News just in from the culture department where many of its 55 public bodies are to be abolished, merged or streamlined.

The most eye-catching is the abolition of the UK Film Council, which invests government grants and Lottery money in film development. (Although Jeremy Hunt, culture secretary, insists that ‘government and Lottery support for film will continue’).

The body has helped to fund 900 films since it was set up in 2000, although it’s not exactly clear from its website which ones they were. (The BBC tells us that they include Bend it Like Beckham and The Last King of Scotland).

Also to be abolished is the Museums, Libraries and Archives Council. Ditto the Advisory Council on Libraries and the Legal Deposit Advisory Panel. And the Advisory Committee on Historic Wreck Sites.

The UK Film Council became one of the highest profile quangos to be axed by the coalition government after culture secretary Jeremy Hunt unexpectedly announced its abolition.

In a raft of mergings, streamlinings and closures, Hunt also axed the Museums, Libraries and Archives council (MLA).

John Woodward, chief executive of the UK Film Council, briefed an unprepared staff about the decision at the council's central London headquarters this morning. No one had seen it coming. He said the decision had been taken with "no notice and no consultation".

In a statement Woodward called the proposal "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".

Film producer Tim Bevan, who chairs the council, said: "Abolishing the most successful film support organisation the UK has ever had is a bad decision, imposed without any consultation or evaluation. 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."

Since it was created by Labour in 2000 the UKFC, with 75 staff, has been responsible for handing out more than £160m of lottery money to over 900 films. Successes range from Bend it Like Beckham to Gosford Park to Fish Tank with the occasional dud – notably Sex Lives of the Potato Men – along the way. Last August the Labour government began consultation on merging the film council with the BFI.

Hunt today told MPs that the film council also spent £3m a year on administration and the money would be better used going directly to film-makers. The question remains however: how will the cash be distributed? The Department for Culture, Media and Sport said work would be done in the next few weeks to answer the many questions thrown up by the council's abolition.

Today's statement also promised "a direct and less bureaucratic relationship with the British Film Institute" but said the BFI, as a charity, could not take on the film council's production functions.

And UK Film Council has also invested $12 mio for digital projection in 240 screens in the UK, according to Screen Digest.

Remuneration
For the year
Ended 31
March 2009
£000
Total
Remuneration
For the year
Ended 31
March 2008
£000
John Woodward
Chief Executive Officer
195-200 205-210
Sally Caplan
Head of Premiere Fund
165-170 160-165
Will Evans
Head of Business Affairs
155-160 150-155
Tanya Seghatchian
Head of Development Fund
(from 1.5.07)
150-155 125-130
Colin Brown
British Film Commissioner
140-145 155-160
Peter Buckingham
Head of Distribution
& Exhibition
140-145 145-150
Alan Bushell
Chief Operating Officer
110-115 110-115
Lenny Crooks
Head of New Cinema Fund
110-115 100-105
Rachel Grant
Head of Communications
(from 17.1.08 to 1.2.09)
60-65 10-15
Lisa Tremble
Head of Communications
(to 21.9.07)
- 40-45

My first decision as culture secretary was to abolish ministerial cars, saving £250,000 a year. I wanted to send a signal that the money we spend on culture should go to culture, not ministerial pay or privileges.

It is in that context that last week I announced the abolition of the UK Film Council and the Museums, Libraries and Archives Council. My department is responsible for an extraordinary 55 quangos, the vast majority with highly paid bosses and costly bureaucracy. But if we are going to face budget cuts I have a duty to ensure that taxpayers' money is spent where it gets the most bang for its buck. It is simply not acceptable in these times to fund an organisation like the UK Film Council, where no fewer than eight of the top executives are paid more than £100,000.

Stopping money being spent on a film quango is not the same as stopping money being spent on film. In fact my second decision actually increased the amount of money going into film when I restored the lottery to its original four pillars, increasing the share going to arts (including film) to 20%. This is expected to increase lottery funding for film by around £3m a year.

Britain is the world's third-biggest film market, with box office receipts of nearly £1bn last year. We make Hollywood blockbusters – including the two biggest franchises of all, Harry Potter and Bond – as well as creative successes such as Danny Boyle's Slumdog Millionaire. Less high profile but equally significant is the incredible skills base we have in our world-class facilities sector which includes visual effects and special effects.

But if the industry is to expand further, we also need to be honest about its failings. Two areas in particular need close attention.

The first is the chronic difficulties associated with film financing. Lew Grade said of Raise the Titanic that it would have been cheaper to lower the Atlantic. The challenges have not gone away. All too often when British film-makers want to make anything of scale, they end up selling all the intellectual property rights in advance simply to finance production. The result is that when we have a hit, the profits do not go back to the film-maker where they could be used to finance the next production. This is what happened with Slumdog Millionaire, a creative success for Film4 but a financial success for Fox Searchlight.

We welcome all foreign investment, which is why the film tax credit is staying. Worth at least £100m a year this is no small commitment. But a healthy film industry will also have a strong homegrown element. Our independent television production sector has understood the importance of IP retention and has become the largest exporter of TV formats in the world.

The second area we need to be honest about is where taxpayers and lottery money is best spent. That is why we want an open debate about, for example, how we fund films of high artistic worth that are unlikely to make it to general release. How do we ensure the public get to see the films they are paying for?

The other decision I have made is to guarantee the future of the British Film Institute. The role it plays in supporting our cultural heritage and promoting the cultural value of film is crucial. But we want to see them do this more effectively, so are looking to remove some of the red tape around what they do and give them greater operational and artistic freedom.

Support for film through the lottery and tax credits will continue. But it must be right to address the structural challenges it faces and focus resources on supporting frontline film-makers rather than expensive bureaucracy. We should not accept the relative size of the British film industry as a fait accompli. Rather, we must step up our ambitions and make the UK the best country for nurturing and promoting its homegrown creative talent.