A French lesson: those film industry subsidies could become an instrument of gender-balancing policy

Announcing the Government’s backdown on capping film subsidies, Economic Development Minister David Parker said without the subsidies, the film industry wouldn’t exist.  

We suppose he meant it wouldn’t exist in New Zealand.

The subsidies are reckoned to result in  studios getting cash payments of up to 25% of their local spending on productions, amounting to $575 million since 2010.

The Government had considered cutting them after questions were raised about what taxpayers are getting for this money, according to Radio New Zealand.  But it was persuaded by officials and the film industry that the subsidies needed to stay.

At least some of those officials would be involved in administering the subsidies and the film industry – clearly – will be as keen to get rid of them as taxpayers would be keen to cop a 25% lift in taxes.

Responding to this news, Eric Crampton, Chief Economist with The New Zealand Initiative in Wellington, said he hated the idea of Avatar enough that he didn’t want to pay to see it at cinema.

“The snippets I’ve caught on TV haven’t changed my mind about it.

“But it looks like I’ll be paying for it for as long as the subsidy-milking franchise is willing to keep on going.”

He recalled the days of agricultural subsidies, when farmers took money to produce stuff like mutton that people didn’t much want to eat.

He also referenced a report by Matt Nippert on the film subsidy madness.

The 2013 agreement suggests the Avatar films will cost a minimum of $500m, of which a quarter – or $125m – will be paid by government.

Actual spending on the films – and the accompanying subsidy – is likely to substantially exceed this minimum as two films are already in production with the prospect of two more in the pipeline. The first Avatar film cost $360m to produce in 2009, and Hobbit trilogy of films, also filmed in Wellington under the subsidy scheme, ended up costing a total just over $1b.

Parker sheeted this exposure, potentially hundreds of millions of dollars to the taxpayer, back to the previous National government.

Asking if there is no way of getting out of this mess, Crampton sums up:

“We’ve gotten ourselves into a particularly stupid equilibrium where we’re throwing tons of money at the film industry so that NZ film school grads will be able to get jobs, and we’re subsidising training the next crop of hostages to the film subsidies.

“New Zealand is too small to be able to afford a lot of this kind of stupid.”

On his Croaking Cassandra blog, economist Michael Reddell says subsidies and special deals for favoured firms/industries seem to have been becoming increasingly common in New Zealand.

He lists Tiwai Point, the Sky City convention centre, the forestry industry, the export education industry

… and probably others I’ve forgotten.

“There are the R&D tax credits the Prime Minister touts at every turn –  the only substantive item in her (very short) list of things the government is doing to reverse the atrocious productivity performance.

“And then there is the film industry, into which many hundreds of millions of dollars have been poured over the last couple of decades.

“There is an industry there, but one which official advice to the government makes clear has no prospect of viability without heavy subsidies.  That should be a good test as to whether there is any robust case for the subsidy.

“Barring something like national defence considerations, any industry that has no credible prospect of ever standing on its own feet without subsidies or protection should be … left to itself, probably to wither and die, but just possibly to transform itself.”

Maybe the Government is on the hook over the Avatar deal, Reddell concedes, “but that isn’t an argument for keeping the whole scheme in place …

He draws attention to various official papers (notably these), which show that even the Ministry for Business Innovation and Employment’s “hired-gun economic consultants” were reluctant to attempt to put a number on the supposed economic benefits of the film subsidies.

The Treasury estimated that net economic benefits were negative.

Because the Minister is convinced there is a benefit, Reddell threw out a challenge:

“It would be nice to see his analysis.  Something for example about why, in a sector in which other countries’ taxpayers are wasting their money on subsidies, we should even be participating in such bidding wars.  And about why and how subsidising/protecting the film industry is so very different from all the other protected/subsidied industries we once had in New Zealand, that were in time forced to either stand on their own feet, or die.  And which, while they lasted, detracted from New Zealand’s overall economic performance, part of the decades-long story of declining relative productivity.”

Reddell mentioned attempts at more sophisticated analysis in various reports MBIE and other agencies have commissioned (including this piece from last year by NZIER).

But he also published this line from a detailed table of New Zealand services exports (June years, $m)

2014 2015 2016 2017
Audiovisual and related services 504 490 397 280

His tart comment:

“Not exactly the trend enthusiasts would have been looking for”.

Other data presented by Reddell are similarly disappointing.

But hey – some good must come from subsidies, surely.

Indeed.

They can become an instrument for social engineering of the sort being robustly promoted by the Ardern Government.

France is introducing a new subsidy bonus for movies with women as directors and in other key roles – one of a series of initiatives unveiled recently to promote gender equality.

Starting next year, movies with enough women in positions such as director, cinematographer and head of production will be eligible for a 15% bonus on top of the subsidy they receive from France’s National Film Board (CNC).

Other initiatives unveiled include mandatory reporting of the gender makeup of crews and employees working on films in the applications submitted to the CNC; ensuring the parity of presidents and members of commissions, festival juries and schools backed by the CNC; and the digitisation and restoration of films directed by women.

But before you conclude there are dubious benefits from subsidies in the film industry, please read on.

Mike Hosking, a broadcaster with a gift for being able to comment instantly on just about anything, says the film industry subsidy is worth it.

Giving his public the benefit of the profound knowledge he gleaned from this “good piece of work in the Herald over the weekend”, he opines:

So could we argue film is unique? Could we argue that what we have and continue to get is, in fact, worth an economic artificiality?

As I say look up the article, read it and make up your own mind.

But for me, I conclude, it was and is worth every cent.

So now you know and David Parker can rest assured he made the right decision.

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