Canada's federal government will boost the production tax incentive, which has made it so attractive to foreign producers, by 45%.

Thanks to a new federal budget announced yesterday, the Film or Video Production Services Tax Credit (FVPSTC) will be increased so that foreign film and television productions will be reimbursed 16% of their eligible Canadian labour costs, up from 11%.

Sure to provoke to wrath of US film labour lobbyists and other film-friendly areas south of the border, the change is meant to ameliorate the removal of a tax shelter last year and improve, or at least, stabilise foreign location shooting - known in the US as "runaway" production - in Canada's regions. In Ontario production is flat while British Columbia is losing ground.

Just two weeks ago, the Canadian Film and Television Production Association (CFTPA) released 2001-2002 statistics indicating feature film production spending by foreign producers was down 10%, to $484m (C$737m).

Overall foreign location production, including TV fare, was off only slightly, with aggregate spending down by $1.18bn (C$2m to C$1.8bn). As a whole, the film and television production industry reported its first zero-growth year in a decade.

Production volume for 2001-2002 has remained at the previous year's level of $3.3bn (C$5.1bn).

The new budget wasn't all good news, however. It also included a 25% cutback on the Canadian Television Fund, reducing the federal government's contribution to the public-private sector fund from $66m (C$100m) to $49m (C$75m) over the next two years.

According to one estimate, the change would translate into an C$83m reduction in Canadian-content TV production or approximately 390 hours annually.