The Great Goose Caper, a Chevy Chase family film currently shooting in Canada, is not the UK government's ideal co-production.
Certainly, its UK spend of 26% of its budget is within existing co-production requirements. But co-productions with such a minimal UK involvement have triggered a dramatic overhaul of UK production treaties by the British government. It's a move that has producers from Canada to Australia up in arms.
Aiming to rectify the perceived imbalance in where co-productions spend their budgets, the UK government is to double the minimum UK spend - currently typically 20% - when British producers are working with offending countries. Canada, far and away the UK's main co-production partner, is the only country singled out by the UK's Department for Media Culture & Sport as an offender.
But some fear this is just the start and that Australia, where the current minimum is 10% higher at 30%, will be next. In Europe, projects such as Spice Factory's current slate of Italian co-productions have raised eyebrows.
John McVay, head of UK producers body PACT, this week called the proposals, "utterly detrimental to getting business done." The Canadian Film and Television Production Association, which is holding emergency meetings with PACT, expects Canada to challenge the UK for taking unilateral action.
Speaking at a conference in New Zealand this week, leading UK producer Nik Powell urged New Zealand and Australia to protest. "It will be extremely damaging for both UK producers and New Zealand film projects," he warned.
The heart of the problem for the government is that many projects have a minimal UK involvement only in order to access the UK's tax-based financing. "Ever since sale and leaseback, it has gone crazy," says Studio Eight Productions' Jamie Brown, whose business is built around Canadian co-productions.
Brown says that The Great Goose Caper is a "classic example" of the eight co-productions he is involved in a year. The film is shooting entirely in Canada, using the UK for some post. The cast includes a few UK actors such as Joan Plowright, while 15 of the 65 crewmembers and technicians are British. Additionally, UK-based Park Entertainment has just boarded as international sales agent.
Brown maintains that the film will spend around 25% of its budget on UK elements. By qualifying as British, the film accesses a sale and leaseback deal worth 14% of its budget.
Exacerbating the situation for the government is the fundamental difference between the UK and Canadian tax systems. Under UK rules, investors write off their costs against 100% of the budget, even if 80% is spent in Canada. Under Canadian regulations, a production receives tax credits only on its Canadian spend.
But producers such as Brown argue that raising the bar to 40% will kill off their bread and butter business. "The break point hits at about 28 or 29%," he says. Others say the current regulations have helped sustain the UK's film infrastructure by having a massive boost for UK post houses. Roberto Benigni's Pinocchio has provisional co-production status, although it is still waiting for final approval, mainly through having done post work in London.
"Yes, there is abuse, but there is a longterm benefit for the industry, which is particularly helpful in these times," says Peter Watson, managing director of Recorded Picture Co.
On the face of it, the change in co-production regulations would seem a massive setback in Film Council chairman Alan Parker's aim of creating a UK "film hub". But the council, the UK's main film support body, apparently feels that the tax breaks might not be extended in 2005 if there is a significant co-production imbalance. Widespread abuse of deferrals and TV productions caused both to be barred from tax breaks this year.
PACT is pressing for a compromise of around 30%. McVay expects that barring TV productions from qualifying for UK tax breaks will dramatically reduce the imbalance, but adds that it is too early to tell the full impact.
"We have to get through this transitional period," he says. "The government is looking to get a reaction, to focus people's minds, to get a debate going."
Yet many UK tax-based financiers seem to sense that the game is, if not up, then at least moving to continental Europe. Grosvenor Park, the Canadian and UK-based tax financier, recently launched a Paris office. Studio Eight is assembling a slate of English language, European-financed films.
The UK government may be able to toughen up agreements with Canada and Australia, but the European Convention overrides national rules. It stipulates that spending in each country need be only 10% as long as three co-producers are involved.
"We are doing more European product," says Studio Eight's Brown. "That is the future."