewer may be able to afford it, as the VAT rise will see an increase in the price of broadband packages.
The VAT increase will also hit media companies selling products direct to the consumer. There may be a flurry to buy larger goods before the January deadline, after that it’s feared there may be a dramatic fall in sales. Research conducted by the price comparison service uswitch.com before the election, showed consumers were more worried about the VAT rise than they were about an increase in interst rates. Six out of ten consumers said they were planning to drastically alter their spending plans.
While VAT will not affect books and newspapers, there is little other good news for local and regional news media already in crisis. Newspapers and broadcasters can only wait for the autumn when the Department of Culture, Media and Sport is due to publish its local media action plan.
Who are the media winners?
So how might the media industry gain from the Emergency Budget? Many media workers are self-employed or work for small and medium sized companies. There has been a guarded welcome for the Budget from such small companies. The Federation of Small Businesses said the Budget would please the vast majority of its members, although it raised a cautionary note about rises in Employer National Insurance Contributions.
Plans to cut Corporation Tax have also been widely welcomed. The website Real Business said today that this was “A very good measure by Chancellor George Osborne. Not only will cutting the corporation tax rate to 24 per cent help to make Britain more competitive internationally, it will also encourage businesses to set up here rather than abroad.”
So with these benefits, overall it could be argued that the media industry is only being asked to accept its fair share of the government’s austerity measures; however those employed by the games industry would probably disagree.
View the full text of the emergency Budget here:
http://www.hm-treasury.gov.uk/junebudget_easyread.htm
