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The Coalition government has been accused of harming the growth of the UK IT industry in a Westminster Hall debate, with a warning that the UK’s position as the world’s fifth largest ICT market could be in jeopardy.
Bridget Phillipson, Labour MP for Houghton and Sunderland South, attacked Ed Vaizey MP, Parliamentary Under Secretary of State at the Department for Business, Innovation and Skills, accusing the government of going back on pre-election promises, highlighting fears that decisions such as withdrawing tax breaks for the games industry would undo positive steps taken by the previous administration to support the UK IT industry.
“It was the Labour Government who developed the framework that pushed Britain to become the fifth largest ICT market behind the United States, Japan, China and Germany. However, I fear that the actions of the Coalition government since the election will jeopardise that,” Phillipson said.
Phillipson attacked the Coalition decision to scrap the Labour initiative to provide universal broadband access by 2012, despite a Boston Consulting Group report showing that 250,000 jobs were dependent on the internet sector.
It was noted that the internet economy represents 7.2 percent of the UK’s GDP, enabling Britain to lead the world in e-commerce, with Phillipson arguing that “a strong broadband network is at the heart of that.”
It was also contended that a review of intellectual property laws announced by the Prime Minister recently will leave Britain’s intellectual property unprotected and exposed to foreign developers, with Ian Lucas, Labour MP for Wrexham, suggesting during the debate that a suspiciously close relationship had been developed between the PM and Google, who oppose the UK ‘s supposedly stringent laws.
“It is interesting that on the very day the Prime Minister announced that there would be a review of intellectual property rights in the UK, Google announced that it would be taking part in the east London high-tech city project,” said Lucas.
Mr Vaizey refuted the comments.
Phillipson also highlighted the decision to withdraw tax breaks previously committed to the UK’s vibrant games industry which could seriously affect the UK’s ability to compete in a highly competitive international market against rivals such as France and Canada.
“The Tories and Liberal Democrats previously committed to providing tax breaks to the computer games sector. I know that many of my colleagues have spoken about that in this Chamber and on the Floor of the House on many occasions, and that there are strong feelings about it. I support their views on the need for tax breaks for the industry,” said Phillipson. “The industry body states that, without them, the UK will be at a disadvantage compared with foreign competitors.”
According to Richard Wilson, chairman of games trade group TIGA and chief executive of developer Rebellion, tax reforms are vital to enabling competitiveness.
"A typical UK developer generates 62 percent of their turnover from the export of video games,” said Wilson. "If the UK Coalition government wants the video games industry to fulfil its export potential then it must introduce tax reforms including games tax relief and TIGA's enhanced research and development proposals.”
Phillipson maintained that the Coalition had inherited a healthy industry from the Labour administration.
“The Labour Government left Britain in a good position to become the world's leading exporter of ICT software and services. From the story of ARM, it is clear that Britain has what it takes to compete in the global market, as long as the Government provide the tools and support that the industry requires,” said Phillipson.
However, despite the recent announcement of £200 million of development in London, a lack of investment in regional services has been a cause for concern with Phillipson demanding that further investment is necessary in areas outside London such as Sunderland where initiatives such as One North East support a games and software industry worth £250 million.
The Coalition has decided to cut the One North East quango, a decision that Philipson has contested.
In response Mr Vaizey recognised the importance of regions such as the north east in ensuring the UK retains competitiveness in the industry.
“There has been recognition of the pioneering role of the north-east and Sunderland in ensuring that the UK remains a world leader in this important industry,” said Mr Vaizey.
However Ed Vaizey also debated the assertions a tax break would be a sure-fire way to support the industry, citing the vitality of the UK games industry as reason why it should stand on its own.
“Let us be clear about it: people want a video games tax break because of the competition that we face from Canada. A tax break is not a panacea; France has a tax break, but we have a more successful video games industry,” said Mr Vaizey.
He also denied that Labour were such staunch supporters of tax relief, labelling such declarations a political ploy.
“It is a bit odd for Labour MPs to claim that if you cut them open, "video games tax relief" will be written on their hearts; the relief was a political ploy to win support from the industry in the run-up to the election, and they knew full well that they would not have to implement the policy.”
However the Minister, who shares responsibilities with both the Department for Culture, Media and Sport and BIS, stated that the Coalition government was committed to supply superfast broadband throughout the UK.
“We want the best superfast broadband in Europe by 2015. We have secured the funding for it-£530 million to the end of the spending review, and a further £300 million after that. We have launched four super-fast broadband pilot projects, in the highlands and islands, Herefordshire, Cumbria and North Yorkshire, so that we can identify early lessons and work out how to proceed in the most cost-effective way. We shall also launch in more detail at the end of the year our policy on broadband, setting out some of the nuts and bolts issues.”