The expectation is that on Wednesday this week George Osborne's budget speech will set out further measures for the government to support growth and investment in the economy.
Funds for new initiatives are going to be limited and that's why the Chancellor should look to sectors were an adjustment to the tax or regulatory system could yield big returns.
Developing an industrial strategy for the 21st century economy should not be about picking winners or investing in trying to create or sustain markets that can't compete, but instead removing artificial barriers that are holding back growth and innovation. This is particularly important in areas of the economy where international competition is strong, and business can easily move to another country.
This creative thinking can make a big impact in the creative sector in particular. The creative industries are of growing importance to our economy as a whole and creating jobs at twice the rate of the national average. They are also an important part of the economic regeneration of many cities like Manchester and Birmingham, and in emerging creative centres like Folkestone in my constituency.
If I could make two recommendations for George Osborne to support growth in the creative sector it would be to introduce tax credits for video games and high end TV production in the UK, similar to those that have been enjoyed by the film industry for the last 20 years.
A study produced by the Film Council in 2010 reported that the core UK film industry contributes £4.5 billion to the economy and over £1.2 billion in tax revenues. Without the Film Tax Relief against investment in production in the UK, it is estimated that film production would be 75% smaller, at a cost of around £1.4 billion to the economy and about £400 million in lower tax revenues.
This investment is not only good news for the major studios like Pinewood and Shepperton, but also post production and sounds production facilities across the country. But it can't be right that a film written by say, Julian Fellowes, like Gosford Park, qualifies for the production tax relief but a TV series written by him, like Downton Abbey does not.
In fact his new TV series Titanic was filmed in Budapest, where it benefited from production tax breaks offered by the Hungarian government. This location was chosen despite the fact there is now a film studio in the Belfast docks where the original ship was built. The American broadcaster of high quality drama HBO, and maker of series like John Adams and The Wire, also now invests 85% of its production spend in locations where tax incentives are offered.
The industry estimates that introducing a net 20% tax incentive targeted for high end TV production would generate at least £350m per year in revenues. Based on this level of production spend and using the film industry multiplier calculated by Oxford Economics in their 2010 study: The Economic Impact of the UK Film Industry, the benefit of a new incentive would be £13 to the UK economy for every £1 of tax relief given. In other words, based on these numbers, this would mean a total return of approximately £1 billion per year.
This tax relief should also be extended to the video games industry, which is another important sector in our creative economy. Games series like Grand Theft Auto, made by Rockstar North in Edinburgh, have sold over 100 million copies around the world.
The UK has some of the industry's most talented games producers and developers. It is estimated that a 'games tax relief' would generate and safeguard over 4,660 jobs and lead to £188 million in investment expenditure by studios.
This would increase the games development sector's contribution to the UK economy by £283 million and generate £172 million in new and protected tax receipts to Treasury. In other words this tax relief would more than pay for itself and would enable UK developers to compete on a more even playing field against government backed developers in other countries like Canada, France, Singapore and the USA.
It should be noted that employment in the French video games development sector has grown by 500 since 2008 but declined by over 1,000 the same period in the UK. Games production in Canada has also increased by a third since it introduced a games tax relief.
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