State’s cinema trip should be censored
It’s time to have some value-for-money thinking restored to what is an epidemic of film subsidies, writes Colm McCarthy
THERE is quite a spat under way about the possible location in Dublin’s docklands of a new film studio, promoted by a former chairman of the Film Board and a group of film industry operators. They have their eye on some State-owned land, possibly land belonging to Dublin Port or alternatively part of the storied Irish Glass Bottle site which ended up in Nama. The chief executive of Dublin Port has accused the promoters of a ‘land grab’ no less, while they claim to be offering jobs, economic growth and all things good and wholesome. The ability of quangos in Ireland to survive the occasional cull during periods of financial stringency has been illustrated again these past few years. A brief spring-cleaning consequent on the Bord Snip report back in 2009 ran out of steam fairly quickly and a succession of brand-new outfits has since been created to replace the few that were closed or merged. This is not a new pattern. The Irish Film Board was actually abolished in response to the public finance crisis of the late 1980s but was resurrected under new political management in 1992 and escaped the re-abolition recommended by Bord Snip’s latest reincarnation. There are two principal enterprise promotion bodies in Ireland, the IDA to attract inward investment and Enterprise Ireland to support indigenous firms. They provide services to all of the economic branches and it is costly, and not good housekeeping, to have separate mini-quangos for each and every sector. Very few economic sectors enjoy the privilege, if such it be, of having their very own Exchequer-funded promotional body. The film industry is an exception and has endorsed the desire of its former chairman, James Morris, to acquire land in the docklands for the new film studio. There are several facilities already available for film production, including the long-established Ardmore studios in Bray, a facility in the former Dell premises in Limerick which has attracted State funding, a facility at Ashford in County Wicklow and a proposal for yet another one in the abandoned airport building in Galway. In addition to funds channelled through the Film Board, there is a generous State grant scheme (misleadingly called a tax credit) designed to defray the costs of producing films here. Some of the TV licence fee money wends its way to the producers through the commissioning activities of RTE and TG4, while the local council in Limerick has put up funds for the new studio there. Wicklow County Council has waived development levies on film studios that would have been payable by any other business. The Irish Strategic Investment Fund (the remains of the ill-fated National Pension Reserve Fund, most of whose money was used to bail out banks and their creditors) has also been taking an interest in film funding. There are even tax breaks for private investors should any real money be required. Multi-stream funding arrangements have the considerable disadvantage (for the taxpayers, not the beneficiaries) of opacity: it is difficult to see what is going on. On the face of it, the film industry is the Irish corporate welfare champion. The so-called film tax credit sounds like a relief of profits tax that might be payable by production companies but it is not. It is payable, in cash from the Revenue Commissioners, at 32pc of the costs of making a film, regardless of whether the company has a corporate tax liability at all. It can be used to defray the costs of em- ploying crews or movie stars not even resident in Ireland. No other economic sector to my knowledge has such an extraordinary deal with the Irish Government and there appear to be no constraints on double-dipping, taking the tax credit and also grants from the Film Board or other arms of the State. Through the misdescribed ‘tax credit’, the State is paying one-third of the production costs of films produced here. Imagine the furore if this deal was on offer in any other sector. There has been a race between European governments to entice film productions to their jurisdictions, to the considerable benefit of Hollywood producers, domestic film financiers and their tax advisers. When various governments around Europe are flashing the cash at a glamorous sector, as appears to be the case in this instance, it does not make sense to follow suit. There are subsidy competitions that it is best not to enter, since you lose if you win. Unusually for a public official, Dublin Port’s chief executive, Eamonn O’Reilly, has gone public in his opposition to the James Morris proposal. The port has plans for whatever spare land is in its ownership and has been unsuccessful in the past in seeking permission to reclaim more from Dublin Bay. Seaports take up lots of land and Dublin, the largest port in the country, does not have enough. If Britain quits the customs union it will require lots more in due course, since every truck arriving from Liverpool and Holyhead will need to be inspected. If Mr O’Reilly is keeping the port company’s land, Mr Morris has sportingly offered to locate on adjoining land which belongs to Nama and for which there are urgent uses, including housing. There was always a risk, when Nama was established, that an agency with such enormous control over land and buildings, as well as the capacity to mobilise funds off the State balance sheet, would attract envious glances from the promoters of all kinds of plausible schemes. The legislation was consciously designed to limit the temptations, but mission creep has predictably set in and Nama is already pursuing objectives in housing policy. If it starts dishing out land to project promoters in the film, or any other, industry the sensible delimitations of its original role will have been abandoned. The site at Ringsend extends to about 80 acres and the film studio promoters are seeking fully 20 acres (that’s about 10 soccer pitches), which seems an enormous site for what they are proposing. The site cost more than €400m at the top of the bubble. One-quarter of it is still worth a lot of money in Dublin’s inflated housing market. The fallout from the financial crash has produced not only Nama but also the Strategic Investment Fund, which has been turning the tattered remnants of the pension reserve fund into what looks like a free-wheeling venture capital operation. They have invested equity capital in a wide range of businesses and the film industry has naturally joined the queue. Now that the commercial availability of finance and risk capital for Irish business has returned to something approaching normal, it is time to expect that some disciplined architecture be imposed on the State’s provision of financial aid to business ventures. The Hollywood-in-Ringsend project requires a zoning designation from Dublin City Council. It should be politely declined but this is not only a planning matter. The fact that this chutzpah-laden proposal has legs at all is evidence that the corporate welfare octopus has grown too many feeding tentacles. The Department of Public Expenditure, and their colleagues in Finance, need to restore some value-for-money thinking to the epidemic of film subsidies.
‘The corporate welfare octopus has grown too many feeding tentacles...’