UK film minister Kim Howells has ruled out a levy on cinema tickets to compensate for the decline in lottery revenue, the government's main source of funding for the UK film industry.

Speaking at the UK Cinemas Conference in London, Howells said: "Even though cinema admissions are rising we would be very reluctant to impose a levy on an industry in a state of flux. Any inhibition on paying customers has to be considered very carefully. At present a levy is not being considered as the option."

Howells congratulated the UK distribution and exhibition sectors on their record-breaking year. UK box office was at its highest level for 30 years, last year, rising to 176 millionadmissions, pushing the average number of cinema visits over the three per capita hurdle. Howells said: "This shows the love and passion people feel for cinema. They love going to the movies. I am very optimistic about the UK film industry."

Howells also pledged the government's support for the industry's fight against piracy, remarking that one in five DVDs sold in the UK was a counterfeit, the equivalent to a loss of $626m (£400m) to the industry.

"We must get rid of the impression that piracy and counterfeiting are not crimes and are victimless crimes," he said, adding that the government had increased penalties for copyright theft last year and that he himself had accompanied a raid on a counterfeiting operation in Wales.

"When they went in they found a huge range of goods. This is the tip of an iceberg. It is very well organised, international, and often a money laundering operation."

He added that the source for the original copies often came from within the film industry. "They are making these copies at a very early stage. This problem goes straight to the heart of the film industry itself."

Other speakers at the conference identified 'For Your Consideration' DVDs and VHS copies, used to support the distributors' BAFTA and Oscar campaigns, as a prime source for the generation of pirate copies, and called for greater controls on their distribution.

UCI's Steve Knibbs questioned why these awards copies were sent out to BAFTA and Oscar voters at all, given the number of preview screenings put on for them, "If they can't be bothered to go to the cinema, why should they even be allowed to vote'," he said.