An all-party parliamentary committee charged with reviewing public funding for British cinema has urged the UK Government to continue offering tax relief as "absolutely essential for the health of the industry."

However, those tax-driven incentives should "evolve" to encourage both the production and distribution of British films. The current Section 48 tax relief scheme, which is aimed at spurring the production of British-qualifying films budgeted under $25m (£15m), is not expected to continue in its existing form beyond July 2005.

In today's published report on The British Film Industry (summarised below), The Culture, Media and Sport Committee concluded that "while there is no acute new crisis - and many underlying strengths - there are longstanding chronic difficulties."

To help ease those difficulties - and "end the currently uncertainty plaguing the industry" - the Committee called on the UK Government to commit to "an evolution of Section 48 relief, without further sunset provisions."

"The Government's key priority should be the speedy and positive resolution of debate over the future of the Section 48 tax relief."

As part of that evolution, the Committee said it agreed with the UK Film Council proposition that the tax regime should now also encourage the distribution of British films.

The House of Commons Committee, chaired by Gerald Kaufman, also urged the UK's public service broadcasters to increase levels of support for production and exhibition of British films. "This should be done in cooperation with the broadcasters in the first instance."

Currently, those public service broadcasters (the BBC, ITV and Channel 4) spend no more than £20m annually investing in feature film production.

The Committee's lengthy inquiry posed the question 'is there a British film industry'' and looked at the industry and the challenges it faces within a highly competitive global industry.

There is indeed a British film industry, agreed the Committee, but it is essentially "an under-capitalised 'cottage' industry based around entrepreneurial individuals driving single-project vehicles."

"The UK film industry has concentrated on production with insufficient emphasis on distribution. In this scenario rights are often pre-sold in order to get the film made in the first place; therefore any unexpected success does not reap proportionate rewards to fund further production or support less lucrative, but worthwhile, output."

"The nature of the British film industry is perhaps not what we would wish it to be. Ideally, we would prefer the main activity to be indigenous production of films about Britain, a substantial proportion of which break out to achieve success in the global market.

"However, the reality is that the British film industry does three things: the most lucrative is the provision of services for the major Hollywood studios - attracted by UK talent, facilities and tax regime - to make high-budget and technically-demanding motion pictures; secondly, there are indigenous, usually distinctively British, films shot in the UK; thirdly, there are films shot abroad, under co-production treaties."

"The success of the industry in grappling with these challenges is largely in the hands of creative, entrepreneurial and business talent in the private sector. However, there is a range of issues - the maintenance of an attractive tax regime; resources, assistance and strategic leadership offered by the UK Film Council; and improvements in training and development - where public policy is involved."

Summary of key recommendations

- In reviewing the tax regime for film production the Government should assess whether there is a case for the introduction of new terminology to assist the classification of films according to country of origin distinguishing cultural content and financial provenance. (Para 13)

- The British film industry is an important national cultural and economic asset with significant further potential. We regard the existing level of tax relief for film production as absolutely essential to the health of the industry. (Para 85)

- We recommend that the Government commits to an evolution of Section 48 relief, without further sunset provisions, along the lines proposed by the UK Film Council and the British Screen Advisory Council (publishing the BSCA study for consultation on the detail as soon as possible). Lead times for decisions about inward investment are long, therefore the Government must end the current uncertainty plaguing the industry, must do so in a positive manner and needs to do so as quickly as possible. (Para 86)

- Increased levels of support for production and exhibition of British films are needed from the public service broadcasters. This should be done in cooperation with the broadcasters in the first instance. (Para 114)

- The BBC should review its approach and level of commitment to feature film production, in consultation with the UK Film Council, given the significant comity of interests in this area. (Para 116)

- We hope and expect that Ofcom [The UK's media regulator] will take meaningful action to improve the relationship between the British film industry and the public service broadcasters to the benefit of the British people's enjoyment of, and access to, film. One avenue will be through the Statements of Programme Policy required from the broadcasters. (Para 117)

- The training and development strategy set out by Skillset and the UK Film Council is an impressive wish list of welcome developments. We believe that it strikes the right notes, particularly on equal access, business skills and cooperation with the industry. We look forward to receiving regular reports regarding progress with its implementation. (Para 133)

Overall Conclusions

- The Government's key priority should be the speedy and positive resolution of debate over the future of the Section 48 tax relief. (Para 152 a)

- The UK Film Council has made a very positive start and must be supported by the Department for Culture, Media and Sport, and the Government as a whole, so that impetus is not lost. This includes adequate funding for the wide range of tasks with which the Council is charged. (Para 152 b)

- A cohesive approach is needed between those parts of Government that have interests in, or responsibilities for, promoting the British film industry in both its impact as a magnet for inward investment and its role as an important window on Britain and British culture, history and society for the British people and the wider world. (Para 152 c)

-We welcome the positive start made by the UK Film Council to its various tasks. It has a wide range of responsibilities and must balance carefully the need to make progress in each area with the risk of spreading its limited funding too thinly. (Para 152 d)

- The UK Film Council has made a convincing case for its approach to revitalising the British film industry in terms of the need for continued but evolving film tax reliefs, including a new focus on distribution. (Para 152 e). We also accept that the role of the public service broadcasters in relation to investment in British films and their exhibition should be tackled as a priority. (Para 152 f)

- The UK Film Council should engage actively with the bfi [British Film Institute] to clarify the most effective working relationship for meeting their objectives; both shared and complementary. (Para 152 g)

- The bfi set out its dual role as guardian of a physical collection of, in our view, unparalleled importance and as a motivator of new and demanding audiences for the films that the UK Film Council is determined to encourage in the future. These are both crucial tasks, which merit adequate resources and commensurate scrutiny to ensure that effective progress is being made. (Para 152 h)

- The bfi should take the lead within the UK film and TV archive community and champion the whole sector, particularly the regional archives, alongside safeguarding its exemplary reputation amongst international peers. An over-arching national strategy promoting both good curatorship and increasing accessibility should be vigorously pursued. (Para 152 i)

For further information see the Committee's website: