asked the Secretary of State for Industry, Trade and Regional Development if he will give details of the way in which the shares of British Lion Films Ltd. have appreciated in such a way that payment of £795,000 is being made to the five directors who purchased a half share in the company in 1958 for £9,000; and if he will make a statement.
From 1958 onwards, the then deferred shareholders, who were also the executive directors, effectively had a a half interest in British Lion after the £600,000 of preferred shares held by the National Film Finance Corporation. In last year's capital reorganisation, after 591,000 of the preferred shares had been repaid, the Corporation and the executive directors were each left with a half interest in the company. From April, 1958, to March, 1963, British Lion, under the management of the executive directors, made profits totalling £1,195,829. British Lion has now been independently valued at £1,590,000 and the executive directors have been bought out for half that sum.
May I ask my right hon. Friend two supplementary questions? First, is not this an outrageously big tax-free profit to make in such a short time, particularly when they were dealing partly with Government money and with Government restrictions? Secondly, if the company is now doing so fabulously well, why sell it?—[HON. MEMBERS: "Hear hear."]
I do not know why my hon. Friend should refer to these as being tax-free profits. They were profits made by British Lion and dealt with in the normal way. The tax loss which existed at the time when British Lion was created has not been used and, therefore, these were profits made in the normal way. The reason why the Government bought out the five executive directors was because, as a result of the arrangement for the five directors to continue to manage this company, they had three options. The first was that the Government should buy out. The second was that they should buy out. The third was that the Government should be forced to buy them out. As the five directors did not exercise their options, the Government had no alternative but to buy the company. The success of the company was due to the management of the five directors, and the National Film Finance Corporation had a holding of the 600,000 deferred shares which were repaid. Moreover, the Government have shared to the extent of 50 per cent. in the success of this company.
My right hon. Friend has not got my point. Is he assuring the House that the difference between the £9,000 that they paid for half the capital and the £795,000 that they are now getting will be subject to tax; or will it be tax-free? In any case, if they are making all that money, I still do not understand why the company should be sold.
If the company is to be sold and if satisfactory arrangements can be made—[HON. MEMBERS: "Why?"] then, of course, the Government will be in receipt of the full value of the company.—[HON. MEMBERS "Why sell it?"] It is being sold because Governments of both sides, including the one of which the present Leader of the Opposition was a member, have firmly declared that it is not the Government's intention to go into film production or distribution. That remains our view, as I have stated to the House.
Is not the Secretary of State aware that this agreement was made by the present Government in 1958 and was severely criticised by my hon. Friends? As the capital profit on these shares is tax-free, as the right hon. Gentleman must know, surely the right solution is, as the hon. Member for Louth (Sir C. Osborne) said, not to sell these shares out of public ownership?
I cannot accept the view put forward by the right hon. Gentleman. This company must be managed if it is held by the Government. When it was previously managed part of the terms were those to which the right hon. Gentleman now objects. As a result of successful management it has gone from a company making a considerable loss, a heavy tax loss, to one in which the Government's money has been repaid as to the deferred shares, and it has taken half of the results of that operation of the capital in which we each had 50 per cent The right solution is, with the proper safeguards, to sell the company into hands which will work independently on distribution and production.
Mr. H. Wilson:
I would not have got to my feet had the right hon. Gentleman not referred to me. Does he recall that this highly successful operation, which was begun with a decision of the Labour Government to create the National Film Finance Corporation, received the most bitter criticism from Conservatives when they were in Opposition? The whole operation has shown that public enterprise, even in this difficult sphere, can work very successfully. Will the right hon. Gentleman now take it that the interests of the film industry demand a continuance of the good service which has been given under the aegis of public enterprise?
If the right hon. Gentleman will look back to the speeches which he made when introducing the Bill he will see that he was not contemplating that the Government or the National Film Finance Corporation should have a holding in production or distribution companies. He made that plain at the time. We are pursuing exactly the same policy now.
But does not the right hon. Gentleman recall that the situation then arose of the growing power of the monopoly in distribution in this industry under the Conservative Government? It was the Conservatives who then had to go still further into public enterprise, with our considerable support. Would the right hon. Gentleman make it absolutely clear that in the wrecking policy on which he is now engaged he will not allow control to pass directly or indirectly into the hands of any American company?
The reason why the National Film Finance Corporation supported British Lion by taking a shareholding was not because of monopolistic tendencies in the industry but because of the great losses suffered by British Lion, and the N.F.F.C. wished to find some way of recovering its money. The monopolistic tendencies were brought about because of the decline in the requirements of the cinema-going public and of the industry itself, in which, obviously, the duopoly has been strengthened. I have given an assurance regarding the sale of British Lion, that it will maintain its present policy towards independent producers.