Morris cast as heroine of UK film industry in battle to save tax credit

Britain's burgeoning film industry will die unless a controversial tax break - due to expire in two years' time - is extended, Estelle Morris, the Arts minister, fears.

Lengthy discussions with film makers have convinced Ms Morris that it would be disastrous if section 48, one of the tax credits behind the resurgence of Britain's film production industry, is axed in 2005. The measure applies to films with budgets of less than £15m, covering a wide crop of recent British hits such as Bend It Like Beckham and 28 Days Later, both now grossing millions overseas, and Calendar Girls and Young Adam, which was released this weekend.

But it has attracted the condemnation of accountants who have said the chance to recoup 20 per cent of money invested was being used by high earners to avoid paying tax by investing in films of little artistic merit. Television companies, too, exploited hazy definitions of what constituted a film, prompting anxiety that more than half of the £200m that the scheme cost in its first four years related to TV shows.

Ms Morris acknowledged there had been abuses, but said the case for the tax relief - introduced by Labour in 1997 - was compelling. Furthermore, the decision must be taken this year so producers could plan without uncertainty. "The evidence is that the tax credit has done what it was meant to do. It was a sound investment and it has proved its worth," she said. "It will be for the Treasury to decide. But I'm quite clear what my role is and ... I think [the credit] has got to continue. Films about British culture won't be made unless Britain makes them."

Her first public statement as Arts minister is likely to delight film makers, lobbying fiercely to save the tax provision. The value of British films - excluding bigger productions made in the UK with foreign funding and UK co-productions filmed abroad - was £165m last year. Bend It Like Beckham cost £3m to make but has now taken more than £45m worldwide, while 28 Days Later cost £4.5m and has taken £46m. Both received tax breaks and lottery funding.

They also help maintain the skills base that enabled the UK to attract inward investment of £234m on blockbusters such as the Harry Potter series.

The maintenance - and possible extension - of tax breaks was an important recommendation in the Culture Select Committee's report on the film industry this month.

But Ms Morris was more cautious about its other main conclusion - that British broadcasters, particularly the BBC, needed to do more in making and broadcasting British films.

She said the Government could not tell broadcasters how they should invest, but she added: "I would say because of the importance of film, I think it would be very nice if the BBC accepted its part, its obligation as a public service broadcaster, to look at film."

Ms Morris has an ordinary punter's knowledge of recent British cinema, but she rediscovered her love of film when very busy as Education Secretary, when to "see a film" was the easiest means to relax.

Nobody expected the Health Secretary to be a GP and she would never be a film buff, she said. "But I do know about lobbying, I know about politics. My job is about advocacy."

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