Government Intervention

What exactly is wrong with this?

In case you haven heard, last year Star Wars was released. The owners of the brand, Disney, are reported to have “got” £31 million from the UK Government last year. Of course they didn’t, they just got tax relief, so the correct way of putting it across would be that the Government didn’t take millions of pounds from a company that made a very successful and enjoyable film.

POLITICO strangely gets this all wrong, with “the government’s contribution to The Force Awakens” particularly standing out; no they haven’t contributed, they just haven’t taken tax from the first 25% of £20 million, and 20% afterwards of production costs. It really isn’t like the British government is paying for lightsabers, it it?

One of the reasons that Disney decided to make the latest Star Wars in the UK was of course that they weren’t going to be taxed the full amount on the production. But I can’t see anything really wrong with the UK government offering tax incentives for films to be filmed. Obviously it would be better for lower taxes all around, but this is demonstrating again that incentives in the right conditions work.

I am pretty skeptical of multiplayer effects, but the claim is that it generates £12 per pound offered in a tax incentive. And, like with google, just because the production company is paying less tax than the high minded but typically ambiguous “fair sharers” would like does not mean that tax isn’t being paid overall. There are plenty of very well paid people who pay income tax here, and without such a vibrant film industry they more than likely would not be employed here, and therefore not pay tax. Nicht gut.

The trend towards conflating Government support with lack of Government intervention makes me very uneasy. Those who tend to point it out (not having a go at POLITICO here because they aren’t in this instance) also seem to like arguing for more Government intervention in the economy with the cry of ‘aha! But it was that clever State led industrial policy what did it.’ No, it seems that a lack of intervention and regulation can be a recipe for success. Who would have thought it…