Britain's video game industry hit by setback

Government scraps plans for sector's tax-relief proposals

LONDON -- Britain's booming video games industry was hit by a major setback Monday after the new government scrapped plans for tax-relief proposals intended to be in its first budget since winning the election.

The move came amid fears that entertainment and media consumption in the U.K. is likely to be hit after a raft of new tax increases were announced in the budget, leaving millions of families with less disposable cash to spend.

Billed as the budget aimed at halting Britain's slide into bankruptcy, and the first budget by a Conservative administration in 13 years promises a period of austerity for all in a bid to reduce Britain's eye-watering budget deficit, which accounts for one in every four pounds spent in the U.K.

But the decision to overturn the tax relief on the video games sector was met with dismay.

"It's a terrible blow. Our industry will be rightly puzzled as to how tax breaks can be lauded before an election, only to be seen as 'poorly targeted' and scrapped just six weeks later," said Michael Rawlinson, director general of the Entertainment and Leisure software publisher's association. "We understand that this decision has been made in the context of the current economic climate," he says. "Yet the Chancellor today spoke of the need for a more balanced economy. If this is to be attained the government must acknowledge that the creative industries are of vital importance."

Tiga, the trade association representing the video games industry, said the move was a betrayal.

"The Conservative Party and the Liberal Democrats gave their explicit support to the introduction of video games tax relief before the last election," says Tiga CEO, Dr. Richard Wilson, "so we're extremely disappointed that they haven't acted on their pre-election promises."

Although the immediate impact on the media and content industries is limited to dropping planned tax relief for the video games industry, the greater impact will be a tightening of spending that could trigger cut backs in entertainment spending.

The collective reigning in of spending of a raft of tax increases, spending freezes and cuts of 25% in the budgets of most government departments is likely to result in families spending less on recreational pursuits like cinema-going, visits to amusement parks and potentially even spending on pay-TV services like Sky, which have thus far appeared to be recession proof.

A 2.5% increase in sales tax from next January will affect almost all purchases in the U.K. bar those on food.

A public sector spending freeze and the prospect of significant job cuts are also likely to affect spending decisions by millions of families.
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