EXCLUSIVE… UPDATE: John Woodward, CEO of the UK Film Council, has e-mailed staff telling them today’s government decision to abolish the government agency “has been imposed with no notice and no consultation… I think we can all agree that this is short-sighted and potentially very damaging, especially as there is at present no roadmap setting out where the UK Film Council’s responsibilities and funding will be placed in the future.”

The government intends to close the organisation completely down with its assets and its remaining operations transferred out by April 2012. The Conservatives have underlined their commitment to £15 million a year of lottery-funded film. The tax credit is also to be retained – at least for now. The question going forward is who will control that money pot. UKFC will be working with Culture Department officials over the summer on transferring power and assets.

Tim Bevan, chairman of the UKFC, also blasted today’s news calling it “a bad decision”. He said: “People will rightly look back on today’s announcement and say it was a big mistake, driven by short-term thinking and political expediency. British film, which is one of the UK’s more successful growth industries, deserves better.”

Today’s announcement comes as 55 other culture department bodies are set to be merged, abolished or streamlined as part of the government’s cost-cutting drive. Department For Culture, Media and Sport secretary Jeremy Hunt gave an interview to the Independent newspaper over the weekend, apparently softening people up for today’s announcement. He warned that no area of his department’s activity was immune from cuts – including the BBC and the Olympics. The culture department, which funds British film to the tune of £26 million each year, was preparing for savage cuts. The Department For Culture, Media and Sport faces having its budget slashed by 25% – or even higher – over the next four years. Back in June, UKFC told me it was drawing up plans for what were 20% cuts in grant-in-aid expenditure might look like over three years. Now that looked optimistic. Final government department budgets will be set in the October 20th spending review.

It’s all part of the kill-or-cure Budget unveiled by the Conservatives, determined to get the UK’s debt-load down before Britain implodes like Greece or Iceland. The BBC has also lost out. Chancellor George Osborne confirmed that a tax on landline phones, proposed by Labour, to fund national broadband access, will not now happen. Instead, cash will be taken out of money Auntie had set aside to help digital TV switchover.

Personally, I think these budget cuts are a Trojan horse for the Conservatives’ political agenda, which has always been to reduce Big Government. Prime Minister David Cameron has long wanted to rein in the state, which currently spends 43% of UK national income. But he knew he couldn’t get rid of all these government jobs when these are the very people whose votes he needs to be re-elected. Now the Tories can just shrug and call everything they do “unavoidable.”

Back in May, the Department for Culture, Media and Sport was ordered to make £88 million of emergency savings as part of Osborne’s plans for £6.2 billion of cuts for 2010/2011. The DCMS and bodies such as the Film Council were told to find savings of 3% out of this year’s budget. As a result, DCMS scrapped the BFI National Film Centre, leaving the BFI to suck up 50% of all arts savings.

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