Why The Film Industry Controversy Matters To All Nova Scotians

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Much has been said and written over the past year about the Liberal government’s decision in April 2015 to do away with the government funding structure for the film and television industry that had existed in Nova Scotia for twenty years. Financing structures for the industry are a bit of an arcane art to begin with (as they are with most industries), and it has been made even more difficult for the average Nova Scotian to follow given the fact that there have been different numbers and statistics put forward by both the government and the industry to attempt to justify their respective positions – the industry has largely relied on numbers provided by the former government film agency in previous years along with industry sources such as the Canadian Media Producers Association, while the government has primarily relied on figures provided by the Department of Finance. The issues involved in terms of the actual mechanics of the production and financing system of the Nova Scotian film and television sector, which after all is but a very small part of a much larger globalized multimedia industry, are complex and difficult to distill into media-friendly soundbites. Nova Scotians could be forgiven if they threw up their hands in frustration and said, “we don’t know who is right, and really… why should we care?”

The answer is simple: The film industry controversy centers on two issues of fundamental importance to all Nova Scotians:

(1) Our ability as citizens to trust our government (and our concomitant ability to believe that it is dealing with us in good faith); and

(2) The way that government does business with the private sector.

When we examine how the Liberal government has dealt with the film industry, serious problems are evident on both counts.

In terms of the first issue – trust and acting in good faith – a government needs to act in an open, honest and transparent manner in order to provide good governance. That means meaningful consultation with citizens, whether as individuals or groups, on issues and decisions that are going to affect them. It requires providing accurate information at all times so that people can make informed decisions as to the right course of action. Finally, it requires the government to keep its word when given.

Where the film industry controversy is concerned, the Liberal government has failed in all three of these requirements.

Not only was there no consultation with the industry about the changes implemented last April, there was no consultation with the government’s own film agency, Film and Creative Industries Nova Scotia. Employees there were as surprised by the decision to gut the film tax credit and dismantle FCINS as anyone else (indeed, they were the first casualties in the steady loss of jobs that has taken place ever since).

In terms of providing accurate information, the Liberal government has continually cherry-picked the information it has provided so that it fits the government’s own agenda. It has repeatedly failed to reference any of the many studies and reports – including those commissioned by the Nova Scotia government itself – that would cast doubt on the narrative that they are trying to sell.

Finally, in terms of keeping its word, the government has repeatedly failed to live up to its commitments, starting with the original sin they committed when they went back on their 2013 election promise to not only retain the film tax credit as it was then structured, but to make it even better by streamlining administrative procedures. The most recent example came just last week when Screen Nova Scotia met with the Minister of Business on Thursday to discuss changes to how the new Film & Television Production Incentive Fund works. The Minister called a press conference on Friday in what SNS had been led to believe would be a positive announcement that at least some proposed changes being agreed to, only to have the Minister show up late in the afternoon to tell the assembled and disbelieving media that he just wanted to clarify that there would be no changes.

Needless to say, film industry representatives were angry at what they saw as yet another failure by the government to act in good faith. Given the government’s track record, who could blame anyone for not believing them – and that is a problem not just for the film industry, but for all Nova Scotians.

In terms of the second issue – the way that government does business with the private sector – the ramifications of the Liberal actions with respect to the film industry are just as problematic. There are two basic ways that a government can provide funding to the private sector:

1. Create a system that mitigates the risk to the government and places it all on the private sector, that encourages entrepreneurship and innovation, and that provides everyone with a level playing field. In this type of system, no money is advanced to the private sector until the project for which they are seeking funding is completed and an independent audit of costs has been conducted, along with a further review by government to make sure that all the criteria for eligibility are met. In the meantime, the private sector company will have to interim finance the project themselves, usually by getting a bank loan based on the bank’s assessment that their venture will be completed successfully and that the government will then provide the funding to repay the loan. The private sector assumes all of the risk. Anyone who meets the eligibility criteria for such a fund can apply, and there is no discretionary power by civil servants to pick who will get the money and who will not (that’s the level playing field). A good idea is a good idea, and if you can sell yours to someone in the private sector and then “build” it, the government will provide you with financial support as a way of encouraging this type of entrepreneurship and creating jobs. This system is transparent, accountable, and free of risk for the government (and by extension, taxpayers). Call this the “first system” approach. It is the ideal.

2. The second way to go about providing money to the private sector is to have a program where a bureaucrat or politician decides who gets the money. Call this the “second system” approach.

John Savage
John Savage

The film tax credit was the epitome of the first system approach. It was introduced in the mid-1990s by the Liberal government of John Savage, who recognized that the film industry was worthy of funding. But Savage was also a reformer who wanted to put an end to the corrupt culture of patronage that had existed in Nova Scotia since its founding, and which had become especially prevalent in the Liberal Party (as one friend of mine told me years ago, “the Liberals don’t do patronage – they are patronage”). Accordingly, his government created the tax credit system – accountable, transparent, risk-free, and open to anyone. His crusading zeal against patronage eventually led to a revolt within his own party, and he was forced from power in what amounted to an internal coup, but the tax credit system remained and continued to work effectively for the next two decades.

The Fund that the current Liberal government has replaced the tax credit with appears, on the surface, to be based on the principles of the first system outlined above – first come first served, and if you qualify you get the money. But governments and bureaucracies are almost invariably drawn towards the second system approach because it allows them to exercise control over who gets government money. In the best case scenario, well-meaning bureaucrats do their best to make good decisions, but usually with a pretty poor track record. In the worst-case scenario, you have a system open to cronyism and patronage, where friends are rewarded for favours that they have done for you along the way, or that they might do for you in the future. It doesn’t really matter if they have a good idea, or are good at what they do, as is required by the first system. When given the choice between the first system or the second, most governments choose the second because it benefits them to do so, even as it works against the interests of citizens in general.

And this is where the real danger lies in the new Film Incentive Fund. The government has allocated $10 million, with a per project cap of $4 million. That means that the Fund, which is structured to be a first system mechanism like the tax credit, has a cap that could be exhausted by just three projects.

Filmmakers are understandably concerned about what would happen next. They want a fund without a cap, meaning that if you have that good idea referenced above, and are willing to take all the up-front risk, then there will always be money there for you. Alberta has a similar film fund, upon which Nova Scotia’s new one has been based, and they operate on the understanding that no eligible project will be turned away. As Calgary Film Commissioner Luke Azevedo stated last October, “This province has never turned down a project that has met the criteria and has never not paid out a project that has met the criteria.” 

Unfortunately, this approach doesn’t seem to work for the Liberal government in Nova Scotia, which has said without equivocation that if and when the initial $10 million is exhausted they will judge requests for more resources on a “case by case basis.” That is a second system approach which potentially allows the government to determine which projects are worthy (whether individually or in small groups), and which ones are not. We have no idea what criteria they would use to make those judgments, or even who would be making them. We have, however, seen repeated indications of the mindset that the Liberal government has when it comes to making these decisions.

In the past week, for example, Premier McNeil stated that he viewed the Fund as “an investment to an organization,” and that the Province was “giving money” to the film industry. That is a second system mindset. If he had a first system philosophy, the Premier would look at it not as “giving money” to an organization, but as creating a fund where individual private sector companies would earn the money only if they met the criteria and completed their production. Language is important, and there is a profound difference between these two philosophies.

Filmmakers under the McNeil government’s approach are confronted with a degree of uncertainty that completely undermines their ability to plan in advance, and they have no guarantee that the government will view favourably their requests for further funding when the $10 million runs out. Indeed, there is even a risk that the government could use the threat of withholding further resources against anyone who speaks out against them. Just as the patronage system allows government to reward friends, it also allows them to punish those whom they perceive as enemies. That is how a system works when the government believes it is “giving money” to people as opposed to them earning it by taking all the risks, creating jobs and satisfying the terms of eligibility for a program.

As a result, the film industry controversy has revealed a government that has not acted in good faith in its dealings with the private sector, and that is inclined to favour providing funding to the private sector based on a system that could allow for patronage over one based solely on entrepreneurship and merit. 

And that is why the Liberal government’s actions with respect to the film industry matters to all Nova Scotians.

Paul Kimball

Why The Film Industry Controversy Matters To All Nova Scotians

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