Scotland video games tax relief must be reconsidered, say MPs

Tax relief must be reconsidered for Scotland’s video games industry, because of the sector’s importance to the area and the British economy as a whole, according to a parliamentary committee.

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Tax relief must be reconsidered for Scotland’s video games industry, because of the sector’s importance to the area and the British economy as a whole, according to a parliamentary committee.

Video games tax relief had been planned by the former Labour government. But last June, the new coalition government cancelled those plans in its Emergency Budget, with the chancellor branding the idea as “poorly targeted”.

The Scottish Affairs Committee said in a report published today that Ed Vaizey, culture minister, had failed to lobby the Treasury directly in the interests of the video games industry. He had promised to support games tax relief at the start of 2010, but by June the Budget still stripped out the cash.

When Vaizey was asked by the committee why he had not lobbied directly, he said he was “quite low down on the food chain”. It appeared that the chancellor had not consulted him before making the Budget decision, the committee said.

Ian Davidson MP, chair of the committee, described the video games industry as a “world leader” for the UK, insisting that the government “must do more to encourage development and growth in the sector”. The region’s video games industry not only created growing numbers of local jobs but also was a big contributor to Britain’s economy, he said.

One of the biggest selling games series to be produced in Scotland is the Grand Theft Auto series, made by Rockstar North.

The industry faced threats from overseas competitors, because of their cheaper labour markets and strong government subsidies, the committee noted in its report. As a result, the industry needed to be monitored for the potential effects of “uneven international competition”, it said. A comprehensive assessment of the benefits of a games tax relief, alongside in which countries the industry succeeds without support, should be carried out, it said.

The report also warned of an alarming skills shortage emerging. It called for a greater focus on the “hard skills such as maths and computer science”, as well as better links between industry and universities. The “brain drain of graduates to countries offering better incentives” was a serious problem.

But large numbers of people employed by the industry in Scotland also lost their jobs last year. When Realtime Worlds, one of the largest development studios, went into administration, video games developer employment fell by 18 percent.

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