When the UK Film Council boasted recently about the amazing success of British films, most of us felt like committing suicide. None of the films the UK Film Council was bragging about were British! Most of them were made by four foreign studios: Pathé, Warner Bros, Disney and Universal - all companies adept at exploiting British grants to subsidise their movies.
About 10 years ago I was at a party in Los Angeles where a group of Warner Bros executives were laughing at the UK for giving them millions of dollars in free money. This money is a complete loss for the UK because, even when it buys stock in a film, revenues are swallowed up by the Hollywood Accountancy Hole.
An American business manager, who had writers and producers as clients, once told me that, when he was at college, his professor put a week aside to explain "Hollywood Accountancy'' to the class. Hollywood Accountancy does not obey normal regulations. Hollywood studios can do things with accounts which are illegal in any other business. The reason is because Franklin D Roosevelt, in 1939, wanted to help Britain by declaring war on Germany but couldn't get Congressional support, as most Americans were either isolationist or pro-German.
Unable to persuade Congress to back a war, Roosevelt launched a propaganda campaign to induce the American people to call for one. He couldn't get the newspapers "on message'' because they were controlled by his opponents, so he went, cap-in-hand, to Hollywood. A deal was made. The studio moguls agreed to produce anti-German movies in exchange for financial-control exemptions. Hollywood Accountancy was born - and continues to this day.
Defenders of UK subsidies to foreign companies insist they create jobs for British film-makers. The idea is that, in return for grant aid, foreign film distributors assign productions to the UK - thus providing work and keeping our production facilities alive. This is an illusion.
In 1988 I worked on Batman, which was being shot at Pinewood. I asked one of the producers, John Peters, why it wasn't being shot in the States. He said: "Because it's 30 per cent cheaper here, and nobody gives you any bullshit.'' (American workers - unionised and citizens of a republic - are less submissive than their British counterparts.)
The funding of foreign films with grants and lottery cash doesn't help us in any way whatsoever. It does the opposite. It rolls a heavy stone over the grave of the UK film industry - preventing its resurrection.
Before the abolition of the Eady Levy and capital allowances, we had our own film industry. Between 1948 and 1972, just one British company (Hammer) made 168 movies - all of them released in British cinemas and sold around the world. In one year alone (1956), Hammer released nine movies. Utterly inconceivable today. The Eady Levy worked as follows: in exchange for access to our domestic market, foreign distributors paid the government a small percentage of the income they received from selling their films in Britain. This was a benign tax because if their movies did badly they lost very little, and if they performed well their losses from the levy were insignificant compared to their profits.
The sums collected under the levy were passed on to British distributors. Although small, in lean years income from the levy could make the difference between a British distributor going bust or staying afloat. But, in the early Seventies, under pressure from the US government, the levy was abolished - and the funeral of the British film industry began.
It makes no difference how often government ministers and quangos like the UK Film Council talk up the British film industry, it doesn't exist. Let me repeat that: the British film industry doesn't exist. It hasn't existed for more than 30 years.
In the past few decades we've had some very nice arts ministers, but they've been unable to help British films because of the impotence of their departments. The only route to a British film revival is through legislation, but no arts minister has had the power in Cabinet to make this happen - though some have tried. The Treasury, the Department of Trade & Industry and the Office of the Prime Minister have been against protecting British films because of a commitment to the ideology of the free market. The problem with ideologies is they are "one size fits all''. The free market, though a boon to most enterprises, was clearly disastrous for the British film industry because it reduced it to little more than a Hollywood service provider.
Today, the Hollywood Seven (soon to be six when MGM is bought by Sony) control a whopping 84 per cent per cent of our domestic market. The French company Pathé controls about 12 per cent. Our own films have less than four per cent market share. No matter what the UK Film Council says, this is not a national industry. A national film industry cannot be said to exist unless it has at least 20 per cent of its home market.
France, despite constant howls of rage from the US government, continues to protect its film industry. By law, foreign companies are precluded from owning a greater than 70 per cent share of the French market. This guarantees 30 per cent of the movies released in France are French. French filmgoers complain about this because most French films are crap - they'd rather see more American ones. What they don't understand is: you have to make bad films to make good ones. Of the hundred-or-so French films released each year, about 90 are bad - which is why the French get so pissed off. But the French industry's hit ratio (approximately 10 per cent) is much better than Hollywood's.
America makes about 2,000 movies a year, of which about 460 are released, out of which 50 are profitable. America's hit ratio is only 2.5 per cent. The French government knows its industry is four times more successful than Hollywood's, but because Hollywood makes 2,000 movies a year, and France only 100, the playing field is not level. So, legislation is used to adjust it. Without this adjustment, French films would be destroyed - and destroyed unfairly.
During the 35 years before 1970, British movies created close to 100 stars. If anyone tells you we have an industry today (let alone a "successful'' one), ask him how many stars it has created since 1970. The answer is none.
But what about Anthony Hopkins, Daniel Day-Lewis, Gary Oldman, Ralph Fiennes, Kate Winslet, Pierce Brosnan, Sir Ian McKellen, Kate Beckinsale, Catherine Zeta-Jones, Jude Law, Keira Knightley and Orlando Bloom? Most of these actors were showcased in British efforts, it's true. But they were all made into stars by Hollywood.
When JK Rowling was approached to sell the rights to her Harry Potter books, she wanted them to go to a British studio. But there isn't one. So she sold Harry Potter to Warner Bros. The UK Film Council brags about the massive success of the Harry Potter movies, but this is sheer nonsense. Their success is a humiliating demonstration of the abject failure of our industry. It's disgraceful these movies were not made by a British company.
It's often believed the reason why projects such as Harry Potter are made by the Americans and not us, is because they have the money and we don't. But we do have the money - British banks are investing billions of pounds every day of the week. But there is not one British company currently set up to give a film a general UK release. Film revenues come from the public paying to see films, so, unless delivery to the public is provided, the banks can't invest.
Before 1972, distributors like the Rank Organisation, British Lion and EMI decided what movies to make and who would make them. They employed bankers and film-makers to produce the movies, and created publicity departments and movie stars to sell them. They released in the UK, then sold worldwide via the international film markets. Their revenues were substantial - though not enough to withstand competition from the larger Hollywood industry. But, as they had government support, in the form of tax breaks and the Eady Levy, they survived.
If protection had not been removed, these corporations would still be financing and releasing films today. And, today, because of new, improved sources of income, the economic climate is enormously improved since 1972 - the year Lord Rank, founder of the Rank Organisation, died, along with our industry. World markets have expanded rapidly. Video and DVD have quadrupled revenues. Thousands of television channels, hotels and airlines now buy movies. And we have a significant advantage over our non-US competitors because our films are in English. Also, we have a superb indigenous infrastructure of modern cinemas thanks to the Nineties building boom in shopping-mall multiplexes. And, on top of this, we have an incredible pool of talent, currently working in Hollywood enriching the Americans, who would much rather be here, enriching us.
The British film industry may not exist now, but - with a little government help - it's a success story waiting to happen.
If anyone still believes the free market is good for British films, they are deranged. Besides, the free market is only free for Hollywood. The reason there are no official laws protecting US films is because they don't need them. They are fully protected by unofficial laws.
For example, when I was living in Los Angeles, I tried to set up a project with an American star. The star's price was $1.5m a picture. About two years later, I'd moved back to England and was helping produce a film for a European distributor. I called the American star's agent to check on the status of the star. The agent wanted information about the project. "Are you paying Working Title rate?'' he said. "If you want him, you gotta pay Working Title rate.''
"What's Working Title rate?''
"For him it's $6 million.''
"What's his price in the States?''
"I see, so, Working Title rate is three times his price?''
The law is that if a foreign distributor, or foreign production company wants an American star, they must pay a tariff. This tariff is the star's price multiplied by three - known in the industry as the "Working Title rate'' because the first to pay it was Working Title, the English production company.
Here's another example of unofficial protectionism: in 1980, George Harrison's HandMade Films financed and produced Time Bandits, a marvellous fantasy written by Michael Palin, starring John Cleese and Sean Connery. When they showed it to the Americans, three studios offered to buy it. But the offers were derisory - not enough to cover production costs. HandMade felt certain Time Bandits would be profitable, and it was willing to share the profits with a distributor; but the unwritten law in Los Angeles concerning foreign companies is: "take, don't give''. If HandMade had been a US company, it could have done a fair deal, but it was foreign so the door to the market was closed.
HandMade resolved to distribute Time Bandits itself, and set up screenings for the US cinema chains. The exhibitors liked the film but were nervous about showing it, in case they offended Hollywood - their regular suppliers. So HandMade came up with a tempting offer: 70 per cent of the gross, plus a generous multimillion dollar advertising budget.
They took it. The movie was released and made a fortune. Hollywood was so aggrieved it prohibited the cinema chains from ever dealing with HandMade again. Profits from Time Bandits financed three more movies - all of which HandMade tried to release in the US through the cinema chains, but its phone-calls were not returned.
On the other side of the "playing field'', there are no restrictions for American companies to enter the British market. Indeed, we welcome them with open arms.
About six months before Stewart Till (chairman and CEO of American distribution giant UIP which controls 80 per cent of the UK home market) began trumpeting the "success'' of British films, I had a conversation with a board member of the European Film Academy. I was curious why Cold Mountain (Disney), Love Actually (Universal), Sylvia (MGM), Shaun of the Dead (Universal), Veronica Guerin (Disney) and Troy (Warner Bros) had been nominated for European Academy Awards as British films. My friend explained they qualified because they'd been produced by British companies.
"But surely it doesn't matter who Hollywood pays to produce its films - they're still Hollywood films, owned by Hollywood studios?''
"In a sense, that's true,'' said the board member. "But you have to understand, a good deal of the European Film Academy's sponsorship comes from these companies, and they like to win awards.''
A revival of our industry cannot be achieved while governments cling to an absolute belief in the free market. Besides, it's hypocritical of the government not to protect British films when it protects British television. In TV, legislation dictates American products cannot take more than a 30 per cent share of terrestrial broadcasting. We won't have a film industry until we're releasing at least 50 films regularly each year. For this to happen, we don't need grants or lottery funds, we need bankers who understand the movie business - and we need a measure of protection. All the government has to do is inform UK distributors that 20 per cent of the films they release must be British. Local distribution and marketing managers will welcome this because it will make them important players in the new British film industry. And, although their foreign parent companies are bound to squawk, they will still retain 80 per cent of a lucrative market.
It's impossible to overstate the importance of having an indigenous film industry. It will have a positive effect on wealth creation - not only in terms of the movies themselves (employment, taxes, profits), but also because of knock-on effects. Indigenous film industries help societies understand themselves. We see this in other countries like India, France, Japan. We, too, need our own film industry. And we need it now. And the government can give it to us, at no cost, with the stroke of a pen.
Jonathan Gems was a writer on 'Mars Attacks!', 'White Mischief' and other films.
A version of this article appears in 'Showreel'. www.showreel.org