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LONDON — The Irish government has slashed the budget of the Irish Film Board by 5%, but rejected a proposal to abolish the board and the local tax incentive.

The cut, which takes the IFB’s budget down to Euros 19.3 million ($28.5 million), came as part of the government’s 2010 budget, in which spending on arts, culture and film was reduced by 6% to $245 million.

The local film biz had feared far worse as a report in August by the economist Colm McCarthy, who was asked by the government to find ways to get public finances under control, had recommended that the IFB and Section 481, the local tax incentive for film and television, be culled.

After a detailed study looking at the contribution the film and TV biz made to the economy and whether the IFB provided the best means to develop the sector, the government has now given IFB the thumbs up and backed the continuation of Section 481 until the end of 2012.

IFB chairman James Morris said: “The support of the government for the Irish Film Board is a strong endorsement of the economic value of the film and television production sector to the emerging digital economy. It is also an acknowledgement of the cultural value of Irish artistic and creative work in building Ireland’s international profile.”

A survey by PriceWaterhouseCoopers last year valued Ireland’s film and TV industry at $822 million a year, repping 0.3% of gross domestic product. It said 6,000 people had permanent employment in the sector.