Updates to this story
Labour has called the Government's refusal to implement tax breaks for the games industry "a remarkably short-sighted decision."
Luciana Berger, a Labour MP for Wavertree, Liverpool has said that the best developers are leaving the UK and going to Canada and the USA. The UK lost 700 jobs in the sector from 2008-09; a full 7 percent of its work force. She said that this was not only harmful to the UK industry and to games already in production but means that some games that would otherwise have been made in the UK are made elsewhere.
George Osborne claimed that the scheme, originally announced by Alistair Darling in the Labour government's last budget in March, was “poorly targeted". Luciana disagrees: she said the UK video games industry makes a valuable contribution to the UK economy. In 2009, it generated £2 billion of sales, added approximately £1 billion to the UK's GDP, raised over £400 million for HM Treasury in tax revenues, and employed more than 28,000 people.
"Why are so many of the video games industry work force leaving the UK at a time when global video game sales grew by 24 per cent. between 2007-09?" she said in a speech.
"Why has the UK games development industry fallen from the third largest in the world based on revenue in 2006 to fifth place in 2009? It is because the UK's principal competitors in Australia, Canada, China, France, South Korea, Singapore and the USA all received national or regional state tax breaks for games production. For example, in Montreal, Quebec, there is a five-year income tax holiday for foreign specialists and research and development tax credits cover 20 percent to 35 percent of qualifying expenditure."
She pointed out other competitive nations have taken a strategic decision that the video games sector is a key element of their economies.
"Can the Minister explain why it is stated in table 2.1 of the Red Book that the non-introduction of video games tax relief would raise an additional £190 million over the next five years? How was that figure arrived at?" she asked.
Earlier on in the week TIGA, the trade association representing the UK video games industry, also released a statement echoing Labour's concerns and called the decision a "mistake."
It said its research showed that over five years, games tax relief would generate 3,550 graduate level jobs, £457 million in investment and raise £415m in tax receipts for HM Treasury. TIGA will continue to campaign for a UK-wide games tax relief. Equally, if the Scottish Government and Parliament had greater tax powers, then TIGA would be calling on them to give a tax break for game development.
A spokesman said: "We want to enhance the video games industry in the UK, and any fiscal lever that can assist us would be welcome. It is up to voters and governments to determine where powers over corporation taxes lie within the UK."