MP debate: UK game tax breaks

A string of Labour MPs still hope to bring the agenda of UK game tax breaks to the coalition government.

Yesterday in the House of Commons, those MPs most sympathetic to the British games industry debated the issue with Conservative MPs and Exchequer Secretary David Gauke.

The full transcript can be found below.

David Hanson (Labour)

As the House will be aware, my hon. Friend Ms Eagle referred on Second Reading to the fact that we want to bring forward a provision on tax relief in order to help to support the video games industry.

Although, undoubtedly, new clause 1 would not do that in every respect, I want to put it before the House, so that we can have an in-principle debate about video game industry tax relief.

The new clause provides an opportunity for the House to consider enhanced relief based on UK expenditure on video game production.

The new clause suggests that we might consider qualified tax relief for the video game industry, and that it should be based on strict criteria: the video game must be for commercial release; it must be a British video game, assessed on the basis of a points system; and it must meet a 25% UK expenditure threshold, whereby 25% of the total expenditure on the production and development of the video game is UK expenditure on goods or services.

We intended to look at that issue, and I would have tabled a much more detailed new clause, but the advice was that we could not.

I hope that I have, however, tabled sufficient proposed changes for the Government to consider bringing back at a future date, or supporting the principle of, tax relief for this vital sector in the United Kingdom.

The video games industry is a real success story for British industry, and we look to support it in detail. As I am sure that the Minister is aware, research from TIGA, which represents the gaming industry, shows that over a five-year period games tax relief could create or save about 3,500 graduate-level jobs, secure £450 million-plus in new and saved development expenditure, and generate about £415 million in new and saved tax relief.

I hope that it would do so in a way that ensures that the cost to the Treasury amounts to about £192 million over five years, which would be more than paid for by the jobs and investment, and encouragement to the industry, that that would develop in due course.

My hon. Friends the Members for Dundee West (Jim McGovern), for Liverpool, Wavertree (Luciana Berger) and for West Bromwich East (Mr Watson) have been very vocal in supporting such a tax relief. I hope that the Minister will consider it in principle, so that we can begin to develop a cross-party consensus in due course.

John Redwood(Conservative)

If it works for this industry, why does it not work for others? Why is the right hon. Gentleman limiting it to this one industry?

David Hanson (Labour)

Our proposal is based on an existing tax relief for the film industry, which has been very successful in helping to generate extra revenue for that industry and keeping production in the United Kingdom.

I am sure that the right hon. Gentleman will be interested to know that the Under-Secretary of State for Culture, Olympics, Media and Sport, Mr Vaizey said this on 13 April – I accept that that was in the middle of an election campaign, so we will take these words as being from that particular time:

"We are committed to a tax break along the lines of the video games tax credit. We have been calling for tax breaks for the video game industry for the last three years."

In the spirit of cross-party co-operation, Mr Foster, who then held the esteemed position of Liberal Democrat shadow spokesman for Culture, Media and Sport-the Lib Dem spokesmen are now all subsumed into one entity-said:

"Liberal Democrats support the introduction of a Games Tax Relief. Following consultation on the details, we would implement the Relief as soon as possible."

At that time, my hon. Friend the Member for Wallasey, who is shadow Chief Secretary, the then shadow Culture Minister, who is now a Minister, and the then Liberal Democrat spokesperson supported this proposal, as did I.

Since then, however, it has vanished without trace-until today’s debate.

Mr Redwood may oppose tax reliefs generally. However, such a relief has been proved to work in the film industry to date. Unfortunately, the Chancellor of the Exchequer said in his Budget:

"we will not go ahead with the poorly targeted tax relief for the video games industry."-[ Hansard, 22 June 2010; Vol. 175, c. 512.]

I want to test with the Minister whether that is an in-principle opposition to tax relief for the video games industry.

If not, is his opposition based on a poorly designed scheme by the previous Labour Government or on poorly targeted suggestions in today’s proposals? Is there, in principle, room for discussion, so that it would be possible for him to bring back, at some point, a tax relief that meets the objectives of the hon. Member for Bath, the Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage and ourselves, and that would, I hope, help to support the video games industry?

John Redwood(Conservative)

Just to clarify the point, the right hon. Gentleman should know that I believe that lower tax rates result in more revenue. I am delighted to see that he is now a recruit to that cause, but I suggest that he should not limit it to one industry.

David Hanson(Labour)

We are happy to consider on a case-by-case basis whether tax relief helps to generate employment and earn business and crucially-I think that this is the right hon. Gentleman’s point-to maintain that business in the United Kingdom rather than transferring it overseas. The film tax credit has proved that that can be the case, and I suggest in the new clause that we consider it for the video games industry.

Jim McGovern(Labour)

My right hon. Friend mentioned the British film industry. Is he aware that figures provided by TIGA, which represents the computer games industry, suggest that the cost of a tax break for computer games would be £55 million, whereas the film industry already gets a £110 million break, even though the revenue generated by both is much the same?

David Hanson(Labour)

Indeed, and TIGA-my hon. Friend says "tiger"; I say "teega", but we both mean the same thing-has estimated that we can make savings to the Treasury by investing in a tax relief up front and keeping jobs in this country. That is the crucial point.

Stewart Hosie(Scottish National Party)

The right hon. Gentleman was right to mention the Chancellor’s argument that the proposed tax break was poorly targeted, but he will be aware of the evidence given to the Scottish Affairs Committee by Edward Troup of the Revenue. He said:

"I am not sure I would say it was poorly targeted. It was targeted at the video games industry…it was perfectly designable if we had continued with it",

and so on and so forth. Does not that experience from the coal face, from inside the Revenue, directly contradict the argument that the Government used to do away with the plan?

David Hanson(Labour)

The hon. Gentleman has effectively read out the next section of my speech. I have indeed examined what was said in the Scottish Affairs Committee. The Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage, said at the same meeting on 20 October:

"It may be that we can revisit a video games tax break in the future."

Was he speaking for the Department of Culture, Media and Sport or for the Treasury? I presume that the Chancellor was speaking for the Treasury in ruling out the idea, but three months later his Minister in the DCMS said that we should consider it in future.

I do not necessarily wish to press the new clause to a Division, but I have tabled it so that the Exchequer Secretary can clarify whether, in the next 12 months or two years, he can meet the objectives that my hon. Friends the Members for Dundee West, for West Bromwich East and for Liverpool, Wavertree, and the hon. Member for Dundee East, have championed so strongly.

Tom Watson(Labour)

The important point about the new clause is the unique position of the video games industry. It has the potential for explosive growth and to create far more high-level, highly paid, highly skilled jobs in the UK.

Yet its competitors, with a fiendish interpretation of international competition rules, are picking off the very best designers and developers from UK production shops one by one.

The industry worked long and hard with the Treasury to build a robust model for a specific rate to allow the industry to grow over the coming years. That is why hon. Members are so concerned-many jobs are at risk if the new clause is not accepted.

David Hanson(Labour)

My hon. Friend makes the important point that those are high-skilled, highly technical jobs that will bring investment to this country. They are intellectual capacity jobs that are helping to grow the areas of our international markets that we need to grow.

To follow up on what the hon. Member for Dundee East said, Edward Troup, the managing director of budget, tax and welfare at the Treasury, said to the Scottish Affairs Committee:

"There would be issues; there would be boundary issues,"

but crucially, he continued, "but it would work." I am not trying to make political capital out of the matter, but if it is proved that the tax break would work-meaning that it can be applied, can deliver, will keep jobs in this country, will grow business and will help resources be reinvested in the British economy-will the Exchequer Secretary be willing to accept the principle and introduce an appropriate clause in some future Finance Bill?

If it is found that the tax break would work but the Exchequer Secretary will not introduce it, I will have to presume that he is not interested in doing so, rather than that he is concerned about its applicability and workability. If so, he is on an entirely different page from the one that the Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage was on in April, that the Chancellor was on before the general election and that the hon. Member for Bath, who is part of the coalition, was on at that time.

Charlie Elphicke(Conservative)

The right hon. Gentleman makes a perennial point that shadow Ministers make, to which actual Ministers presumably perennially say no.

May I point out to him the table in proposed new section 1216Q of the Corporation Tax Act 2009, in new schedule 2? It mentions points being given for at least 50% of a game’s production budget being incurred in the UK, and proposed new section 1216R states what the percentage of UK expenditure has to be. Will he confirm that that does not conflict with any European law provision?

David Hanson (Labour)

I have taken advice in drafting the new clause, and my advice is that it is workable and applicable, although I have had to leave out certain aspects.

My purpose is not to force this particular model on the Treasury, but to use the new clause as a debating point, so that the Treasury can respond to the principle and decide whether this is a good proposal that will help matters, bring investment back to the United Kingdom and be supportive. I would, potentially, be happy to withdraw the new clause at the end of the debate, and I am happy to listen to what the Minister says, but I want to get to the nub of the issue.

The Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage, the hon. Members for Bath and for Dundee East, who speaks for the Scottish National party, my hon. Friend the Member for Dundee West and Labour Front Benchers all think that some form of games tax relief to help maintain the industry in the United Kingdom would be a good thing.

All I want today is for the Minister to say, "Yes, I agree with that general principle. Over a period of time, I will look at how we make this proposal workable and how we bring it back in a future Budget or Finance Bill."

Indeed, he could say today that he is happy with the proposals and that the Government will look at them again in the near future in whatever format they choose. It is important to get that on the table.

Dr Richard Wilson, TIGA’s chief executive, has set out his view that we will potentially lose jobs. He said:

"the UK is losing out on jobs and investment because of the absence of Games Tax Relief. High-skilled jobs could be created in Manchester and Warrington. Instead they are being created in Montreal."

He says that that is particularly because our

"key competitors, particularly Canada, have tax breaks for games production. The UK does not."

Others who comment on these matters, such as Danny Bilson, THQ’s vice-president for core game brands, has said:

"The talent in the UK is extraordinary…We have a studio up in Warrington that’s an excellent studio…but I’m sorry, it’s…about money at the end of the day."

We need to ensure that we have the support for such things. That is the reality of the market. World-leading publishers recognise that we have an asset, which it has taken years to build up and which is worth hundreds of millions of pounds, but it will go abroad if we do not compete on the same level as our Canadian colleagues.

In France, there is a 20% tax reduction for video games, and tax provisions in Canada have driven up staff numbers by 43%, but in the United Kingdom we have seen the head count start to decline over the past few years.

I do not want to go into great detail or to take up the House’s time. I simply want to tell the Minister that there is real scope for these proposals. There is scope to develop the UK film tax credit model and to use it for the UK video game tax model. We can ensure that we help to grow the sector, and we can meet the commitments that colleagues made during the general election campaign.

I tabled the new clause so that we could hear whether the Minister is still of the view that there is no scope for such proposals or whether he could look at the issue in detail and bring back proposals in due course. I commend the new clause to the House.

Mark Field(Conservative)

I have spoken on many occasions to leading lights in the video games industry, and they outlined many of the concerns that have been expressed by the hon. Members for Dundee West (Jim McGovern), for Dundee East (Stewart Hosie) and for West Bromwich East (Mr Watson).

There is a risk that a significant amount of business is leaving these shores because of a perception, and indeed the reality, that there is unfair tax and regulatory competition from further afield.

One of my concerns, which I expressed before the election to leading lights in the video games industry, is that trying to emulate the film tax credit is not necessarily the right route down which to go.

Back-Bench and Front-Bench veterans of Finance Bills going back a decade or more-you are one, Madam Deputy Speaker, from your time as a Minister, as am I from my time in opposition-will know of the concern that the film tax credit has had to be updated almost annually, because of the clear abuses and unintended consequences resulting from it.

There was a sense that although the film business in this country benefited from it, there was a significant through-flow of cash that was not in the interests of either the Exchequer or the high-quality products of which our film industry has been rightly proud in decades gone by.

Stewart Hosie(Scottish National Party)

Notwithstanding the hon. Gentleman’s points about the film tax credit, I am sure that he will understand the business model around which the video games industry operates.

A large amount of cash is spent in the development of games, but revenue drops off in the run-up to a new hardware offering or console being developed. The difficulties that the sector faces are exacerbated by the regular new hardware offerings.

Does that not make a stronger case for some sort of assistance?

Mark Field(Conservative)

I accept that. There is also little doubt that we have some tremendously high-quality people working in this business.

I must say, in parenthesis, that one difficulty is that hitherto we have had to import far too many such people from beyond these shores. I know that our university media studies industry is much discredited, but those media studies courses that are linked to the video games industry in particular often ensure that we get some of the brightest and best of the home-grown talent in our universities entering the industry.

I take on board the concerns of Mr Hanson, given that the issue before us has been in the ether for years. I would prefer not to rush into anything, although I hope that my hon. Friend the Minister will take on board the deep concerns expressed today so that we can come back, perhaps during next year’s Finance Bill, with a workable model based on the proposals before us.

I would like to put in a word not just for the video games industry, unique though its interests are in the minds of those who run and work in those businesses, but for the animation industry. It is a related industry within the media sphere, and faces many of the problems expressed by the hon. Member for Dundee East and businesses in the industry.

The animation industry is deeply concerned that it is losing some of its brightest talent, and feels that-this is felt not just in the animation sector-it is facing unfair competition not only from the Canadian and French models, but from Ireland and, dare I say it, Scotland.

It feels that it is losing out to a large degree. I would therefore like to see a clause that brings the video games industry, the animation industry and all these other industries under a single protocol. Such a protocol could operate well and effectively, so I hope that the Treasury will consider one in next year’s Finance Bill.

Jim McGovern(Labour)

The hon. Gentleman has indicated that part of the computer games industry is based in his constituency-in fact, he seemed to indicate that the industry originated there.

Does he agree that a change of name or title is required? When people hear "computer games industry", they think of young lads between 15 and 30 sitting in front of a computer screen playing "APB" or "Grand Theft Auto", when in fact, as people who have visited Abertay university in Dundee will have seen, it is used in medical research, construction and architecture. Perhaps we need a change of focus, rather than continuing to call it the "video games industry".

Mark Field(Conservative)

The hon. Gentleman is right to make that important point, although it also raises the question of how we couch such a new clause and schedule in a future Finance Bill to ensure that it takes on board an industry that we want to encourage rather than see go much further afield.

I am not a young lad of 15 or 30-or even of 46-so the industry has passed me by, but there is no doubt about the enthusiasm of the companies operating in this sphere.

One of my biggest concerns is that all too often those companies have to employ programmers from eastern Europe and other parts of the world in order to get the relevant level of expertise. That is a regrettable state of affairs. None the less it is undoubtedly a thriving and enormous industry, in which we are cheek by jowl with the Japanese in terms of our expertise and export potential.

I implore the Minister to take our concerns seriously. Now would not be the time to accept a proposal such as the one before us, but I hope that he will give sufficient comfort to Opposition Members to ensure that they do not press the matter to a vote. However, the issue is worth discussing at length today.

Sheila Gilmore(Edinburgh East, Labour)

One thing that I have not understood-I have not understood it from either the debates that we had in the Public Bill Committee, on which I served, or the responses to the various parliamentary questions that have been asked about the video games industry and tax relief-is whether the objection is to the detail of previous proposals or this proposal, or whether there is a more fundamental objection about giving such a relief at all.

At times, it seems to be suggested that it is not appropriate to give such a relief, but it would be extremely helpful to know which it was.

If the issue is the detail or exactly how the proposal is to be implemented, that could be discussed further. However, targeting such an industry-or indeed any industries-might be felt to be inappropriate. In one answer given in the Chamber last week, the suggestion seemed to be that a lower rate of corporation tax generally would be sufficient, without targeting specific emerging industries.

However, a tax relief is important to a growing industry in that it allows it to get off the ground and develop in the way that it needs to. People have already spoken about the cash-flow difficulties for sectors such as the video games industry, so it would be helpful if the Minister could clarify where the Government are on this issue and what their future plans might be.

John Redwood(Wokingham, Conservative)

I am delighted that the Opposition have highlighted the example of the video games industry. However, I fear that it is only one example among many of how we are at risk of losing talent, enterprise, jobs and business development in a number of areas because our rates of taxation are now not internationally competitive.

It is interesting that the Opposition, who do not normally favour lower rates, have identified lower rates-or a lower tax imposition-as the answer in this case.

I hope that they will think on these things more widely, because the combination of a high marginal rate of income tax and what is now quite a high rate of corporation tax by international standards is not a good combination in an intensely competitive world, where there has been a shock to overall demand and where we are having to fight for our commercial lives in world markets.

From my point of view, there are a couple of problems with the proposals before us. The first is that going for 25% for British content is a low ambition.

I would have thought that one would want a rather higher rate of British content if we were formulating some special treatment for the industry.

There is also a problem with concentrating on the profits that a company generates, because some companies will be small businesses with talented entrepreneurs. They might have just one good game in them that earns them an awful lot of money in a short space of time.

That is when high marginal rates on apparently high earnings-they become genuinely high earnings where it is possible to sustain them-could become quite an imposition, because those entrepreneurs might get caught in the year or two of their success, but find afterwards that they are no longer able to achieve that.

The issue is therefore not just about corporation tax or profits tax; it can also be about income tax. I hope that the Minister will reassure us by saying something about how he sees our overall tax regime developing, in both corporation tax and income tax, because we have a general problem and we need to show the way to lower rates as quickly as possible in this very competitive world.

I would also repeat to my hon. Friend the simple point that the evidence from the American and the British experiences is that when countries have been bold enough to cut rates on enterprise, income and profits, they have usually found their revenues increasing. It is quite obvious that the Government need a lot of extra revenue, so I would recommend that proposal to him.

David Gauke(Exchequer Secretary, HM Treasury)

New clause 1 and new schedule 2 seek to provide additional tax relief for companies producing video games. The measure was announced, but not implemented, by the previous Administration.

As the Chancellor said in the emergency Budget statement, this tax relief for the video games industry is poorly targeted, which is why we have decided not to introduce it.

The United Kingdom’s video games industry is recognised as a world leader, having produced hugely successful games such as the "Grand Theft Auto" series, and has led to innovations in industries as diverse as defence and health care, as Jim McGovern pointed out.

All that has been achieved without specific Government intervention for the sector through the tax system.

We estimate that the relief proposed by the Opposition would cost some £40 million to £50 million a year-that was the costing for the previous Administration’s proposal-and we believe that without strong evidence of a market failure in the games industry, it is difficult to justify spending that amount of money on such an intervention, particularly given the state of public finances.

Jim McGovern(Labour)

At a recent meeting with the Minister, I told him that before the Budget that announced the intention to promote tax breaks, there were at least six ministerial visits to Dundee, which included the then Secretary of State for Scotland, Ministers from the Department for Business, Innovation and Skills, and the Department for Culture, Media and Sport, and the Chancellor.

There was a lot of consultation before the then Chancellor eventually announced the decision on tax breaks. Will the Minister tell the House how many visits were made to Dundee before this Government’s decision to withdraw them?

David Gauke(Exchequer Secretary, HM Treasury)

The circumstances facing us in the run-up to the June Budget were such that we wanted to introduce a more fundamental reform of corporation tax. In that Budget on 22 June, we announced a reduction in the main corporation tax rate from 28% to 24% over the next four years.

In doing that, we wanted to show a sense of direction, to ensure that Britain was open for business, and that we were providing lower rates. Our approach is to have a broader base but lower rates rather than targeted intervention, unless there is clear evidence that intervention is the right approach.

Stewart Hosie(Scottish National Party)

The Minister is being generous. He is paraphrasing the Green Book, which says that the Government will

"prioritise spending which supports private sector growth and investment".

Various forms of those words have been used since his party and the Liberal Democrats took office. Surely tax breaks that would cost perhaps £195 million and would deliver £415 million in tax receipts are precisely the sort of investment in precisely the sort of industry that would meet the Government’s objectives.

David Gauke(Exchequer Secretary, HM Treasury)

We have heard the figures quoted by TIGA, but we do not accept the validity of that analysis because we feel that some of the assumptions underpinning those estimates are erroneous.

The research commissioned by the industry implicitly assumes that the investment incentivised by the subsidy is entirely additional to the UK economy.

In reality, it is likely that the relief will displace investment from elsewhere in the economy, so the net impact on total UK investment could be limited. For example, it is possible that such a tax subsidy would divert investment from more productive sectors to the detriment of the productivity of the UK economy as a whole.

If Opposition Members are making the case that lower taxes always result in growth in the economy, I would listen with great interest and it would-my right hon. Friend Mr Redwood made this point-be an interesting conversion to supply-side economics.

I do believe, however, that the strongest economic case can be made for lower tax rates as a whole, across a broader base, as opposed to targeting some sectors, unless there is a strong case that there is some kind of market failure. We have not yet heard such a case being expressed in a way that we find persuasive, and that is why we decided not to proceed with video games tax relief.

That is not to say that we do not wish to support British businesses-far from it; we do. It is vital that we have a strong private sector to drive the recovery, but we must support that growth in the right way.

In the emergency Budget, the Government announced a major package of reforms to the business tax regime with the aim of creating the most competitive corporate tax system in the G20.

Mark Field(Conservative)

The Minister has twice referred to the concept of market failure. Did not Stewart Hosie make a compelling argument when he spoke about the very nature of this market?

Perhaps we should be talking not about market failures but about the way in which the video games industry operates and the fact that its nature makes it susceptible to the kind of tax relief that we are looking for.

The Minister is understandably, and rightly, sceptical about some of the figures being put out by TIGA, but a multiplier of nine seems pretty high. What level of multiplier would be so unacceptable as to allow this kind of relief to be put in place?

David Gauke(Exchequer Secretary, HM Treasury)

The TIGA analysis makes the assumption that everything achieved as a consequence of the relief would be additional to the economy.

It does not appear to recognise that there would also be displacement, and that highly skilled graduates would not remain unemployed if they did not find work in the video games industry. We are therefore sceptical about the TIGA analysis.

My hon. Friend makes his point well, however, and the nature and profile of the video games business clearly have some significance for his constituency, but we are as yet unconvinced of the necessity for the tax relief that was proposed by the previous Government, and that is proposed in the new clause.

The Government’s focus must be on providing a strong business environment for sectors across the board, including video games.

Our reforms will reduce rates of corporation tax by four percentage points over the next four years, which means that the UK will continue to have the lowest main rate in the G7.

This will improve our relative position significantly, compared with that of our competitors, after the years in which we have fallen behind. This will benefit companies across the economy, including those in the video games industry.

Stewart Hosie(Scottish National Party)

My party welcomes the reduction in corporation tax; we believe that it is a good thing. However, some of the businesses that are creating video games are not big enough to pay corporation tax.

Many of them are dependent on the annual allowances, but some of those have now gone, and one has been halved. So although I welcome the reduced corporation tax, the overall package will not necessarily help the start-up studios and small studios as they develop their games.

David Gauke(Exchequer Secretary, HM Treasury)

We have also reduced the small profits rate of corporation tax from 21% to 20%, when it was set to go up to 22%, and we have effectively reversed the jobs tax-the increase in national insurance contributions that would have hurt start-ups. We are also offering start-ups, including those in the hon.

Gentleman’s constituency, a national insurance contributions holiday for the first 10 employees, so there were plenty of positive policies for start-ups announced at the time of the Budget. Indeed, given the state of the public finances, it was a very pro-business, pro-growth Budget in the way that it set up proposals for lower taxes.

On tax simplification, the Office of Tax Simplification earlier today announced the list of reliefs and exemptions within the tax system.

When its work began in the summer, the general expectation was that there would be about 400 reliefs and exemptions; the total reached is 1,042 such reliefs and exemptions.

Many play an important role within our tax system-I do not wish to decry that-but we have to think carefully about introducing new areas of complexity and new reliefs and exemptions, unless there is a strong case for doing so. Members have already made the case for video games, but the Government remain unconvinced.

Jim McGovern(Labour)

I thank the Minister for giving way again. He talks about hearing what has been said in the Chamber, but as far as I am aware he has not yet met Richard Wilson of TIGA.

Like everyone else who mentions the organisation, I originally referred to it as "Teega" but Mr Wilson continually refers to it as "Tyga", and I assume that he knows better than I do.

I believe the logo resembles a tiger, so there is a connection with the pronunciation there. Will the Minister agree to come to Dundee and I will arrange for Richard Wilson to be there?

If figures are to be bandied about, with the Minister saying they are erroneous and Richard Wilson saying they are correct, it would be better if those two were in the same room at the same time to discuss the issue.

David Gauke(Exchequer Secretary, HM Treasury)

I am grateful for that invitation. I am sure it will be small comfort to the hon. Gentleman, but I will accept the pronunciation "Tyga" and concede that point.

I am not sure that it would be terribly helpful if we were all in the same room to discuss these particular numbers.

As I say, we are not convinced by the case made on these numbers. Of course, Members with constituencies that have a concentration of video game companies will want to make that case, but it is right for the Government to look at the economy as a whole and to bring forward policies that benefit all parts of the country and all sectors, including the video game sector.

As I said in the meetings I have had with the hon. Member for Dundee West, there is no sense in which the Government are in any way anti-video games or think it is an antisocial issue or anything like that.

It is question of economic efficiency and where we believe the role of Government can be best used-and that is in providing a favourable climate for businesses.

I appreciate that the new clause and new schedule proposed by Mr Hanson are probing measures, but I would like to touch on a point made by my hon. Friend Charlie Elphicke.

This relief is targeted at a specific sector and it would be considered to be state aid; as such, it would require notification to and approval from the European Commission.

The new clause and new schedule would be effective from Royal Assent. As the Government would not be able to secure approval in such a short period, the provisions would create an illegal state aid.

As I said, I understand that the amending provisions are probing, but the same issue applies to the previous Government’s proposals-and they, too, would have required state aid approval, which is worth putting on the record.

The new clause would create unjustified distortion and complexity in the corporate tax system. We do not think that such an intervention would represent good value for money for the Exchequer or be conducive to providing a simple and competitive tax system.

The UK needs a tax system that supports all businesses, because it is the private sector across the board that will drive the recovery. I therefore ask the right hon. Gentleman to withdraw the new clause and new schedule.

David Hanson(Labour)

I am grateful for the Minister’s clarification of the Government’s response. If we take into account the comments made by my hon. Friend Sheila Gilmore, it is clear that the Government are not in favour of the principle of this type of tax relief rather than the practicalities of the suggestions in the amending provisions.

I am disappointed about that. I remind the Minister again of what the Under-Secretary of State for Culture, Olympics, Media and Sport, Mr Vaizey said When asked during the election campaign whether the Conservative party was in favour of a games development tax break, he answered:

"emphatically, 100 per cent in support for game tax breaks. No ifs, no buts."

That does not appear to be the Government’s position today, which disappoints me.

Perhaps at this point I should declare that PricewaterhouseCoopers helped me to draw up the new clause. I shall register that in due course.

I think that we need to reflect on this issue. Mr Redwood, Mr Field, Stewart Hosie, my hon. Friend Jim McGovern, my hon. Friend Mr Watson and, outside the Chamber, my hon. Friend Luciana Berger have demonstrated great support for their industry.

Many jobs depend on it, not least in the constituency of my hon. Friend Chris Leslie. We must ensure that we do not transfer jobs to Canada, France and other countries just because of the impact of our tax regime on the industry, and just because-as has been pointed out-some companies do not qualify for the help that the Government have provided through capital gains tax relief owing to their size.

I accept what the Minister has said today, which I interpret as a closed door, but I must tell him that Members, including those with constituency interests, will return to the issue.

I hope that he will accept the suggestion of my hon. Friend the Member for Dundee West that it should be examined in detail, that he will meet representatives of the industry, in London if not in Dundee, and that he will consider discussing with those who are helping to create this wealth how we can ensure that we keep the jobs in the United Kingdom. I hope he will not allow that door to remain completely closed.

I give the Minister notice that both Back Benchers and Front Benchers will return to the issue, so that we can all fulfil our manifesto and election pledges and, more important, protect the industry in the United Kingdom as a whole. Having said that, I beg to ask leave to withdraw the motion.