In what is a very crowded field, Trump has announced one of his most unhinged policies to date. He intends to levy a 100 per cent tariff on films made outside of the US. Regular readers of this blog will know my opinion on tariffs (they’re terrible, will fail to achieve their aims, and ultimately make American households and firms worse off). The proposed 100 per cent tariffs are particularly bonkers given that they will almost certainly be some form of retaliation, not just on the US film industry but on other services industries. The US might not manufacture anything decent these days but it really is very good at services and so this will be a major hit to the US economy.
However, in between all the ramblings and idiotic policies, Trump kind of has a point.
He is right that other countries are luring film producers to their shores through incentives such as tax breaks and subsidies. There are also other measures in place. For example, if a streaming service wants to operate in a certain country then they often need to guarantee that it offers a certain number of shows made in that country or filmed in that language. This increases costs for these businesses and represents significant barriers to trade (which negotiators have to try and get removed).
One of the worst offenders for much of this is the UK. The government offers numerous grants, tax breaks, and other subsidies to film producers in order to encourage them to make their films in the UK. The rationale for this is that it will attract investment and create jobs. These are obviously very good reasons, we should all be pro-investment and job creation. However, the case for continuing these subsidies is still not convincing.
The UK is a hub for tv and film production due to the studios, equipment, expertise, and talent located here. As such, it will always be an attractive place for producers and so is more than capable of standing on its feet without support from taxpayers.
Moreover, any support for the film industry comes at the expense of households and businesses in other industries who are already struggling. Why should they be forced to subsidise the incredibly wealthy firms and individuals in the film industry?
While it is true that these subsidies have added some value to the UK, we do not know at what cost. There is obviously the direct cost in the form of explicit grants and the revenue which the government goes without due to the tax cuts. As discussed above it means that firms in other industries and households have to pay higher taxes in order to cover the shortfall and the government has less money to spend on public services and other projects. Who knows what these firms in other industries and households could have done if they were paying less in tax or which infrastructure projects the government could have funded. They could have been far more innovative and productive, attracted more investment, created more jobs, and stimulated higher growth. We just don’t. At the very least it means that the jobs created and investment attracted by the subsidies to the film industry have come at the expense of jobs in other industries and investment in other regions of the UK.
The film lobby in the UK will no doubt claim that we need to keep the subsidies flowing as if we don’t then producers will simply go elsewhere as other countries offer attractive subsidies themselves. As discussed above, this is unconvincing given the relative strength of the UK film industry. It is also part of the wider issue with subsidies. They lead to governments wasting more and more taxpayers’ money in order to outbid their rivals when this money would be much better spent elsewhere or simply not extracted from people and businesses in the first place.
If the government really wanted to support the film industry without wasting taxpayers' money then it should liberalise the planning system so that studios can expand and homes and transport infrastructure can be built nearby so that workers can afford to live in the area. It would also row back on its frantic drive towards Net Zero which is driving up energy costs for businesses in every industry. What is more, it should work with other countries to move towards a much more liberal copyright regime.
On a related note, it has been rumoured that the government is going to abolish DCMS. For non-UK readers this is the Department for Digital, Culture, Media, and Sport. It used to just be the Department for Culture, Media, and Sport but it added ‘Digital’ in a power grap and decided to not add another ‘D’ for some reason.
I am admittedly prejudiced against the department as I found them the second most annoying one to deal with when I advised Truss. The negotiations for the Digital Economy Agreement with Singapore were delayed as its officials attempted to muscle in and had lots of unreasonable demands (but that’s a story for another day). I have more legitimate arguments for getting rid of it.
I’ve written before that if you really want to bring government spending down then the State has to do far less. The fact that the government is handing out huge grants to cultural activities which it deems as ‘worthy’ would be an obvious example here. It’s obviously right that a few people in Whitehall are responsible for nationally significant events such as the VE Day celebrations taking place this week, but this could easily be done by mandarins in the Cabinet Office, the Ministry for Communities and Local Government, and councils.
Perhaps even more importantly, given that it deals with ‘Digital’ and ‘Sport’ it means that a relatively unimportant department is responsible for two of the jewels in the crown of the UK economy, namely digital services and the Premier League. Given their importance to the UK it seems bizarre that they are ‘dealt with’ by this middling department with a hodgepodge portfolio.
Digital Services and the Premier League are not in safe hands at DCMS. The country almost lost a huge chunk of its digital services/startup ecosystem when Silicon Valley Bank went bust due to the incompetence of the Bank of England and it only survived due to the efforts of HM Treasury and the excellent Startup Coalition - something you would have expected DCMS to be all over. In fact it seems determined to regulate away one of the country’s most successful industries while also thwarting the government’s trade negotiations. It’s a similar issue with the Premier League given the government’s desire to regulate football.
These industries should be the responsibility of serious departments where their importance to the UK economy is recognised and are given the respect they deserve. Alternatively (and preferably) they would just be left alone by the government and allowed to get on with attracting investment, creating jobs, and driving growth.
The UK government should be incentivising firms to invest and set up shop in the UK. However, this should not come at the expense of taxpayers. It should treat all industries the same for tax purposes and let them – and households – keep more of their own money and spend it as they see fit. Trump’s policies are unhinged but the upside is that they could hopefully shine a light on the absurd and unsustainable subsidy schemes for the film industry around the world. The government should stop subsidising the film industry and close down DCMS while it’s at it.
Thanks as ever for reading!