• As someone who has paid for UK private surgery on 6 occasions in the last few years due to pressure on IoM Hospital Waiting Lists ( 2 Tumour Operations; 2 Hip Replacements; 2 Cataract Operations) I find it abhorrent to see my taxes going to buy Shares in an unlisted private UK Film Studio, rather than be applied to improving the efficiency and cost-effectiveness of essential mainstream public services for the Manx people.• The Pinewood studio proposal makes it seem like politicians are out of touch with reality & the electorate.
• In risking the £49m on this venture, it appears that only one person obtains 100% security of outcome and that is Mr Christian – as at least he comes out of it with an even more prestigious job as Director of Pinewood Studios.
• Am I the only one who feels like The Little Boy in Hans Christian Anderson’s tale of “The Emperor’s New Clothes”?
The story in which only the Boy sees that the Weavers have not delivered to the Emperor all that was promised ?
While the Crowd and Emperor’s courtiers are simply too frightened to speak up, for fear of being viewed ignorant or out of step !
• Please treat the £49m as totally new money put on the table before you, as that is what it is.
• Please do not vote for the UK Film proposal UNLESS you are honestly unable to think of any better way to spend the money and thus are happy to explain that to your electorate
THE PRESENT POSITION
• CinemaNX has the management contract for investing funds which the Manx people set aside to pump-prime a LOCAL Manx Film Industry, when economic times were good.
• The 2 key figures in CinemaNX are Steve Christian and Marc Samuelson.
Steve Christian has been the driving force behind attempts to develop a LOCAL IoM Film Industry.
His efforts were rewarded with some £85m of Manx taxpayers’ money being put into a Media/Film Fund.
• There have been regularly calls for more transparency in how this money was being spent.
These calls have been compounded by late publication of Accounts and the inadequate information in them.
The handling of the funds was distanced even further from public scrutiny by the establishment of CinemaNX.
While a private company structure was argued for confidentiality, commerciality & flexibility, it inevitably drew a further veil over the transparency of its activities.
• Mr Christian has argued strongly that the operation of his film business requires total confidentiality and trust.
While this may be true, businesses requiring such high level confidentiality are best funded by private capital.
Compulsory Public Taxation is not best suited to funding non-transparent risky commercial ventures.
Ultimately, Information is Power.
And lack of transparency results in those denied information becoming totally reliant upon those guarding it.
In the words of Aung San Suu Kyi “ Lack of transparency means no Accountability ”.
• The CinemaNX management contract comes to an end in August 2012.
Entitlement to existing IoM Film royalties etc., will nevertheless continue to flow into the Treasury.
However, CinemaNX will lose its IoM Government management contract income.
It is obvious that CinemaNX has been a failure, or its contract would be simply rolled over in a blaze of glory.
• The end of its IoM contract means CinemaNX Directors Christian & Samuelson need to find replacement income.
Mr Samuelson, formerly cited as a key player, is already quoted in the press as waving goodbye to CinemaNX.
That just leaves CinemaNX Director Steve Christian to resolve his own situation.
However, in the latest proposal, the £49m Pinewood Studio Share combined Purchase/Management Contract will result in Mr Christian being made a Director of Pinewood Studio
FUNDING THE MANX FILM INDUSTRY GROWTH WITH THE HELP OF VAT
• Initially, the UK/IoM VAT Agreement enabled the MANX FILM INDUSTRY to exploit 100% VAT retention for IoM Film. This was seen as a major VAT tax coup for IoM. It increased the IoM VAT take significantly. The UK subsequently reformulated the VAT regime. It now prevents any such manipulation of the agreement.
• Under the reformulated VAT regime, the IoM Government is now faced with a permanent c. £175m per annum VAT reduction penalty imposed by the UK.
• Within 2 years the size of the VAT reduction imposed by the UK wipes out any VAT gains accumulated by IoM Film under the previous loophole.
• The c.£175m p.a. VAT reduction will remain a perpetual additional burden on Manx Taxpayers.
OXFORD ECONOMICS / IOM FILM CONTRIBUTION
• The end of the CinemaNX management contract provides an opportunity to examine what we now do with the £49m of Manx Taxpayer Money still left in a cocoa tin currently labelled “IoM Film”.
• As it is uncommitted, the £49m could continue to be invested into IoM Film. But under CinemaNX, IoM Film Development has been uninspiring over the past 5 yrs (i.e. post VAT changes).
• The biggest coup was the shock discovery on its own doorstep of the IoM TT, with its unique cinematic appeal.
• Alternatively, the £49m could be put back into Treasury Reserves - due to the present unforeseeable economic circumstances and drastic measures needed to re-balance the Budget.
• Otherwise, it could be used to pump-prime/induce other New Concepts e.g.
- A world renowned Medical Speciality Unit
- A “New Manx Design” Competition and Eco Village Development (to break away from White Cottages)
- An additional Marina
- A Tax-Free Industrial Starter Unit park ……………………etc., etc.,
• As some decision was required, Oxford Economics was asked to review the IoM Film contribution.
• The Oxford Economics (OE) study is disappointing. It seems drafted just to support The Pinewood Option.
Supportive statistics rely heavily on the early heady days of VAT regime exploitation by the Film Industry. The poor recent performance by CinemaNX and the Film Industry over the last 5 years is just ignored.
• OE states that Film has generated £290m of revenue, chiefly by taking maximum advantage of the previous UK/IoM VAT sharing regime.
OE does not question if legitimate exploitation of the prior UK/IoM VAT system contributed to the UK view that the established VAT Sharing Protocol was no longer appropriate – resulting in an adverse change in the formula.
As that change led to a c.£175m p.a. VAT reduction penalty, the issue needs airing.
• It is difficult to prove/disprove the many intangible benefits that are often claimed as repayments by IoM Film.
But to afford the Taxes that set up IoM Film, Manx Taxpayers need to have Real Cash in their own wage-packets. Because payment in intangible Awards, Achievements, Credits & Applause does not pay their Tax Assessment.
• Also, sloppy quoting of statistics by OE (e.g., IoM Film is responsible for 2,000 Jobs) is very misleading.
Taken at face value, with an IoM working population of 40,000, that means that every 20th IoM worker one encounters is praising IoM Film for being in their job. Such a thought is bizarre.• As well as the benefits attributed to IoM Film, there are also the inevitable Forgotten Failures ……..
- Failure to turn Jurby into the promised land of a Manx Hollywood
- Abandonment of education/college/technical training courses to support IoM Film
- Closure of Ramsey Film studios & the stigma of its controversial planning approval
- Failure to spot or attract a Blockbuster
- Investments in Flops
- After banking their fee, the inevitable uncomplimentary comments about the Island by some IoM Film “Stars”
- Failure to provide permanent local jobs in IoM Film (except for IoM Film management itself)
- Constant metamorphosis of the bodies involved, making it difficult to monitor what was going on
- The loss of our patriotic Manx global marketing banner “ISLE OF MAN FILM”
- The subsequent loss of the replacement Manx marketing banner of “CINEMANX”
- The proposed loss of the latest marketing banner of “CinemaNX”, in favour of “Pinewood Studios”.
• The OE approach to the best utilisation of the unallocated £49m is one-track and blinkered.
It is as if the £49m can ONLY be spent on “FILM” – simply because it’s lying in a cocoa tin labelled “FILM”.
• However, the new and adverse VAT regime & harsh re-balancing strategy measures mean that the option of returning the £49m to Treasury is a valid strategy. OE does not adequately discuss this.
• Such a failure seems totally out of touch with day-to-day experiences of the electorate, at a time when IoM Politicians and the Electorate are confronting :
- Main-line Public Sector Service Level & Job cuts
- Nursery closures
- Threats of State Pension cuts
- Growing Hospital Waiting Lists & pressures
- Questions over the future funding of University Education
- Reduced Grants to the Voluntary Services Sector
- Re-examination of policy on Public Housing Rents & Tenancies
• Few electors will understand Minister Karran quoting lack of funds for closing Nurseries, while his political colleagues are buying unlisted shares in a private Film Studio business in an adjacent room.
• In the real economy, families apply uncommitted funds to where they are MOST NEEDED for the BEST RETURN.
So funds in the cocoa tin labelled “Dream Holiday” may need to be applied to “Repairing the Car”.
In dramatically changed economic circumstances, Good Intentions must give way to Practicalities.
• Even if politicians feel entitled to invest £49m of the Compulsory Public Tax Levy on Speculative Shares for Capital Growth, this should at least be done on the basis of Independent Financial Advice with the freedom to choose from the global stock market.
On that basis, no IFA / Stockbroker it would merely recommend “a punt” on Pinewood Studio Shares.
• Nowhere does the OE study ( vetted prior to release by industry insiders IoM Film/CinemaNX ) mention industry rumours of the rival Warner Bros Studio development at Leavesden, incorporating the Harry Potter franchise.
To be credible, expert advisers must be in possession of such game-changing knowledge when offering advice.
INVESTMENT OF £24m IN PINEWOOD STUDIOS - PLUS £25m FUNDS FOR PROJECT MANAGEMENT
• Pinewood Studios was acquired for a capital value of £96m by John Whittaker [i.e. Peel Acquisitions (Pegasus) Ltd] in April 2011. The acquisition was made at £2 per share, plus a 2.5p Dividend to follow.
• Commenting on the £96m or £2 per Share offered for Pinewood, Lord Grade Chairman of Pinewood, said:
“The Pinewood Independent Directors have recommended this offer to shareholders as it delivers certainty at an attractive premium. In the context of increasing illiquidity in the trading of Pinewood Shares, the Pinewood Independent Directors believe that this stable time in a volatile industry offers shareholders an opportune moment to realise value."
• Mr Whittaker’s acquisition was seen as a step towards obtaining planning permission for 1400 houses on the 105 acres of greenbelt land which physically joins Pinewood Studios to the M25 and to West London.
Ultimately, this did not receive approval. It could happen at some time in the future.
• Mr Whittaker is admired as a very highly respected and shrewd businessman and deservedly so.
He did not get where he is by being on the losing side in transactions involving his property interests.
• The proposal by IoM Government to pay £24m for 20% of Pinewood Shares (including 15% owned by Peel Holdings/Mr Whittaker) re-values Pinewood at £120m.
This is £24m (25%) more in real money than the £96m Value when acquired by Mr Whittaker only 14 months ago.
THE £24m (25%) PROFIT IN 14 MTHS ASSUMES THAT NO ASSETS HAVE BEEN STRIPPED OUT OF PINEWOOD SINCE APRIL 2011. IN OTHER WORDS, THAT IoM GOV’T IS BUYING a 20% SHARE OF EVERYTHING THAT MR WHITTAKER ACQUIRED AT THAT TIME.
IF THIS IS NOT THE CASE, IoM GOV’T WOULD BE PAYING A HIGHER PREMIUM THAN 25%.
• At a time of major global economic lows in Share Values, it is surprising that IoM Government is paying 25% more than the £96m Value attributed to Pinewood in more buoyant times only some 14 months ago.
• At a time of greater economic confidence, Lord Grade said the £96m Valuation represented “an attractive premium”. One must surely ask why we are prepared to pay 25% more than this in an Economic Downturn.
And the Treasury is right to totally disregard the current c.£3.50p Pinewood share price, as such prices can be far too easily driven up or down at will in unlisted companies with low traded turnover.
• IoM Government is intending to place a further £25m for “management” by Pinewood Shepperton Plc.
• Therefore, IoM Government will entrust £49m of IoM Taxpayer community funds with Pinewood Shepperton Plc and Pinewood Studios, located in the UK.
• After committing the £49m, Steve Christian will be made an Executive Director of Pinewood.
• There are many pertinent issues surrounding the Pinewood Board Director Appointment e.g.,
Conflicts of interest; Salary; Contract Term; If the seat on the Board is remunerated and paid to IoM Government via its Appointee – with Mr Christian acting in that capacity.
• The current Film Expenditure proposal seems at odds with the original concept of creating a LOCAL FILM INDUSTRY BASED IN THE ISLE OF MAN - to provide a LOCAL Film Studio, LOCAL Work, LOCAL Jobs, LOCAL Creativity, LOCAL Tourism, LOCAL Media Expertise, LOCAL Construction, LOCAL Specialist Financing and the global awareness of a LOCAL Isle of Man Film Industry.
• What is currently proposed seems analogous to telling IoM residents that the Government has changed tack.
We are NOT to “ BUY LOCAL ”.
The latest policy is to buy a 20% Equity Stake in “ Tesco UK ” , instead,
• One major undisclosed fact is that since Peel paid £96m for Pinewood, Warner Bros has announced that it is to spend £100m developing a rival 200 acre London Film Studio at Leavesden only 10 miles from Pinewood.
The new studio will be 50% bigger than its Burbank Studio in Los Angeles. Uniquely it will be capable of handling 2 Blockbusters at once and is also to be linked with its Harry Potter Tour.
DEMOCRATIC MANDATE FOR USE OF FUNDS RAISED VIA COMPULSORY TAXATION
• In essence, electors see their politicians as responsible for provision of recognisable essential public services and creating a suitably environment for commercial inward investment and private sector job creation.
Politicians are mandated to raise public funds for such purposes by Compulsory Taxation of the populace.
• Politicians are not elected to found businesses, to be venture capitalists or compile electorate share portfolios.
Such risk activities are seen as the responsibility of Private Individuals, Entrepreneurs and Investment Managers.
Such activities are not part of a traditional democratic mandate for imposition of Compulsory Public Taxation.
Public sector involvement should induce the Private Sector - by pump-priming, tax breaks, secured loans etc.,
• Tackling ongoing deficits on the operation of Ronaldsway Airport, Bus Transport and Rented Housing present sufficiently grave commercial challenges to management in the public sector, without the distraction by trying to turn round the recent fortunes of IoM Film.?
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