Three Big Ideas #30
Tenuous tax breaks, crafty beer monopolists, and growth vehicles and destinations
Welcome to our weekly Three Big Ideas roundup, in which we serve up a curated selection of ideas (and our takes on them) in entrepreneurship, innovation, science and technology, handpicked by the team.
🎥 Eamonn Ives, Research Director
Taxes are what we pay for a civilised society, so the saying goes. But you hardly have to be a diehard libertarian to think that not everything funded by the public purse is strictly necessary for upholding a functional state. One such example, recently documented by The Observer, is how the 2022 film Jurassic World: Dominion was subsidised by the taxpayer to the tune of £89.1 million through Film Tax Relief. And it wasn’t alone – for the year 2022-23, more than half a billion quid was dished out via this tax break, taking its total to nearly £6 billion since it was created in 2006-07. (Film studios aren’t the only beneficiaries of these schemes, as similar ones exist for other ‘creative industries’, such as High-end TV production, theatre and video games.)
Now, the obvious argument in favour of this scheme is that it drives companies to produce films in the UK rather than elsewhere. This generates benefits like employment, increased local spending, and, yes, new tax revenues that flow back to the Treasury eventually. Indeed, analysis from the film lobby claims that for each £1 the industry receives in support, £8.30 is returned to society.
Quite the return on investment – assuming it’s true. Unfortunately, I can’t help but be sceptical. As Adviser to The Entrepreneurs Network Sam Dumitriu pointed out, the wider evidence base on similar film tax reliefs around the world suggests a far lower multiplier. While I don’t doubt they help the industry – as any reasonable person should expect a subsidy to – the real question is how cost effective that help is. Each pound that gets ploughed into reliefs has to be raised by taxing other businesses more sharply, thereby destroying value elsewhere in the economy. Or an alternative way of looking at things is that money spent on enticing more film production in the UK is money not spent on funding the NHS, schools or some other part of the state.
Moreover, sectoral reliefs like this create a cottage industry of lobbyists whose sole purpose is to defend their fiefdom rather than being genuinely productive. A more neutral approach to tax (and reliefs from it) would eradicate the need for these jobs to exist, and their hard work and effort could be deployed for more worthwhile ends.
As it happens, Film Tax Relief is closing in 2027, but only because the Audio-Visual Expenditure Credit is taking its place. At a time of straitened finances and an increasingly heavy tax burden weighing down on the economy, the Chancellor should think about whether it’s time to call ‘cut!’ on reliefs for film production.
🍺 Philip Salter, Founder
According to Anton Howes’s latest Age of Invention essay, the road to mass-produced pale ale was much longer, more winding, and more interesting than expected. It’s another of his essential long reads which, taken together, tell the story of Britain’s Industrial Revolution.
Drying malt was once a difficult endeavour, as smoky fuels like wood and coal tainted the malt and harmed its quality. Anton tells the story of how inventors attempted to solve this by developing smokeless kilns – devices that separated fire from malt, allowing the use of cheap, smoky coal without tainting the product.
A series of proposed and patented designs emerged in the early 1600s, including Hugh Plat’s lead-heated floor, John Shotbolt’s iron-conducted heat system, and Cornelis Drebbel’s thermostatic stove, which automatically regulated temperature using early thermostat technology.
There are numerous parallels to draw with industry today, including an attempt by Shotbolt to centralise and monopolise the malt trade under a corporate charter, despite Drebbel’s invention being technically superior. Alongside others, Shotbolt proposed creating a Society of Maltsters, a new official guild, which claimed to represent all maltsters in England. But really, it was an attempt to create a monopoly disguised as professional regulation.
While we’ve greatly improved at brewing beer without needing a monopoly, we remain burdened by ‘furious monopolists’ – those whose claims to act in the public interest are dubious at best, even as they profit handsomely from regulation.
🛣️ Anastasia Bektimirova, Head of Science and Technology
“Growth” has become Westminster’s favourite promise, with every other new policy proposal claiming to deliver it. But few seem to articulate what kind of growth, and towards what ultimate purpose. As Jeegar Kakkad of the Tony Blair Institute recently tweeted:
“One cannot just say ‘here is a policy to deliver growth’. Not all growth is equal. One needs a theory of the type of growth (therefore economy) you want. One can then judge policies on whether they are aligned to that type of growth or not.”
Economic growth is often viewed as a destination when it really is a mode of transportation. A sports car and a bus both move forward but at different speeds. Both are important, but they serve different purposes, carry different passengers and a different number of them, arriving at different destinations. Each vehicle is engineered differently, has different fuel requirements and a different impact on the landscape it traverses. In last weekend’s piece on abundance, Janan Ganesh wrote “you can’t buy moderation... you can’t build or grow your way to civic sanity”, noting that “the biggest head-scratcher in the modern world is the lack of correlation between abundance and voter happiness.” Just as not all vehicles are suitable for every journey, not all forms of growth address every societal challenge.
Before debating how to accelerate, we should first figure out where we’re trying to go. Ian Hogarth’s analysis of Europe’s technology sector illustrates this well. When Ian argues for building trillion-dollar companies, “this isn’t just about growing the tech industry for those that work in it: it’s about creating a more prosperous and resilient society with more wealth to pay for Europe’s public services.” Pro-business policy asks often miss this point. Companies are part of a national ecosystem, not the endgame.
When Bank of England economist Andy Haldane travelled the country after the 2008 financial crisis, armed with economic recovery data, the public often asked him: “Whose recovery?” So, alongside asking “will it deliver growth?”, it’s worth asking “what kind of society would this growth create?” Growth of what? For whom? At what cost? For what purpose? The vehicles we choose reflect what we believe is worth growing, who benefits, and which trade-offs we accept. Articulate a society you wish to create and align your wealth engines to get there.