Stuff reveals the price we are paying to subsidise movie moguls – and then Sepuloni announces a new film-making fund

There is apparently no shortage of politicians with a not-so-secret Hollywood love affair – or so said Mark Milke, an independent Canadian analyst and consultant, in an article for the Fraser Institute some seven years ago.

They love to throw tax sweeteners and direct subsidies at the film industry to lure film production to their province or state, he observed at a time when the film industry in Canada was pressing provincial and federal governments to pony up most of the cost of a C$32-million film studio in Calgary.

He proceeded to challenge the claim that – in Alberta – for every buck in direct taxpayer subsidies, a ten-fold return in economic activity would result.

Such crony capitalism for film is then akin to miraculous manna from heaven.

Our politicians are not immune from being bedazzled by film industry pixie dust

Arts, Culture and Heritage Minister Carmel Sepuloni yesterday launched the Premium Productions for International Audiences Fund, making $50 million available

“ … in a unique opportunity for the screen sector to tell New Zealand’s stories to a global audience”.

This was one of three announcements on the Beehive website when we checked earlier today.

The others were:

  • The Government has taken a step towards ensuring safe drinking water and more efficient wastewater and stormwater networks with the first reading of the Water Services Bill.  The Bill provides the mechanics of the regulatory regime that Taumata Arowai, the new water services regulator, will administer, and will detail the powers it will have.
  • New Zealand supports a peaceful and democratic solution to the current crisis in Venezuela, Foreign Minister Hon Nanaia Mahuta says. She called for the will of the Venezuelan people to be respected with the holding of free, fair and transparent elections.

We especially relished Mahuta’s statement about respect for the holding of free, fair and transparent elections.  This is a minister who, wearing her Local Government hat, is about to sack the elected city council in Tauranga and is pledged to change the law to deny citizens the chance to stop the further spread of race-based electoral arrangements.

But our focus here is on state aid for the movie business.

This week, Stuff’s Thomas Coughlan reported on the cost of subsidising the new Lord of the Rings TV show.

He dug up a 2019 Treasury paper which examined the cost of subsidising the TV series through the NZ Screen Production Grant, an effective subsidy of the cost of producing films in New Zealand.

At that pre-Covid time, the Treasury warned that some options for dealing with the high cost of the show could trash the Government’s strong public finances, plunging its books into deficit and damaging our treasured debt-to-GDP ratio.

Its recommendation was to make savings elsewhere to avoid increasing the budget deficit or the government’s debt.

In other words, every dollar paid out to film producers would have to be taken from somewhere else.

Coughlan proceeded to inform us that …

The grant scheme has run massively over the budget envisaged in just a few years. In the 2017 budget the scheme was given $55m a year for the years 2017-2021.

But by 2019, the scheme already required topping up. An extra $155m was approved for the rest of that year. This year, the Government approved a further $206m.

To put this in perspective, Coughlan compared the money paid out to a handful of Hollywood films this year with increasing welfare benefits.

Upping benefits by $25 a week for people on jobseeker and emergency benefits is estimated to cost $283.6m this year. Upping benefits for sole parent support cost just $104m this year – half the amount set aside for film grants.

The reason for this out-of-control cost – he explains – is that New Zealand’s film subsidy scheme is completely uncapped.

That means if all of Hollywood decided to move to New Zealand, taxpayers would have to fork out billions.

The scheme [is] very simple. For every $5 a producer spends in New Zealand they get $1 back. Some lucky films get an even bigger return with. “5% uplift” that means that for every $4 they spend, producers get $1 back.

The Treasury has always classified the scheme as a “significant fiscal risk”, warning that the uncapped subsidy endangered public finances.

With both Avatar and The Lord of the Rings drawing on the subsidy at once, that “significant fiscal risk” could be on the horizon.

But our Treasury number-crunchers would be looking for a way around the problem, surely, and yes, in September last year they produced a briefing paper with advice on options for dealing with the “sizeable grant payment” the Government would owe the producers of Lord of the Rings.

The Government went along with a recommendation to keep operating allowances fixed and make trade-offs with other Government spending to afford the film subsidy.

Treasury warned that this would “reduce room for additional spend in other areas” and “require trade-offs” to be made. This would “limit the Government’s ability to fund other initiatives during the Budget process”.

And trade-offs were made. Of the $3 billion operating allowance for 2020/21, $185m was set aside for film subsidies – equating to just more than $1 for every $20 in the operating allowance.

And who benefits from making this decision at the expense of (let’s say) welfare or housing programmes?

According to Coughlan:

A substantial portion of the money this year will go to companies owned by Jeff Bezos, the world’s richest man, who is behind the latest Lord of the Rings adaptation.

Bezos has had a good 2020, Coughlan reported.  His net wealth has increased this year by about a third of New Zealand’s entire GDP – US$75 billion (NZD $106b).

Just a day or two later, Sepuloni came into the spotlight to launch the $50 million Premium Productions for International Audiences Fund.

Speaking at the Big Screen Symposium in Auckland, the first major gathering of the screen sector this year, Sepuloni said:

“New Zealand’s successful response to COVID-19 puts us in an enviable position for film making. We have a golden opportunity to capitalise on the worldwide demand for content and our current production advantage.”

The fund has been designed

“ … to give high quality productions the flexibility and support to take a step towards bigger, bolder and more ambitious projects, as they showcase Aotearoa’s stories and culture to the world.

“We’re looking for productions that will strengthen international investment, grow jobs for New Zealanders and improve skills and capability. Preference will be given to those proposals with the highest cultural benefit to Aotearoa and support for Māori cultural aspirations.”

Sepuloni trundled out numbers to show the screen industry contributes around $3.3 billion to GDP, employs 16,200 people and indirectly supports technical production, hospitality and venues.

She said the fund is providing a balance between investment in productions ready to go to support COVID-19 recovery and longer-term projects through two separate funding rounds.

The fund guidelines and eligibility criteria for the first round will be made available by the New Zealand Film Commission, NZ On Air and Te Māngai Pāho this month.

And so taxpayers may wish a Happy Christmas to prospective winners of their largess.

Notes with the press statement explain:

Manatū Taonga Ministry for Culture and Heritage Arts and Culture COVID Recovery Programme

This fund is part of a suite of initiatives in the Manatū Taonga Ministry for Culture and Heritage Arts and Culture COVID Recovery Programme announced in May 2020, and is delivered by the New Zealand Film Commission, NZ On Air and Te Māngai Pāho.

Reallocated from the New Zealand Screen Production Grant – International, this fund makes up the $73.4 million screen recovery package announced in July 2020.

The remaining $23.4 million in this package is the Screen Production Recovery Fund which has already supported 41 screen productions resume work after being shut down, delayed or impacted by COVID-19 this year.

Further information about the programme

The Arts and Culture COVID Recovery Programme includes a mix of initiatives delivering short-term relief against the impacts of COVID-19 to the arts and cultural sector, as well as offering longer-term support for up to four years.

Collectively these initiatives will safeguard jobs and create new opportunities, promote innovation and enhance people’s access to cultural experiences when we need them most.

In this year’s budget, the Government invested $374 million in the programme “to help the sector survive, adapt and thrive”.

More information is available here. 

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