No Relief

Published as part of our sister-site GamesIndustry.biz's widely-read weekly newsletter, the GamesIndustry.biz Editorial, is a weekly dissection of an issue weighing on the minds of the people at the top of the games business. It appears on Eurogamer after it goes out to GI.biz newsletter subscribers.

The lows always taste most bitter when they come so soon after the highs, and after yet another great year for British development talent at E3, it was only a few days before the inevitable come-down arrived - in the form of the first Budget to be delivered by the UK's new Conservative/Liberal Democrat coalition government.

In the wake of the financial crisis, austerity and belt-tightening was expected. Even if economists are still divided over whether it's really necessary, politicians have succeeded in convincing a fair chunk of the public, and more importantly, themselves, of the need. Cuts in public spending and rises in taxation were both on the menu, and both promptly delivered.

Even as the country as a whole winced collectively, however, the games business was singled out for a particularly bitter pill. Only a few months ago, years of intensive lobbying finally paid off when plans to extend the film industry's tax relief schemes to videogame development were revealed. The plans were uncontroversial, winning support from all major parties in the house. Earlier this week, they were scrapped outright.

"Poorly targeted", our new Chancellor, George Osborne, announced. That pronouncement which will be puzzled over for months by the industry, as it regroups itself from the blow and resumes its lobbying efforts. Was there, perhaps, some way in which the relief could have been structured that made it better targeted, more focused on the objectives which the coalition government aims to achieve?

I suspect not, because my own feeling is that when Osborne described games tax relief as "poorly targeted", what he meant was that it targets the games business. At a time when the government is preaching austerity, extending tax relief to a sector such as videogames - which despite the advances of recent years, remains controversial with the tabloids and with large swathes of the older voters who make up the Tory heartlands - could easily be pounced upon by the press.

Osborne and his front-bench colleagues already know that selling a Budget which essentially sees a Cabinet full of millionaires imposing harsh cuts even on some of society's poorest people is going to be tough. Including support for an industry whose cultural and economic value is far from universally recognised would just make the job even harder. The games business has become much more proficient at lobbying and presenting its case in recent years, but when the chips are down, its weak public perception makes it into an easy sacrifice for a career politician to make.

The disappointment from the games sector, however, has been tempered somewhat by the fact that few really expected the promised tax relief to materialise in this Budget. The direction in which the wind is blowing has been fairly obvious - I proclaimed a few weeks ago that I'd eat any given item of headwear should the relief be confirmed by Osborne, so my fine collection of hats, at least, is safe.

It ought to be tempered further by the fact that while specific measures for the games business have not been included, there were a number of bright spots in the Budget for UK businesses as a whole. Corporation tax is being lowered, which should help the majority of British studios, while relief on National Insurance payments for small companies will be a big help for the small start-ups which make up a significant part of the UK games industry.

Not all bad news, in other words. The blow to the British games business will also be reduced by the continuing weak position of Sterling on the currency markets, which is allowing studios here to remain very competitive compared to their US colleagues, and even more so compared to studios in deflation-hit Japan.

If those aspects of the Budget lift the gloom, however, there ought to be a certain measure of dismay at how Osborne's ending of the relief plans has been greeted. Outside of the specialist press, and even in some corners of the enthusiast media, there has been much sage nodding at the apparent wisdom of Osborne's decision. It has been accompanied, worryingly, by serious questioning of the business case for the tax relief - an argument many within the industry probably thought they'd already won.