There's a disconcerting calm underpinning Screen's annual guide to soft money this year.

Over the last few years, analysis of subsidies has been a task for a war correspondent. Enormous upheavals in incentives turned the international business on its head around the world, most notably in the UK and Germany. So much of the film industry was financed by tax avoidance schemes that the collapse of some of the biggest posed serious questions about future funding.

After the deluge, however, has come an unexpected calm in many international markets. Hollywood found its replacement with interest in slate financing with the hedge fund giants. And in much of the rest of the world, soft money sources - still so vital to film production - have settled down into a stable if often frugal normality.

It is possible to plan budgets around incentives that can mostly be understood and trusted without having to be a genius at reading between the lines of company accounts. What is more, it is becoming increasingly possible to compare subsidies between territories because most have been drawn up with the same core thinking, under the same free trade rules and with the same core assumptions on costs.

Attempts to return to the old ways of doing business through tax loopholes have largely been nipped in the bud. And the change BBC Films announced this week to the deal it offers UK producers is a sign of the healthy flexibility a stable system can offer.

But there remain nagging concerns that cannot be ignored. One of those is the rise of so-called 'cultural tests' governing soft money. While the notion of protecting a native film culture against the supposed hegemony of Hollywood has been a stated aim of many governments, these tests have not been devised out of some kind of political or philosophical will. They are, on the whole, pragmatic creations responding to particular market forces, and need to be seen as such in judging their success.

The tests allow incentives to take advantage of the 'cultural exception' to general global free trade agreements. If one was really trying to support a local industry, there are more effective measures: quota rules on exhibition, tasty incentives for footloose Hollywood productions. But such measures are not allowed under international trade agreements, in which film is just one more commodity to discuss.

The age of protectionism has been consigned to the dustbin of history. The only question now is how effective cultural tests are. And here there is a serious question mark. If one takes the protection of cultural output at face value, the tests are hopelessly narrow. In the UK, for example, the restrictions on the kind of film that unlocks incentives are ridiculous. British culture is nothing if not international. This is a country whose history, for better or worse, is inextricably tied to the rest of the world. Yet a film struggles once it crosses the English channel, meaning anyone wanting soft money needs to be insular.

More importantly, such incentives distort film-making, forcing content to be shaped toward unlocking soft money rather than creating a vision. An incentive must be a means, not an end - cash leading creativity is the classic definition of a subsidy culture.

We have to remember this is not free money, but in most countries it is taxpayer's money. During boom times where the mathematics clearly demonstrate that tax dollars in film actually represent investment in the wider economy (and they do in most places at the moment), there is little resistance to incentives. But that can change and the influence of events beyond our control - the economy, demographic changes, competition from other entertainment and so on - will be a challenge.

That is why a seemingly stable soft money system is only part of the battle. The industry needs also to recognise the significant shifts that come with digital change, whether we like it or not. Chief among those are the demands of audiences which shift the emphasis away from production and towards a changing distribution landscape.

If we are feeling comfortable, then we are not looking hard enough.

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