Can they justify the expense?

Big numbers don’t mean much to most people. Few will ever handle €4.7 million in their lives. Even grasping the meaning of €47 million is too far a leap for most people, myself included. I saw once an explanation of scale to help grasp big numbers. It would take you 11 days to count a million seconds. But it would take you 32 years to count a billion seconds. And it would take you 32,000 years to count a trillion.

How long will it take the accountants at the finance ministry to count the €47 million that are being paid to Ridley Scott’s production house to film the sequel to Gladiator in Malta? Not too long. They understand far better than I ever could the significance of the sum they are paying.

While we don’t understand the meaning of money on that scale, perhaps the government could explain to us why this is justified. You need to spend money to make money. That’s when expenditure becomes investment. If part of that investment involves paying part of the spectacular multi-million fees collected by Hollywood stars, in the process creating a multiplier effect in the economy that benefits the community, then so be it.

But within reason. This post will attempt a definition of reasonableness in this context. It can’t be simply a net calculation that justifies the €47 million expense with the production spending €48 million in hotel rooms while it’s here.

Here are four criteria I would consider to support such an expense.

Firstly, proportionality with the other declared investment priorities of the government.

There are so many cases containing €47 million that the government has to spend on stimulating economic activity. Not many as it happens.

Some other activities could include research and development, innovation in high-precision manufacturing, infrastructural improvement to the tourism product, kick-starting profitable creative arts businesses, incubating small businesses, training skilled labour for specialist activities, and so on. The list of priorities, in theory, should be ranked and publicly known, such as in the Business Promotion Act, so that investors understand where the public’s money is going to flow and prepare themselves to receive it and use it to its fullest extent. And then, on a programmatic basis, say in three-year rolling plans and more granularly in the annual budget, the government allocates funds through schemes and transparent competitive processes.

We don’t know what the budget of the Film Commission is because news of its expenditure is in incomprehensible excess of the annual allocation voted by Parliament. There appear to be no schemes and certainly no transparency or competition for its funds. It allocates money in deals brokered in smoke-filled rooms like this was the Middle Ages: not the smoking, that wasn’t around in the Middle Ages; more the spending without accountability.

I would support prioritising film as an economic activity, but where does it fit in the pecking order? Is anything like €47 million spent on any one R&D engineering project in manufacturing? Is that amount spent in allpublicly supported R&D engineering projects in manufacturing supported throughout any given year?

Second criterion is sustainability. Will the €47 million in public money spent on one Hollywood film this year bring about another film next year with less public spending and another one the following year to the point sometime in the future where the public no longer needs to subsidise this economic activity? Because if these film projects only showed up if we paid them what it would cost us to build a school every time, how is this better than the old perennially loss-making ship yards? These grants are public subsidies, which I’m not in principle against. Subsidies can help direct the economy towards fairness or better respect for the environment. They can prop up an otherwise sustainable economic activity through a tough patch. All that is eminently understandable.

What is not desirable is creating artificial economic activities that exist only because of public subsidies. That would stifle genuine economic growth in profitable sectors. It would consume human resources in unproductive activities. It’s just not the best way to spend public money.

The third consideration would be direct return and the relevance of that return. The press reports on the €47 million spend on Gladiator suggest that a big chunk of the expense is going towards paying for talent and equipment that is flown in for filming and flown out immediately the filming is done. Beyond whatever publicity the film might bring in the industry for having been filmed here, that has little economic benefit to the country.

There will be spending in local support talent and ancillary services like food, transportation, and accommodation. Presumably someone has added that up and presumably it works out to at least what the government is spending on this.

But here too the issues of proportionality and sustainability come back. Clearly we can’t justify the profitability of hotels and taxis by how much money the government spends on them. Is this the sort of benefit that only materialises when the government pays such a huge budget on a single film or is there measurable growth that develops independently of future government spending?

There’s remarkably little expectation that spending €47 million on Gladiator will help local film makers to acquire the equipment, skills, resources, and sustained income to start producing audio-visual works that they can then sell overseas. Because that would be a real economic return for government spending. It would create a sustainable and profitable economic activity which currently does not exist.

It is reasonable to expect that if the government were to spend €4.7 million a year on locally produced film projects (rather than €47 million on Gladiator), the economic return which is measured in a new economic activity (indigenous film-making) would be more sustainable in the longer term.

Fourth criterion is legality. Times of Malta pointed out that no EU country spends so much public money on a single film. Is Malta distorting the market then? Are we using public money to divert economic activity away from other EU destinations? Of course, we’d want to do that, right? We’d want an investor to choose Malta over Spain or Sweden or Italy. We’re allowed to compete even within the market. What we’re not allowed to do is go into bidding wars using tax money to undermine each other. Could Germany or Italy outbid us in such a pointless economic war? I’d rather think they could.

That’s why we have competition laws. Are we complying with those?

Are we complying with state aid rules? State aid rules do allow tax rebates and even cash rebates paid out through a scheme, but how much of this Gladiator deal is open to anyone else and how much of it is negotiated behind the scenes? A hint to an answer to that question is in the fact that until the press exposed it, the fund was a secret.

If the government bothered to justify its decisions rather than keeping them secret, we might learn that the criteria of proportionality, sustainability, relevance, and legality are all amply met.

The secrecy however suggests otherwise. The government is spending exorbitant sums to purchase prestige, photo opportunities with Hollywood stars, to create the illusion that they’re doing something, creating jobs in a glamorous, camera-flash lit context.

Consider all those billboards by the Malta Film Commission around the entire island. They claim they are working to create jobs in film. None of the advertised jobs are specialised positions: there are no directors of photography, no editors, no visual effects designers, no screen-writers, no producers, no film makers. They advertise jobs for security guards, hairdressers, and make-up appliers.

It’s as if sixty years ago when hotels first opened in Malta they advertised jobs for cleaners because the cooks and the porters would be flown in.

In spite of their spectacular spending, the government have little to no expectation that Malta could ever become a creative hub or a centre of film-production. Their imagination remains limited to Malta as a cheap film-set where they can pay people whose income compares well to the national budget to pose for photos with them.

No one will complain. After all few people understand what €47 million really amount to.