Location and production incentives, including tax credits and tax breaks as well as regional and national direct support schemes, are a key factor in financing and reducing costs for film and television productions throughout the world.
It is estimated that, in Europe alone, there was €6.85 billion of such funding for film and audiovisual production in the years 2002-2005. (Think Tank on European Film and Film Policy, May 2007.)Each year more and more territories introduce incentives or raise the value of existing incentives, and they are an increasingly important aspect of international film and television production.
For several years, programme-makers working for the BBC have accessed location and production incentives in circumstances which are in accordance with the key principles of the BBC Editorial Guidelines that our editorial impartiality and integrity are not compromised and that we retain editorial control of BBC output.
2. Regulatory Environment
The Framework Agreement contains a prohibition on mixing the licence fee and third party funding in BBC programmes without the written approval of the Secretary of State, subject to certain defined exceptions. However, some of those forms of third party funding, such as location and production incentives, are allowed provided they comply with the principles in the BBC's Statement of Policy on Alternative Means of Finance, approved by the Trust and DCMS.
The relevant principles in relation to location and production incentives are:
BBC Services may not broadcast sponsored programmes or carry advertising and it is important that arrangements with external organisations do not give any impression that a BBC Service is commercially sponsored
The BBC's editorial impartiality and integrity must not be compromised and the BBC must retain editorial control of BBC output
The choice of partners must be appropriate and must not risk bringing the BBC into disrepute.
In the UK, such funds are usually administered by the DCMS and UK Film Council-affiliated regional film & TV agencies.
In Europe, these incentives are governed by European Community law, in particular, the state aid rules of the EC Treaty. Community regulation recognises the difficulty European producers have in getting sufficient upfront finance at the current stage of development of audiovisual production within the European Union and in the face of strong international competition. Exemptions are provided by law to support the fostering of audio-visual production by EU member states with the rationale of encouraging the expression of the diversity and richness of European culture.
A number of countries around the world, including the UK, offer incentives to stimulate film and television production and encourage media and cultural investment.
These funds can be administered by a government entity (at regional, federal or national level), a separately constituted agency or cultural organisation.
It is often the case that incentive programmes, when first introduced, are directly administered by government for logistical reasons. As the support structure matures a separately constituted support agency may be introduced, particularly in the case of discretionary funds.
There is a long history of film and television producers across the industry being assisted by these schemes. International filming, supported by such schemes, also significantly boosts the co-production value of projects to distributors and international broadcasters and is critical in raising co-production finance
Many BBC programmes receiving such incentives are co-productions with broadcasters from other countries, where the incentive may be sourced by the co-producer concerned and currently the majority are produced by independent production companies, who may also source the incentive.
Accessing such funds supports the sustainability of the production community and is in line with the principles of the BBC's Code of Practice with independent producers. Furthermore it supports the BBC's fulfilment of its key public purposes:
Stimulating creativity and cultural excellence (the relationship with the UK film industry and the tax breaks available in the UK are essential to this objective)
Bringing the UK to the world and the world to the UK (an important principle which applies in terms of BBC production of films and TV content which will be shown throughout the world.)
This type of funding supports ambitious and important projects across a range of genres. It also contributes to securing greater range and diversity in what we deliver on screen for our audiences.
Recent commissions involving location and production incentives include The Damned United, Peter Morgan's adaptation of the best selling novel featuring Michael Sheen and Jim Broadbent (BBC Films - Screen Yorkshire), Kenneth Branagh's detective series Wallander (BBC Drama - EU Media Fund), Grandpa in my Pocket, an adventure series exploring the relationship between grandparent and grandchild (BBC Children's - Welsh IP Fund), Learning Gravity (BBC Knowledge - Irish Film Board) and the award winning documentary film Man on Wire (BBC Knowledge- UK Film Council).BBC Films (Films Co-Funded for Theatric Release)
The BBC's participation in the funding of films for theatric release takes place in the context of an international film-making industry, not a television one.
UK public investment in film alone was £277 million in the fiscal year 2006/07. Of this amount, which includes tax relief, approximately 66% was for production.
Independent producers of films produced in the UK recoup 20% to 25% (depending on the budget) of the qualifying spend through the non-discretionary UK tax credit provided by HM Revenue and Customs (with qualification regulated by the DCMS). This tax incentive was hard fought for by the film industry, and is an essential element of the financing of British films.
The BBC does not apply or qualify for the UK tax credit on any feature film and has no jurisdiction over the application. In this arena, the BBC does not act as a commissioner or a producer. It is a key developer of film projects and a co-funding partner on approximately 8-10 films each year. Recent examples include The Duchess and Brideshead Revisited.
The BBC is often a minority funder; there are commonly four or five funding parties for each film, such as the UK Film Council, domestic and international distributors (e.g. Miramax, Pathe, Warner Bros.) as well as national and international screen agencies).
BBC Films determines at the outset the appropriateness of the funding partners and the editorial integrity of the production. Credits are also contractually agreed between the parties in the context of theatric releases, and remain in place for any future television broadcast of the film.
Care will need to be taken in relation to any proposal for the BBC to co-fund a theatric film on topical UK politics or contemporary UK history. As part of the BBC's referral processes it will be referred to the Controller, BBC Fiction, the Controller, Editorial Standards in Vision and, if necessary, the Director, Vision.
4. Key Principles
In accessing location and production incentives, programme makers must ensure that the BBC's editorial integrity is not compromised in any way.
We must consider the types of funding, which funders are appropriate and the types of production which may accept such funding.
Which programmes may accept such funding?
BBC-commissioned drama, comedy, entertainment and children's programmes;
BBC-commissioned factual productions where the funding could in no way undermine the BBC's integrity or impartiality.
Certain categories of programming should not access location incentives and tax breaks regardless of the actual facts of editorial influence:
News and Current Affairs programmesmay not accept such funding whether discretionary or non-discretionary.
Factual programmes which focus on the current politics of a country may not accept funding from schemes operating there.
EU Media Programme
The EU Media Programme, promoting Fiction,Animation and Creative Documentaries, is accessed by independent production companies registered in one of the EU member states and requires the participation of professionals who are nationals/residents of EU member countries and the participation of at least three European broadcasters.
As the aims of the EU Media Programme are consistent with the BBC's own objectives, these funds will remain accessible to all BBC-commissioned programming, including any current affairs programmes commissioned by BBC Vision that meet the criteria of the EU Media Programme'sCreative Documentariescategory. Any such current affairs proposal will be subject to mandatory referral to Director, Editorial Policy.
5. Types of Funding
Although schemes vary hugely in the way they operate, they broadly fall into two distinct categories: Discretionary and Non-discretionary.
There are critical differences between Discretionary and Non-discretionary funds when viewed through the lens of editorial compliance.
(a) Non-Discretionary Funds
These funds generally flow directly from government agencies and there is frequently, especially in those territories without a fully-developed audiovisual policy infrastructure, no separately-constituted film commission or agency that administers them.
Where governments retain no discretion as to which projects can access these tax breaks and incentives, governments often see no need to establish separate agencies with separate governance structures.
Although rules vary, non-discretionary funds are rule-based systems - if you tick a box or a series of boxes [e.g the level of investment in the location], you are automatically entitled to get such a rebate.
In addition, tax breaks, by their very nature, are refunds given through the tax system to programme-makers who access the funding (the money that arrives in a production budget is normally funded through gap finance pending the refund being claimed).
There can therefore be no question of editorial integrity being affected on programmes that access fully automatic "non-judgemental" funding.
(b) Discretionary Funds
These funds are frequently operated through some type of Film Commission or Screen Agency. Examples include UK screen agencies (Scottish Screen, Northern Ireland Screen, Screen West Midlands and UK Film Council etc), Irish Film Board and the Canadian Television Fund, which are agencies operating separately from government.
Although there may be some basic rules and regulations set by these schemes concerning which productions are able to access funding, the agreement to give funds to a project normally involves a decision-making process that evaluates the project in some way - usually on the basis of support of local talent, local creative elements and economic value to the geographical area they serve.
It is this "decision-making process" and the inherent judgement of a project that this entails, which requires us to evaluate whether accessing funds from these bodies would impact editorial integrity in any way.
6. BBC Assessment of Discretionary Funds
In order to provide continuing clarity and a robust framework for the circumstances in which such funding is accepted, we will undertake a programme of review of location and production incentives and a list of discretionary schemes that have been subject to this review will be made available to programme makers (in-house and independent).
On an ongoing basis, we propose that each of these discretionary schemes should be formally assessed by us. The key basis for this assessment would be a careful examination of the scheme's i) constitution and policies; ii) track record and investment history; and iii) in the case of European funding, compatibility with state aid regulations.
This assessment would address the following questions:
i. Does the fund have a constitution and governance structure that is separate from state or Government on individual decisions taken, and/or are the published aims and objectives of the relevant scheme consistent with the BBC's editorial guidelines e.g. free from party-political ambitions?
ii. To the extent known and/or publicly disclosed by the fund [in line with its own confidentiality provisions], have the fund's criteria been applied to individual decisions in a manner consistent with the BBC's editorial integrity and impartiality? Or does the track record of the fund indicate any political agenda not consistent with the fund's stated aims or the BBC's editorial guidelines?
iii. If the scheme is funded by a Member State of the European Union, and therefore subject to European state aid regulations, has the scheme, or the independent producer seeking to access the scheme, ,confirmed that it is operating in compliance with the Cinema Communication of the European Commission.
Most of these schemes are focussed on attracting investment to their specific area but some will also legitimately take a view on the creative value of the project. So long as such judgements are creative ones ("is it any good?", "does it help to nurture local talent?") and are decisions independent of editorial influence then we should feel confident that the integrity of the programme would be unaffected.
In the case of a new fund without a track record, criterion ii would not be relevant. Therefore, close attention would be paid to existing funds that are structured in a similar way to the fund, the track record of any other predecessor funds in the territory, and/or the history of key executives associated with the fund, if known.
This process would enable the BBC to approve discretionary schemes. It would involve a senior business affairs representative within BBC Vision, a senior advisor from Editorial Policy and the Controller, Editorial Standards for BBC Vision, who will determine the approved Discretionary schemes for the division.
The assessment itself should normally stand for 5 years, after which we will re-examine schemes to make sure our knowledge is up to date. With organisations outside the UK, we will, however, keep a watching brief to ensure that arrangements in the country do not require a reassessment at an earlier time.
7. Procedures in BBC Vision
We will integrate the application of location and production incentives into Vision's editorial compliance processes.
There will be mandatory referral to Controller level across the division, therefore all in-house programmes, wishing to use such schemes will be subject to sign-off by the relevant Genre Production Controller.
In addition, there will be a mandatory referral to Controller, Editorial Standards in Vision for all topical factual programmes, and for factual drama productions focusing on the current politics of a particular country where such schemes might be considered. Editorial Policy should also be consulted.
Also, any proposal which requires a substantive change to a well-established BBC Vision programme brand as a result of seeking access to location and production incentives will be referred to Controller, Editorial Standards in Vision to ensure there is an appropriate overview of such arrangements. Editorial Policy should also be consulted.
The BBC's relationship with independent producers is set by The Code of Practice for the Commissioning of Independent Television Productions. Independents are responsible for producing programmes in accordance with the BBC's contractual requirements and Editorial Guidelines. The BBC purchases a licence to use the independent company's programme(s) on the BBC's public services.
It is important to ensure that the operation of our relationship provides an appropriate balance between the parties' contractual responsibilities and the BBC's editorial and compliance requirements.
The independent, as programme-maker with responsibility for putting together the budget and funding for a programme, is the party applying for any incentive funding and is contractually responsible for ensuring all aspects of the production, including any such funding, comply with applicable BBC guidelines. The BBC's processes will support this.
The BBC's Executive Producer, accessing advice from BBC Editorial Policy and BBC Legal, is responsible for ensuring that all relevant editorial compliance issues on each programme are discussed with the independent and are recorded on the editorial specification for the programme (which forms part of the contract). This will also apply to editorial compliance of location and production incentives.
The list of schemes reviewed by the BBC will be available to the BBC's Executive Producers and to independents.
Credits for BBC Commissioned Programmes
End credits for the providers of tax breaks and location incentives are generally a mandatory requirement of funders. In addition, they provide transparency in line with the principle in the BBC Editorial Guidelines which states that we will fairly credit others where editorially appropriate.
For both discretionary and non-discretionary schemes, we believe that credits (and, where required by the scheme, a logo) should be given to acknowledge the enabling role of funders. We also need to ensure that the wording within the credit makes the nature of the funding received clear to audiences (our primary aim) and that no impression is given that the UK government or any foreign government has influenced the editorial content of the production when crediting providers of tax breaks or location incentives.
For discretionary and non-discretionary funding, while it is preferable that government logos do not appear, we accept that this is often required across the international industry.Where possible, we will negotiate to avoid using the relevant logo and use appropriate wording instead to credit the financial support received. However, not all governments will agree to this, so the use of a government logo may be necessary in some circumstances. We will only accept this where the credit adequately explains the nature of the fund on the BBC's version of the programme.
Appendix 1 outlines the credits currently required by the various government agencies.
Reviewing these against this criteria of clarity for our audiences, we believe that both the South African and Ireland statements for example do make this very clear:
South African statement "Produced with the assistance of the Department of Trade and Industry South Africa, who does not accept any liability for the content and does not necessarily support such content."
Ireland statement "Produced on location in Ireland with support of investment incentive from the Irish Film Industry provide by the Government of Ireland"
Our policy here should be to work with the other tax credit schemes (including those that currently require no logo) to find similar wording for the UK audience that makes the nature of the funding clear. Credit wording for individual projects will be agreed by a senior representative from Business Affairs and the relevant BBC Executive Producer based on this policy.
Appendix 1: Sample Credits and Logos
Sample Credits and Logos for discretionary and non-discretionary funds can be viewed here.