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Going Soft.

Posted June 9th, 2013 by Ben

I’m not sure how much it costs to get an MP to ask a question in Parliament these days, who knows, perhaps some of them still do it of their own volition… Still, Conservative MP Penny Mordaunt has asked her colleague Ed Vaizey about the level of recoupment achieved by the UKFC before it closed. Doubtlessly, being a question from one of his own back benchers, Ed was really reluctant to come forward with the answers but thankfully the searing edge of our parliamentary democracy left him no choice but to reveal numbers that suggest his government did the right thing in closing down the UKFC and transferring its powers to the BFI.

As with most statistics concerning the UKFC these can be read in various ways, all of which seem to basically say the organisation was a massive failure and everyone involved in it was literally satan. All of them. This is an odd mathematical quirk of UK film stats which doubtlessly will soon be reapplied to the BFI. But let’s look at the numbers…

At first glance the figures show that almost none of the films supported by the UKFC repaid their investment in full and that almost all of them repaid absolutely sod all. So at first glance the UKFC invested very badly in bad films that took no money. Boo to the UKFC.

Adam Dawtrey who compiled the numbers gives a fairer assessment. After all, as he points out, these numbers are about recoupment of the investment, not box office return. The fact that, for instance, “In The Loop” is down as a zero recoupment doesn’t mean that the film was a bad investment and a failure – it just means that the producers have kept all the money and not given any back to the UKFC. Here we hesitate. Does this mean that UK film producers are shits who don’t give back public money? Who are we supposed to be booing? Well, the then culture secretary Jeremy Hunt was clear about this – any money repaid would simply have lined the pockets of the overpaid staff of the UKFC. So hoorah to the producers for not paying it back and boo to the UKFC.

Dawtrey is again nicely sanguine on this point though.

“…there was a reason why the UKFC execs were paid so well. Getting money back from tricksy distributors isn’t a job for amateurs. Without the sleuthing skills of the UKFC’s debt collectors, perhaps only half of that £8m would have been found.

There are already whispers that the BFI isn’t quite so hot on the trail. But it needs to be. The acid test will be how much of the King’s Speech income it can claw back from the Weinstein Company. It’s unlikely to be a mission for the fainthearted.”

We’re still not that comfortable with debt collectors as heroes but nevertheless that’s a muted hurrah for the UKFC and a murmured boo for the BFI. Though British film producers come out of this as a rather shady bunch. From these statistics we appear to be uncomfortable middle men, stood very still, hoping that no one notices we’re still holding the cash.

Armando Iannucci… for some reason hasn’t paid back the £500k given him by the defunct state film funding body. I mean, what a bastard. He’s like a failed manbank draining our nation of joy.

But let’s just think about what public funding actually is. The point of state funding is to identify something important to us a nation that nevertheless cannot stand straight in the global market place. You know, like Lloyds bank. The key point is that when the state funds something the “investment” is crucially different from when a private individual or corporate body invests in something. Though pleasing to draw a parallel between the actions of a state and those of a household it is very bad economics. The money given to the film industry by the government was never going to come back to the government coffers except through an increase in the tax bill of Daniel Craig. To judge the fitness or otherwise of the UKFC by examining the recoupment of its loans is like sifting through horse shit to work out who will win the Grand National.

The real problem faced by the UKFC was that it’s creation was the triumph of political dogma over economic reality. Using public money to support one of our most globally successful creative industries makes sense – it secures jobs and inward investment. If nothing else the public support of my industry has secured a great deal of US money has poured through the economy as the Hollywood studios come over here to make their big explodey films about magic and guns.

Sadly the nature of this industry means that sooner or later the taxpayer had to foot some of the bill for films it didn’t enjoy watching. This, apparently, is much harder for the taxpayer to get along with than the idea of their money going towards killing arab kids somewhere in the mountains. So the wheeze was to create the UKFC which would “act like a studio”, supposedly ensuring that there was some creative and commercial control over where the taxpayer’s money went.

This sounds smart, you take the US business model, which clearly works for them, of having well paid men in glasses make financial decisions about films based on their commercial potential and you attach it to the necessary but politically uncomfortable act of supporting our home industry with a truck load of public cash. Except, in so doing you create a schizophrenic organisation that is supposed to act like a hard nosed commercial player whilst all the time being nothing more than a government bureaucrat. Rather than enabling our industry to have straightforward access to state support the government chose to lumber them with another argumentative and meddling investor that has none of the clarity and financial purpose of a real investor. It’s like putting a dog collar on a cat and calling it a vicar – delightful and well meaning but not fit to read your funeral rites.

Those “loans” were only loans because to call them anything else was politically difficult. Why should they be paid back? To support the creation of other films? Surely if you want to do that then the money is better kept by the people who have just made the successful film. I mean fair enough The Kings Speech paid back, I guess they didn’t know what else to do with it, by why did Bright Star pay back 81%? Shouldn’t Jane Campion have had that to make her next film? Of course you want to continue supporting new people to come through… but that’s what public subsidy is for. If you give it once and let them keep it then they don’t have to keep coming back. Expecting the “loan” to be paid back just keeps the producer on the hook to the state which, surely, is the direct opposite of what you want. If you’re looking to use these figures to attack the UKFC then surely the problem is that so much money was given back rather than being kept by the people who knew how to use it best.

The Kings Speech.

Oh fuck fuck bugger – you mean I gave back £1000k and it was all spent on firing everyone and moving the office to the Southbank? Oh for fucksake!

The real question is not whether the UKFC was a success or a failure. It’s not even whether the BFI is going to do a better or worse job. The real question is what does our industry actually need from the government? Support? Yes, not as much as Lloyds or RBS but yes, it does still need and deserve support from the public coffers. And the best way of delivering this support is through the existing tax system. Currently the Film Tax Credit offers a 20% repayment of all spend on film production in this country. It’s available to anyone making films in the UK and no one complains that their money is being misspent because there is no one person individually responsible for making the decision. Extend that same tax break to pre-production and development costs and we will take on the world…

  1. Darren Bender

    Hi Ben,

    A hugely insightful article but there is one bit of (doubtless inherited) terminology in it that may mean your excellent commentary is based on wrong assumptions. Using the word ‘producer’ to refer to whoever is responsible for repayment of a UKFC investment is misleading and likely to be unlikely.

    As a receiver of a UKFC investment (well under the 300k threshold of this newly published list) I was required (as I have always with substantial amounts of public money) to utilise a collection agency. A collection agency (for those who don’t know them) is an accounting organisation that for a small fee is contractually the receiver of all revenue for the film. They collect the revenue and then share it out according to the investment agreements.

    The investment agreements set out whoever has invested in the project and what the recoupment schedule is i.e. who gets their investment first and who gets what share of any profits and when do they get them. Since producers are generally at the very dry bottom of the ‘waterfall’ (recoupment schedule and the profit share) I doubt that they are sitting on UKFC money.

    What you are tremendously right about is that producers should have been permitted to reinvest their UKFC investment only into the funding of their next developments and / or productions, thereby increasing their share of each future project, this would have enabled them to build viable production businesses, no doubt secured on aspiring for ever larger audiences and the sort of creative quality that gives a film ‘legs’ or a ‘long tail’. Alas we have still yet to see this most sensible of all funding initiatives adopted.

    cheers
    db

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