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Theatre Tax Relief

Volume 828: debated on Thursday 9 March 2023


Asked by

To ask His Majesty’s Government what plans they have to maintain Theatre Tax Relief at the higher rate of 45 per cent/50 per cent for the next three years; and what assessment they have made on the impact of that relief in facilitating growth and investment in the sector.

My Lords, at the Autumn Budget 2021, the Government temporarily increased the headline rates of theatre tax relief to 45% and 50% in recognition of the impact of the Covid-19 pandemic on the sector. The Government acknowledge the concerns of the industry about the upcoming taper of the rates in April, and we will keep this matter under review.

My Lords, when I tabled this Question, I hoped that I would be helping the noble Lord, Lord Parkinson, in his annual debate with the Treasury over tax levels. The theatre tax sector generates nearly £2 billion extra value added to local economies. Does the Minister agree that reducing theatre tax relief at this stage would be premature and harm the sector’s recovery? What other forms of support does she envisage providing, given that audiences to theatres have recovered to only 73% of pre-Covid levels?

My Lords, I should remind noble Lords that the level of tax relief will remain enhanced from April at an elevated rate of 30% or 35%. I know that my noble friend Lord Parkinson and the Secretary of State have been engaging with the sector carefully to hear about its ongoing challenges and, as the noble Lord has said, they have fed that back across Whitehall and to the Treasury.

My Lords, the theatre tax relief has been a resounding success, and the higher rate has resulted in one US producer increasing their investment in UK theatre by 250%. We all have a duty to make my noble friend Lord Parkinson as happy as possible, so will the Minister acknowledge that administering the tax relief costs a great deal of money? Will she either provide a special grant to the British Film Institute, which administers the film, TV and audio-visual tax credit, or introduce a levy on the film tax credit—a very small levy—to cover the institute’s significantly increased cost in administering it so well? She will make our noble friend extremely happy if she agrees to that.

My Lords, there are two different tax credit systems, as I understand it: one for film and audio-visual and the other for theatres. Both have huge value to the sector and also to the sector’s contribution to our economy. We are committed to ensuring that they continue to be able to contribute in that way. We want to make the system as simple to operate as possible, and all suggestions for doing that are gratefully received.

My Lords, the creative future report from the Communications and Digital Committee of your Lordships’ House, on which I sat until recently, called on the Government to benchmark the UK’s creative industry tax-relief schemes against those of other countries that are now offering similar schemes but with more attractive rates. This includes a new theatre production tax credit from New York, which is a direct competitor. What assessment have the Government made of the threat that this kind of international competition presents to the UK’s continued pre-eminence in the creative industries?

The noble Baroness is right that we should think about our international competitiveness. Tax reliefs for the cultural sector are not actually that common, but she has identified one in New York. We have looked at our scheme against that and, overall, our scheme is more generous than the New York one. We are confident that it provides great support for our theatres, not just within the UK but as international competitors as well.

My Lords, given that the Minister has mentioned it, may I extend the Question to cover the Government’s attempt to modify HETV tax relief for all audio-visual productions? I appreciate that this is out for consultation, but does she agree that it would be a mistake to increase the minimum expenditure threshold for HETV relief to above the current £1 million per hour, as to do so would threaten the production of many low-budget domestic British dramas, comedies and documentaries? Does she acknowledge that, on this basis, even “Happy Valley” might never have been made? Will she either confirm that the Government have no intention of making this change or, if they are proposing to do so, agree to have an impact assessment before the decision is made?

My Lords, as the noble Lord has noted, that proposal is out for consultation. As part of a package of reforms, we are looking at reviewing the £1 million per hour minimum expenditure threshold and considering whether it should be increased to reflect current production costs. However, I assure the noble Lord that, in considering these different reforms, the Government remain committed to ensuring that the final package of reforms best serves the need of our audio-visual industry.

My noble friend Lord Bassam referred in his question to changes in audience behaviour since the pandemic, which has had a very serious impact on the ability of performing arts in particular to plan confidently. Audiences appear to respond to strong, novel programming, which is where the highest initial risk tends to lie. Has the Treasury made any assessment of the potential loss to the Treasury if performing arts organisations and others start to decrease their investment, thereby damaging the potential they have to draw audiences, which would then impact Treasury revenue?

My Lords, the points that the noble Baroness makes are entirely those that we would want to consider in looking at the issue. She is absolutely right about the value and the costs when it comes to the production of these shows, which is why the tax relief is focused there. She is also right that they can bring huge economic benefit, including through exports, attracting visitors to the UK and productions going on the road. Those are the kinds of things that the DCMS and the Treasury will consider when looking at the tax relief.

My Lords, there are concerns similar to those of the theatres in the visual arts sector concerning the museums and galleries exhibition tax relief. The Treasury and the noble Lord, Lord Parkinson, will be aware of this, having received the letter signed by many museums’ and galleries’ organisations which asks for that relief to be extended. It has been not just helpful, but vital to the sector, not only for the larger museums, but smaller galleries and emerging artists outside London. If the Government want to see this sector grow across the whole country, they should seriously consider maintaining this tax relief, and at the current level.

The noble Lord is right that the theatre tax relief is not the only cultural tax relief that we have. The Covid support that was put in place to extend the levels of that relief cover those areas as well. I know that my noble friend Lord Parkinson has been listening very carefully to the representations made by that sector and passing them on to the Treasury.

My Lords, my noble friend will be aware of the value in present circumstances of tax measures that can boost growth and enhance tax receipts. In that respect, will she and her Treasury colleagues look positively at representations from the video games industry on the extension of the video games tax relief, which is estimated to enhance growth to the extent that tax receipts would rise by more than £200 million a year?

My Lords, the Government keep all taxes and tax reliefs under review. My noble friend is right about the value that the video games industry brings to the UK. The Chancellor has identified our creative industries as a key driver to our future growth, which is what we have heard in the range of different questions from noble Lords today.

My Lords, the creative industries are one of the most successful industries in the UK. Is there not a lesson in that the more support the Government give them, the more successful they are? Do we need a cross-party approach to this, so that all departments contribute in the way that they do, for example, in Ireland?

I absolutely agree with the noble Lord about the contribution made by the creative industries to our economy and society. That is why the Government put such world-leading support into them. I am sure that we welcome the cross-party approach of Labour supporting the Government in this area.

My Lords, is not my noble friend much encouraged by the great consensus that we have seen this morning that cutting taxes results in increased investment and growth?

I am greatly encouraged by the support that this House has offered to the creative industries sector. When we look at tax rates, we need to look at individual sectors and the individual response that those sectors have. I can reassure my noble friend that we are committed to having a competitive tax regime that stimulates growth and attracts businesses to the UK.

My Lords, it is the case that theatres and all artistic venues need artists. One group that has some support from taxpayers is the BBC. Will the Minister condemn the decision by the BBC to cut the BBC Singers, which is such a tragedy for the arts world? I would like to support them here, just before the end.