Written evidence submitted by the Scottish Government

 

Introduction

 

The Scottish Government welcomes the Scottish Affairs Committee’s Inquiry into the creative industries in Scotland. We understand the Committee is looking at the contribution of the creative industries in Scotland to employment and the economy, and considering how UK policy—in areas such as tax reliefs and intellectual property rights—affects these industries.

 

Earlier this year, the Economy, Energy and Tourism (EET) Committee at the Scottish Parliament also conducted an Inquiry into the creative industries in Scotland and considering their economic impact.  Specifically, the Committee considered how Scotland can grow sustainable TV and film and video games industries.  Should the Scottish Affairs Committee find it useful, a copy of the report from that inquiry (published on 31 March 2015) can be found at:

 

http://www.scottish.parliament.uk/S4_EconomyEnergyandTourismCommittee/Reports/Creative_industries_-_final_report.pdf

 

A copy of the response from the Scottish Government (published on 28 May 2015) is available at:

 

http://www.scottish.parliament.uk/S4_EconomyEnergyandTourismCommittee/Inquiries/SG_Letter_and_response_in_one_doc..pdf

 

The Scottish Government and its public sector agencies are currently working towards delivering on the recommendations identified by the EET Committee

 

Digital content is often at the heart of the creative industries and it is vital that businesses within the sector stay ahead of the curve when it comes to new platforms and technologies. In order to reap the benefits of new technologies, businesses need to be able to rely on a suitably skilled supply of staff. Work being driven forward on the digital economy agenda is therefore of great importance to Scotland’s creative industries sector.

 


1) What is the footprint and economic value of the creative industries in Scotland?  How does this compare to the UK as a whole?

 

Since 2007 our Scotland’s Economic Strategy has identified the creative industries as one of our key growth sectors in recognition of their direct contribution to the economy and the existing comparative advantage which drives their potential to deliver sustainable growth in the long-term (through increased productivity and the potential to be successful in global markets.)

 

The creative industries bring valuable economic benefits to individuals, communities and the country as a whole.  Our Growth Sector Statistics Report (updated May 2015) clearly evidences the continuing significance of Scotland’s creative industries in respect of scale, employment and growth within Scotland’s overall economy.

 

The creative industries are worth around £5.8 billion to Scotland, support over 60,000 jobs and overall, creative industry exports represent around 3.3% of Scotland's total international exports.  Scotland’s art, film, fashion, music and literature are well represented as is design, IT and computer gaming industries.

Quarterly GDP series shows, on average, growth from 1998 to 2008. However, thereafter growth drops off considerable and then dips before showing some signs of recovery in more recent years.

 

The preferred measure for growth in the sector approximate GVA (aGVA) is only available from 2008 onwards. This data also evidences a dip coinciding with the recession, with the index for Creative Industries nowhere near recovering the 2008 nominal levels as of yet.  However, it is worth noting that the change is so great that there may have been some structural (or data collection) effects around the time of the recession.

 

GDP data shows that the quarterly GDP index rose from 101.7 in Quarter 4 2013 to 105.4 in Quarter 4 2014 an increase of 3.6 per cent.  Employment stood at 68,600 in 2013, representing a 5.2 per cent increase from 2012 (up 3,400 jobs).  In Scotland, the sector accounts for 2.8 per cent of employment.  Within the creative industries, 32.4 per cent (22,200) of jobs are in Digital Industries, or software and electronic publishing.  Another 29.4 per cent (20,200) of jobs are in Visual Art, which includes sectors such as advertising, architecture, design and fashion.

 

 

In March 2014, there were 13,825 registered enterprises operating in the sector, representing 8.3 per cent of all registered businesses operating in Scotland.  Scotland’s sector is characterised by small businesses.  In 2014, 97.9 per cent of Scotland’s Creative Industries registered enterprises were small (0-49 employees), whilst large enterprises (250+ employees) accounted for 0.7 per cent of registered enterprises.  Almost all enterprises in the sector are Scottish registered [UK owned] (97.6 per cent) accounting for 74.8 per cent of employment in 2014.  One per cent of businesses are foreign-owned, accounting for 15.5 per cent of employment.

 

In summary, Scotland's creativity is recognised throughout the world and we have a strong international reputation for excellence.  The sector continues to deliver economic benefits to Scotland.

 

2) How do the creative industries in Scotland differ to the creative industries in the UK as a whole?

 

The Scottish Annual Business Statistics defines the Creative Industries as: advertising; architecture; arts; crafts and antiques; computer games; design; fashion and textiles; film and video; music; performing arts; writing and publishing; photography; TV and radio; software and electronic publishing; museums and galleries; and cultural education.  This is a different definition of the creative industries than that used by the UK.

 

What makes the creative industries distinctive in Scotland includes their authenticity; provenance; heritage and traditions; the use of quality materials; their inventiveness; artisan and technical skills; digital innovation and concern for the environment.  They are innovative, resourceful, agile, open and connected. 

 

In the main, although not exclusively, they consist of small companies, sole practitioners, growing micro businesses, co-operatives and social enterprises.  Creative collaboration comes naturally in Scotland, with some working in manufacturing, digital and international collaborations, as well as with the wider economy.

 

However, the Creative Industries in Scotland share many characteristics with the UK as a whole, in that :

 

 

 

However, in screen there is a significant difference in the percentage figures with over the whole of the creative industries - 14% of screen industries in the UK but only 4% in Scotland accounting for both employment and GVA. Recent successes in Scotland, such as the filming of Outlander, soon to enter its third year of production, will significantly improve the contribution of the screen sector to the economy and there is potential for further growth.   Production spend from screen in Scotland was a record £45.2 million in 2014 – up £8 million from 2013.

 

Fostering screen production is a high priority for the Scottish Government, as

Scotland has a wealth of creative talent in the screen sector. Ensuring opportunities for that talent to flourish is vital because, as well as direct economic benefits, a successful film and television sector can have significant spill-overs into other parts of the economy, particularly the tourism sector.

 

3) How effectively do the UK, Scottish and local governments work together to promote the creative industries of Scotland at home and abroad?

 

At home

 

Creative Scotland, Scottish Enterprise and Highland and Islands Enterprise are the main public sector delivery organisations set up to co-ordinate support to the creative industries in Scotland and we understand that they are submitting their own responses to this Inquiry. All the public sector agencies which support the creative industries in Scotland are brought together under the Scottish Creative Industries Partnership (SCIP), which was established in 2009 by Scottish Government and remitted to Creative Scotland to chair. It is not clear to the creative industries businesses in Scotland what the public sector support offer is. Following the EET Committee report and recommendations, a Memorandum of Understanding is being developed between CS and SE and we anticipate this will be published shortly. 

 

SCIP’s remit has recently been refreshed to:

 

(i)                 support the health, sustainability and growth of the creative industries

(ii)                co-ordinate the efforts of the public agencies, working with industry, in order that individual agencies can develop and deliver appropriate, effective and efficient services and support to the industry

(iii)              focus on the strategic response to these aims and provide a platform for developing deeper partnership working by building greater alignment between the partners’ business plans, and where appropriate the co-ordination of partnership activities

(iv)              influence and co-ordinate sharing of intelligence, research, knowledge and to co-ordinate decision makers

(v)               monitor progress and influence decision making

(vi)              develop a work plan with industry

A Creative Industries Strategy for 15/17 will be published by Creative Scotland in December 2015 which will complement their 10 year plan and Arts Strategy with their International Strategy expected to be published in early 2016.

 

In the video game sub-sector, Abertay University plays a strong role in enabling talent in this sub-sector to grow. The Scottish Government has supported Abertay in the past to host annual Summer events ‘Dare to be Digital’ (which is a competition for students to develop a new video game) and another event to showcase the events to the public ‘Dare to Protoplay’ (which is useful to gather user feedback on the games with the best game being selected from feedback to that event).

 

On a UK-wide level, we are aware that Scottish Enterprise and Scottish Development International work closely with their counterparts in UK-wide bodies like Innovate UK and UKTI and are also involved with other organisations, like Tech City UK. In addition, the Chief Executive of Creative Scotland, Janet Archer (appointed on 1 July 2013), also attends the UK Creative Industries Council (CIC) as an observer as its remit covers England only.

 

The Scottish Government has announced a further £3million for screen support over 15/16 and a further £1.75m over 15/17. Creative Scotland will administer these funds and in doing so, will collect evidence from companies who secure this funding so that the impact of this funding can be monitored in order to make a decision for future funding for screen support from 2017 onwards. 

 

However, as Culture is devolved, we would wish to see much greater engagement between the UK Government and Scottish Government in terms of reserved areas which, when driven by the needs of the wider UK and implemented, may be detrimental to the interests of Scotland.  For example, we mention later under question 5, immigration policy, and have already re-stated our expectation to the Department of Culture, Media and Sport that we will be consulted on any signing of Cultural Memorandums of Understanding with other countries by the UK Government to ensure that Scotland’s cultural priorities are reflected in these documents.

 

We are also not consulted on issues of tax relief or UK-wide incentives for film and have set out at question 6 where other countries have different models that could be investigated by the UK Government to determine if they delivered greater benefits for the screen sector than currently available. We would also want to see greater data collection by HMRC on creative industries tax reliefs start-up funding from UK wide companies such as Transit Start-Ups and screen funding from the British Film Institute and how much has been claimed by companies in Scotland, rather than UK wide.  This would enable us to determine the impact in Scotland and whether Scottish companies are at disadvantaged in claiming these incentives compared to the rest of the UK.         

 

Abroad and internationally

 

There are two particular sub-sectors where Scotland has significant strengths in addition to video games which have been mentioned previously:

 

Music For example, Celtic Connections has a key strand ‘Showcase Scotland’ which invites 180 international producers and festivals directors to the event, exposing them to Scottish musicians for potential onward booking and touring.  An impact study in 2010-11 found that artist income and delegate expenditure was in the region of £4.2 million.  The Expo office now holds an annual inward visit in May for a specific target country, which has included North America and France, increasing the exposure of Scottish Musical talent on an international platform.

 

Fashion Design – For example, organisations such as Scotland Re:Designed provide a platform for Scotland’s designers and textile companies to establish, build and secure business relationships.  Selected individuals receive training, support and exposure to the world’s fashion industry enabling them to build their business in a global market.  They have profiled Scotland during Ministerial visits to France, North America and most recently Hong Kong.

 

4.              What are the barriers to the growth of the creative industries in Scotland, and how can these be overcome? 

 

This important question was also posed by the recent EET Inquiry into the creative industries. The challenges for the sector can be considered around four economic drivers - investment, internationalisation, innovation and inclusive growth.

 

The strategic priorities of our Government are based on three key themes: creating more, better paid jobs in a strong sustainable economy; building a fairer Scotland and tackling inequality through passing power to people and communities; and protecting and reforming public services. Additionally,  internationalisation is one of four interlinked priority areas along with innovation, inclusive growth, and investment in infrastructure and skills.

 

The creative industries have a role to play in taking forward all three of the strategic priorities and the four interlinked priority areas for this Government. Success will rely on collaborative working across the sector, with the public sector adopting an enabling role that empowers individuals and businesses to work together to achieve common goals.

 

 

It is estimated that the ICT and digital technologies sector in Scotland requires 11,000 new entrants (particularly software engineers) per year to meet both replacement and growth demand. This problem is also relevant to the UK-wide sector and countries globally are reporting similar pressing needs for those with software skills.

 

The gender imbalance within the sector continues to be an issue at both Scottish and UK levels. Only 19% and 15% of the sector’s workforce are women in Scotland and the UK respectively.

 

To address the skills agenda, in March 2014, Skills Development Scotland launched the ICT & Digital Technologies Skills Investment Plan, with associated additional funding of £6.6m from the Scottish Government in March 2014 and this together with the Skills Investment Plan for the Creative Industries launched in June 2015 will provide a framework to ensure that the needs of industry are met.

 

The SIP outlines key actions under 4 key themes – immediate need; raising the sector profile; broadening the future talent pipeline; and making the education system more responsive.

 

The main priority, designed to address immediate need, will be the introduction of an industry led Digital Skills Academy called Codeclan. Codeclan will begin operating in Autumn 2015.

 

Another important element of the SIP action plan is to raise the sector’s profile and highlight its opportunities. To help improve the sector’s image, a multi-channel marketing campaign will launch in September 2015, aimed at young people, especially women, as well as graduates and career influencers.

 

The Scottish Government is also working with Skills Development Scotland on the implementation of their Skills Investment Plan for the Creative Industries which was published at end June 2015.

 

The action plan within the Creative Industries SIP is set out thematically and includes four different priority areas.  Within each of these four areas there are a number of objectives relating specifically to that theme. With the growth in digital platforms being a major opportunity for growth for the creative industries, but with an associated major gap in digital skills in businesses in Scotland, the SIP focuses on digital but does not neglect to include more traditional market opportunities where the sector is experiencing difficulty.  The four areas the SIP action plan focusses on are:

 

 

 

Addressing the Digital Agenda - widening and deepening the availability and utilisation of digital economy skills across the whole sector in national and international markets.  It will increase the use of digital technology to develop new goods, activities and services to support future growth.

 

Developing Diversity, Industry Readiness & Progression - uplift learner experience and understanding of real world creative processes, jobs and outputs by increasing the number and quality of work experience places, internships, live projects, placements and apprenticeships - both within and outwith educational provision - with the aim of bridging the gap.

 

Developing Leadership and Business Skills - strengthen leadership, management and business skills to create, protect, exploit and sustain platforms and routes to global digital markets.

 

New Approaches to Delivery - research, resource, promote and provide new skills opportunities via online learning, digital CIAG, a range of MA options including advanced apprenticeships.

 

4a.               What, if any, changes need to be made to enable the creative industries to capitalise on their Intellectual Property?

 

A strong and stable Intellectual Property regime is the foundation of Scotland’s globally successful creative industries sector and works to the benefit of individuals and businesses.  Investment in creative industries requires a stable legal framework that allows rights to be protected and commercialised, which businesses can understand and use and provides for a fair return on investment and sufficient incentives for creators.

 

Countries that provide such a stable framework attract higher levels of investment into their creative industries, both domestically and from overseas.  Industry can respond to a supportive policy environment with investment in new content, creating growth, jobs and exports for Scotland which will contribute to economic growth.

 

However, Intellectual Property is a reserved issue and changes should be implemented by the UK Government which increase an awareness in businesses of the importance of IP rights, support growth in investment in new IP, create an IP licensing and enforcement framework fit for the digital age and introduce greater transparency to, and business involvement in, the activities of the Intellectual Property Office.

 

In November 2014, the Smith Commission Agreement on Scottish devolution recommended that all powers over the management and operation of all reserved tribunals (which includes administrative, judicial and legislative powers) will be devolved to the Scottish Parliament other than the Special Immigration Appeals Commission and the Proscribed Organisations Appeals Commission. This included the transfer of the Copyright Tribunal’s functions to a Scottish tribunal.

 

Collecting societies have the authority to license copyrighted works and collect royalties on behalf of their members. They collect royalty payments and distribute the royalties to the copyright owners. The disputes the Copyright Tribunal is involved in to resolve usually relate to the terms and conditions of licences, or the refusal by a collecting society to provide a licence.

 

So, despite this devolution of the Copyright Tribunal, which the Scottish Government welcomes, the laws providing for the underlying reserved substantive rights and duties with regard to Copyright will continue to remain reserved.  This may impede the way in which the Scottish Government wishes the Tribunal to operate and so this issue, which also relates to the devolution of other Tribunals, will be discussed further with the UK Government.

 

5.              What can the UK Government do to create an environment which encourages growth in the creative industries in Scotland?

 

The Scottish Government’s priorities for international partnerships have been set out in an International Framework as it is accepted that international engagement makes a crucial contribution to sustainable economic growth and strengthens our international reputation.

 

In support of the Digital sector, the Scottish Government’s strategy Scotland’s Digital Future: Supporting the Transition to a World-Leading Digital Economy (2013) called for a seamless programme of support and advice for businesses, on digital topics, that integrates and builds on the range of support currently available.

 

Our internationalisation agenda is two-fold. Firstly to create an environment within Scotland that supports a better understanding of international opportunities and a greater appetite and ability to seize them.  Secondly, to influence the world around us on the issues that would most help Scotland to flourish.

 

Therefore, we need to ensure that we work closely with the UK Government on reserved issues, where appropriate. For example, we have recently received a letter from Ed Vaizey, Minister of State for Digital and the Cultural Economy informing us that he intends to publish a White Paper on Culture at the end of this year or early next year and we have agreed to work with him on that.

 

The Scottish Government also considers that current immigration policy is too heavily influenced by the priorities of the south east of England. The Westminster approach is based on the values of the UK Government, which is driven by a desire to reduce the numbers of incoming migrants. That is why, in our submission to the Smith Commission, the Scottish Government called for competence over certain aspects of immigration policy, for example, the post study work visa, in order to better meet our particular economic needs.

 

The reintroduction of a post-study work route has strong cross sectoral and cross-party support in Scotland.  We welcomed the Smith Commission’s view last year that we should work together with the UK Government to explore a potential post study work scheme for Scotland, which would act as an important lever for attracting the best international student talent, securing essential income streams, and ensuring Scotland's global competitiveness.

 

The Scottish Government will continue to press the UK Government for the reintroduction of a post study work route for Scotland.  The Minister for Europe and International Development has established a cross-party steering group which includes representatives of all major political parties in Scotland, with education, student and business interests also represented.  The Group will look at how a post-study work route can best work for Scotland and will take forward the work of the Post Study Work Working Group, which recommended the route be reintroduced in a report issued in March this year. The first full meeting of the Group will take place on 30 September 2015.

 

 

The EU’s proposals for the creation of a Digital Single Market represent significant opportunities and potential challenges for the creative industries.  We welcome the opportunity that the Digital Single Market proposals provide to look across the whole market and deliver a European framework that will support Scotland and Europe’s creative industries to develop their business and reach new audiences and customers.  However, the proposals must also ensure that European cultural diversity is protected and that the creative industries are fairly rewarded for their work through an effective intellectual property regime. In particular this may present issues for television producers, where a key part of the cost model for production is often based around the sale of secondary rights for re-transmission and this will need to be carefully factored in to further developments on this area. 

 

We are taking steps to ensure that Scotland’s creative industries interests are represented as the Digital Single Market proposals develop over the coming months and years.  We will work with the UK government to ensure that their consultation processes around the Digital Single Market are inclusive of Scottish creative industries stakeholders and we welcome initial steps in this direction.

 

The UK Government will represent all nations of the UK in the EU negotiations that will decide the ultimate shape of the digital single market.  It must be ensured that all administrations in the UK are able to feed into the processes that will inform these negotiating positions and that the positions reached represent the results of discussions between administrations.  The Smith Commission recognised that EU policy coordination with the UK Government should be improved, particularly by ensuring that Scottish Ministers are consulted and their views taken into account before final UK negotiating positions relating to devolved policy matters are agreed.  This must be adhered to both in practice and in spirit in relation to the digital single market proposals.

 

 

 

 

6.              How could the system of tax reliefs for the creative industries better encourage growth of these industries in Scotland? 

 

The extension of UK tax reliefs in 2014 to animation, high end television, video games and visual special effects and, subsequently in 2015, for children's TV and then game shows and competitions has been warmly welcomed by the Scottish Government. The Finance Act 2006 introduced a Film Tax  Credit (which is against corporation tax) allows production companies to claim a payable cash rebate of up to 25% of the qualifying UK film production expenditure for all films.  The tax relief can only be claimed on up to 80 per cent of total qualifying expenditure. It is therefore typically worth 16% of qualifying production costs.

Although this represents a significant expansion of Creative Industries tax credits in the past two years, under the current constitutional framework, the Scottish Government is unable to use the fiscal levers available to other national governments to nurture and grow its domestic film and TV production sector, or to attract new inward investment, to maximise the benefit of the development of infrastructure.

 

However, tax relief is only one element in the series of factors that producers will take into account in taking location decisions. Scotland has seen a number of recent successes for the broadcasting sector such as the increase in the number of network television productions made in Scotland and broadcast across the UK, and Scotland becoming a popular film location.  These achievements show Scotland has significant potential to become a world-class and highly attractive location for productions. However, from the variety of incentives offered for film and TV production around the world, it is also clear that the industry is both mobile and competitive and will go wherever the best incentives are available. Therefore, more could be done to investigate and consider introducing other forms of incentivisation funding available in other countries to the UK.

 

The Isle of Man provides equity investment, including ‘gap financing’ and tax

credits, to film and TV productions through its Media Development Fund. There

are no upper or lower limits on investment with projects considered on a case-by case basis.

 

The Netherlands offers an investment tax incentive for film investment, if the

film is considered a business asset. The deduction varies between 1 and 28% of

the total investment and may be applied to an investment of between €2,200 and

€301,800. The Netherlands also offers immediate depreciation of the development costs of films but not the films themselves. In May 2014 the Netherlands Film Fund announced the Netherlands Film Production Incentive, which offers 30% cash rebates on eligible Dutch spend for features and feature length animations with a minimum production budget of €1 million euro, and for documentaries with a minimum budget of €250.000. The maximum grant per application is €1 million.

 

The Belgian regime for audio visual works offers Belgian investors, that invest a certain amount in recognised Belgian audio-visual works, a partial exemption of their taxable profits. The investor must: be Belgian; not itself be engaged in production of audio-visual works; realise taxable retained earnings of at least €1,500,000 a year; and must be prepared to make an investment for a maximum amount of €500,000. The qualifying investor can then exempt 150% of what has been invested in the audio visual work from its taxable retained earnings. This amount cannot exceed €750,000 or 50% of taxable retained earnings.

 

In Ireland, the previous 28% tax relief increased to 32% from 1 January 2015 and is available for the production costs of feature films, creative documentaries, television drama and animation, provided there is an Irish co-producer who will provide the full range of production services. There is a ceiling of €50 million on qualifying expenditure per project. Film production companies advancing R&D activities may qualify for an R&D tax credit that can be offset against corporation tax liabilities. In addition, the Irish Film Board is allowed to provide production funding on a tiered structure ranging from 100% for projects capable of being delivered for no more than €100,000 down to 25% (€2 million max) for films with a budget of over €5 million.

 

The Italian Government offers soft loans (to be repaid within 3 years) and contributions (a percentage of box-office earnings) to producers as incentives to encourage the production of films in Italy. The legal office of the film producer must be in Italy or an EU state and the nationality of the film must be Italian.

 

In France, audio-visual companies subject to corporation tax which locate the production of documentaries, fictions or animations mainly on French territory with French or EU participants, can receive tax credits of 20% of the expenses incurred to be set off against corporation tax. Also French residents can deduct 40% (48% in some cases) of the cash they pay to a company, whose exclusive activity is film financing, from their taxable income (up to certain limits).

 

Current Hungarian legislation allows a tax break up to a maximum of 20% of direct production costs incurred in Hungary. Hungary also offers accelerated depreciation for equipment, machinery and buildings used solely in the production of motion pictures as well as a corporation tax allowance on investment for motion picture and video production of at least HUF100 million (around €400,000). The amount of tax allowance in a given year cannot exceed 80% of corporate tax liability. State subsidies allocated by The Motion Picture Public Foundation of Hungary consist of refundable and non-refundable grants, subject to certain criteria. These are only available to Hungarian films or co-production films based on the proportion of Hungarian participation.

 

The Czech Republic offers retrospective subsidies of up to 20% of films’ expenditure on goods and services acquired from Czech registered firms or firms registered for tax in Czech Republic. Production firms must meet cultural and production criteria (e.g. director or actors are Czech domiciles or are resident in any European Economic Area nation, film concerns an event belonging to Czech or European culture or history).

 

Another possibility would be to target specific categories of programming for further tax relief. For example, media reports indicate that the tax relief for animation has enabled the BBC’s CBeebies channel to increase its commissioning of animated programming aimed at children aged six and under. So, broader support for high quality children’s programming might be one possibility that could be extended.

 

Any form of support would require State Aid approval by the European Commission and would have to comply with the Communication from the Commission on State Aid for Films and other Audiovisual Works, which came into force on 16 November 2013 and the General Block Exemption Regulation adopted in July 2014.

 

6a What, if any, tailored support is needed for the creative industries in Scotland?

 

It should be noted that any changes to corporation tax is a key economic lever which would encourage investment and support jobs in the UK and Scottish economy. Analysis undertaken by the Scottish Government shows that a three percentage point reduction in the headline rate of corporation tax would, in the long term, increase the level of GDP by 1.4% and increase employment by 27,000 jobs. The use of this powerful policy instrument is one example of how a supportive business environment can be created to support sectors across Scotland’s economy.

 

 

On 1 January 2015, the rules for where VAT is charged for intra-EU supplies of digital services to non-business consumers changed.  VAT is now due in the country of consumption rather than in the country where the supplier is based.  Whilst the legislation will bring some important benefits in terms of protecting UK revenue, the Scottish Government is concerned about the seemingly disproportionate impact on small businesses in Scotland and the rest of the UK that are supplying digital products and services online. This is because of the additional administrative burden of registering for VAT where these businesses are considerably below the UK VAT threshold; the reporting requirement that this may mean for their UK sales and the potential for creating a tax liability.

 

Whilst the UK Government considers the advantages and disadvantages of changes to the reserved tax issues – it should be noted, there are other current opportunities being pursued by the Scottish Government to help realise the success of Scotland’s film and TV production industry more broadly.  For instance, broadcasting and the BBC Charter Renewal is an important issue. The Scottish Government and the UK Government recently agreed a Memorandum of Understanding which, for the first time, guaranteed a full role for this Government in the review of the Royal Charter to ensure the BBC better meets the expectations of viewers in Scotland. We are seeking more commissioning and broadcasting in Scotland to provide an enhanced platform for content made by Scotland’s film and television production industries. This would benefit our creative industries by enhancing the domestic demand for independent TV production and also providing a shop window for Scottish produced content to be marketed within the rest of the UK and internationally. Furthermore an enhanced production sector in Scotland would have a beneficial impact on our ability to attract, develop and retain skilled workers, from technicians to writers and artists.

 

Also, in the latest in a series of measures taken by the Scottish Government to support the Scotland’s screen sector to grow, we announced a £2m Tax Credit Loan Facility for the UK Tax Credit for the screen sector over 15/16 which was launched in April 2015. This facility was set up to assist production companies in Scotland to finance their projects more effectively through the period of productionAt the same time, we launched a £1m Screen Skills Fund over 15/16 to provide training and skills development opportunities. 

 

On 3 September, we launched a £1.75m production growth fund which will run over 15/17 and is expected to attract more large-scale film and TV productions to Scotland.

 

 

 

 

Conclusion

 

The Scottish Government believes that Scotland’s creative industries must continue to be at the heart of our continued economic development and growth.  Scotland is increasingly recognised for its modern, creative and innovative industries and this recognition builds on our reputation that we are a creative nation, strengthening both our society and our economy.  Scottish Ministers look forward to seeing the outcome of the Committee’s inquiry.

 

September 2015