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I beg to move,
That the Cinematograph Films (Collection of Levy) (Amendment No. 4) Regulations, 1965, a draft of which was laid before this House on 29th April, be approved.
As hon. Members will know, the levy, which is a proportion of cinema takings, is paid into a fund and distributed to producers of British films. In order to improve the condition of cinemas whose box office receipts are small the levy is not payable in any week when receipts fall below a prescribed limit, which is now £300.
The purpose of the new Regulations is to increase to £350 the amount which a cinema may take in any week before incurring levy liability. The reason for the proposed change is that the value of the existing exemption has been eroded by increased cinema operating costs of some 15 per cent. since it was fixed in November, 1962. The proposed increase to £350 will merely restore the status quo and thus assist small exhibitors who remain in business.
The levy yield in the year which ended in October, 1964, was the record sum of £4·2 million. It has been estimated that the change in the exemption limit will reduce the yield by about £100,000 in a full year but that this reduction is likely to be at least partially offset as a result of increased takings in cinemas generally. This Measure should benefit producers and distributors as well as exhibitors, especially if it enables more cinemas to be kept open. The Cinematograph Films Council has been consulted and agrees with the proposal and I am confident that it will prove acceptable to the House.
I thank the hon. Gentleman for his short explanation of the draft Statutory Instrument, but there are one or two questions I wish to pose. Obviously, the main exercise of the change is to give benefit—only a fringe benefit but certainly of some value—to smaller cinemas.
The Cinematograph Films Act constituted the British Film Fund, a statutory fund, as successor to the voluntary British Film Production Fund. The statutory scheme, as the voluntary scheme before it, provided for the transfer of payments as between different branches of the United Kingdom film industry specifically for the benefit of British film production.
It is important to make it clear that this is not a subsidy. It consists of sums paid into the film industry and allocated in the same manner in which certain other sections of the film industry obtain the rebate or distribution of various sums. The Regulations made under the 1957 Act require cinemas, with certain exceptions, to pay into the British Film Fund sums calculated—and I would like confirmation of this—at one-ninth, I believe, of the amount over 11d. of each payment for admission. What are the exact exemptions which are provided for at the moment? Will there be any increase in those exemptions under this Statutory Instrument?
There are trading arrangements whereby exhibitors pass back to the distributors and the distributors to the producers a proportion of the burden of the levy and exhibitors thus bear about 65 per cent. of the levy and the distributors and producers of British as well as foreign firms—and this is worth noting—bear the rest.
Could the Minister of State tell us how much of the sum he mentioned is to be borne by the showing of foreign films as the second part of the 35 per cent. not borne by the exhibitors themselves? I accept that the total paid into the fund last year was just over £4 million, and I think that it is indicated that the fund will be at about this level for the next 12 months. However, I wonder whether the Minister can say what he believes will be the level of the fund in the 12 months afterwards. He suggested that there would be a drop of only about £100,000. Can he say on what basis that is calculated? There is some concern, especially among the members of the British Film Producers Association, that the fund may drop below that figure.
The change to be effected by the passage of the Statutory Instrument will therefore exclude those cinemas which are not able to take £350 as opposed to £300. It seems impossible to assess the likely effect of the change on the British Film Fund since at the end of 1964 there were widespread adjustments in prices of admission to cinemas. This will mean that many cinemas will no longer have to pay into the fund as they were paying in previous years. Has that been taken into account in the assessment of the total which may accrue in the fund for the year 1965–66? Has the British Film Producers Association been consulted on this matter? I know that there have been consultations with the statutory body, but has the Board of Trade consulted the Association and, if it has, can the Minister tell the House what has been the outcome?
I am informed that the Association is concerned about possible loss of revenue and claims that it may not be in its interests for this Statutory Instrument to go through. Obviously there are conflicts of interest in this matter. There is the position of the exhibitors and that of the producers, and it must be obvious that the producers would not wish small cinemas and small exhibitors to close down, because that would close down their outlets for the films they are making. We on this side of the House do not want to take sides in this conflict, but we want to ensure that there is a fair measure of agreement between both sides.
Have the Government considered the possibility of taking steps to make up the fund to the £5 million mark, which was the sum initially discussed when the Cinematograph Films Act, 1957, was going through the House and which has been the level which the British Film Producers Association has considered essential if it was to function as healthily in the production of British films as it would like? The Minister will realise that there are certain powers under Section 6 of the Act which allow the Board of Trade to assist if it so desires. I wondered whether the Government would be willing to hear representations from the Association on this matter if the film producers wished to go to the Board of Trade. I should have thought that there could be no reason why the Board of Trade would be unwilling to hear representations from them.
If I could have answers to these three questions and an assurance that the Board of Trade would be willing to hear any representations from the producers, I believe that hon. Members on this side would be more than pleased to support the Government in the passage of this Statutory Instrument.
As the hon. Gentleman rightly said, the Cinematograph Films Act became a statutory scheme in 1957. The levy is collected by the Customs and Excise and is one-ninth of the amount by which cinema seats exceed elevenpence after, under the new Regulation, takings of £350 in any one week. The exemptions are for educational and charity films. Providing that they are shown, these exemptions will continue. I cannot give the numbers. I do not think that they are even on record. They may be, but I am not aware of them. I cannot say on how many occasions cinemas show educational and charity films and therefore are exempt from the levy.
The hon. Gentleman correctly said that the levy goes to the British Film Fund Agency, a Statutory Board appointed by the Board of Trade. I should remind the hon. Gentleman and the House that the makers of British films benefit under the scheme. They are the main recipients. In 1962–63 they recieved £3·6 million from the levy. In recognition of the work done by the Children's Film Foundation last year, they received £137,500 from the levy. The yield of the levy in 1964 was a record £4·2 million.
There is one very interesting factor which has emerged recently. Cinema admissions have continued to decline. In 1964, they were 367 million as against 383 million in 1963. On the other hand, receipts increased. In 1963, receipts were £59 million, but by 1964 they had increased to £62 million—an increase of £3 million, in spite of the fact that cinema admissions were falling. The loss is an estimate. As I said in my opening remarks, initially it means a loss of £100,000 per year in the levy yield. But this is a small price to pay for helping to keep some of the small cinemas in business. Indeed, it is in the interests of the producers, distributors and exhibitors to keep open as many outlets as possible. This is precisely what the Regulation is designed to do.
The third point which the hon. Gentleman raised was on consultation. This has arisen because the smaller of the two trade associations representing exhibitors, the Association of Independent Cinemas, provided figures showing that costs had risen by 15 per cent. and requested that the exemption limit should be raised to £350. The main exhibitors' association, the Cinematograph Exhibitors' Association, expressed agreement with the proposal. The main producers' associations indicated that they could not support the change, and this was reflected in the speech of the hon. Gentleman. The renters' association was neutral. The Cinematograph Films Council, which represents all branches of the industry and includes several independent members which the Board of Trade is statutorily required to consult on changes in the levy regulations, recommended by a majority that the change should be made.
The fourth question the hon. Gentleman asked was, whether provision was being made to make the levy up to £5 million? As he knows, it is based on a minimum take of £2 million and a maximum take of £5 million. It has never reached that. As I said, last year it came to £4·2 million. But I think that the point should be made here that the British film producers have their income increased by 80 per cent. via the levy, so in that sense the levy is helping them tremendously.
Rising costs having brought about the erosion in the value of the levy over the past few years, it is essential to make the limit £350 now, and this will really be for the benefit and in the interests of producers, distributors and exhibitors.
The hon. Gentleman will realise, of course, that the limits of £2 million and £5 million were set in 1957. Just as costs for exhibitors have risen, so they have for producers. My question is this. If the British film producers wanted to come to see the hon. Gentleman in order to make certain that he fully understands their position, would he be willing to see them?