Cinematograph Films Levy

– in the House of Commons at 12:00 am on 15th July 1971.

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10.23 p.m.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I beg to move, That the Cinematograph Films (Collection of Levy) (Amendment No. 2) Regulations, 1971, a draft of which was laid before this House on 1st July, be approved. This small change in the arrangements for the cinematograph films levy has been recommened to me by the Cinematograph Films Council, and I feel that it is right that it should be made. I suggest that I briefly describe the effect of the Regulations, and then I shall be happy, with leave, to reply to any points or give any information which the House requires after I have heard what hon. Members say.

The main change proposed in the Regulations is to raise the exemption limit by which small cinemas are exempt from paying the Eady levy. It is at present £400, and the Cinematograph Exhibitors Association asked in the Council that it should be raised to £450. The Council debated the question of the levy at some length but decided that it was not wise to advise a change in the level of the levy ; but it recommended an increase in the exemption limit to £500. I personally believe this is right, and the Government have made the necessary Regulations to enable the Council's advice to become operative. I think it will help a few small cinemas which hitherto have fallen just on the wrong side of the exemption limit and it may save them from going out of business at what is admittedly a difficult time for such small cinemas.

The Regulations have been agreed by the industry as a whole and the Films Council, and I therefore commend them to the House.

10.25 p.m.

Photo of Mr Roy Mason Mr Roy Mason , Barnsley

The hon. Gentleman was certainly brief. I hope that, if he is fortunate enough to catch your eye again, Mr. Deputy Speaker, he will take more time to reply to the questions which must be asked.

When Regulations of this kind come before the House the test which should be applied, when we are altering the levy exemptions and deciding whether more should be exempt or less, should be : what effect will it have upon British film production? Obviously it will have effects upon confidence in the industry, and so upon production and upon investment, and if confidence is adversely affected, not only is that bad for the industry and for all who work in it, but it will not help the cinemas either, because the volume of production will be less, and choice restricted, with a subsequent effect upon cinema audiences. I will return to that in a few moments.

First of all, from the exhibitors' point of view, cinemas have been closing at a quite rapid rate. More than 3,000 cinemas were in existence before 1960. The number had dropped to 1,772 in 1967. The cinemas had been closing at the rate of about 100 per year since that time. I wonder, first of all, whether the Minister expects any slowing down of this trend because of the increased number of cinemas which will be exempt from paying the levy.

Secondly, the Minister is seeking Parliament's consent for the exemption rate in paying the levy to be raised from £400 per week to £500 per week, taking earnings on the average throughout the year, an increase of £100, but in view of inflation, labour costs, and so forth, during the last few years since the rate was changed in 1968, can the Minister say what the real increase is to be? What really is the small establishment, the seaside exhibitor, going to gain from this £100 exemption? I gather that nearly 100 more cinemas will be exempt by raising the rate of exemption figure. I wonder whether the Minister could tell us how many independent cinemas will now be freed from levy and how many will be free of levy within the service.

My third point from the exhibitors' point of view is that in the 1968 levy change we also dealt with some changes in the distribution levy. I have in mind, of course, newsreels and the low-cost films. In view of the fact that labour costs have risen so much in the last few years and that the test for helping low-cost film production is based upon labour costs, I am wondering whether the Minister might give an indication to the House how low-cost film producers have fared since the 1968 alteration and whether he has any intention in due course of altering the distribution percentages again.

Production is the core of the problem. If production is endangered the independent cinemas and those on the circuits will be affected, and if there is a cutback in British film production because of a smaller yield from the levy, not only will choice be limited but the quota will be in jeopardy. From the film producers' point of view a reduction of the levy by exempting more cinemas could be a direct threat to production. By exempting more cinemas, investment in the industry is likely to be less attractive, especially in British productions, and, following the hon. Gentleman's statement about gradually withdrawing Government finance from the British film industry, this constitutes a double blow to British film production.

If, because of this, there is a reduction in film production, our export earnings will be adversely affected and enthusiasm for American investment will be dampened. These are adverse effects that could quickly flow from the exemptions announced by the Minister. Because we agreed when in office that the National Film School should take a share of the levy fund, there will be still less money available for British production.

In the past 12 months there has been a distinct change in Government policy towards the film industry. It seems to be a policy of madness. Does the hon. Gentleman realise where this policy is leading? He must be trying deliberately to kill British film production. His impositions on the National Film Finance Corporation and the reduction of its loan-making powers, allied to less money from the levy, are bound to affect production, employment, and the use of studios, and to lessen confidence in the future of the British film industry. That is a daunting prospect for all in the film industry.

I gather that the Cinematograph Exhibitors' Association asked for the exemption minimum to be raised from £400 to £450. Why did the hon. Gentleman agree to £500? Why did the Cinematograph Films Council recommend £500?

At the end of 1969 there were 1,581 cinemas. The cinemas that were exempt from paying the levy because their takings were less than £400 per week numbered 706. This new exemption limit will release another 96 cinemas, bringing the total exemptions to 802. That means that more than half the cinemas in the country will not be paying anything towards British film production, and there will be a further loss of £76,000 to the British film producer.

I hope the hon. Gentleman will take a little time to answer those queries. I am not satisfied that the Regulations are in the interests of the producers and exhibitors as a whole and, therefore, this change does not meet with my approval.

10.34 p.m.

Photo of Mr Hugh Jenkins Mr Hugh Jenkins , Wandsworth Putney

In the ordinary course of events it is possible that the change which is proposed in these Regulations, which is of a relatively minor character, might have escape detailed criticism in the House, but my right hon. Friend has made it clear that this is not the ordinary course of events.

The Regulations are placed before the House in circumstances in which the Under-Secretary of State has become a monster in the eyes of the British film industry. He is quoted in the today's "Cinema"—dated Friday, 19th July—as saying that it is not the Government's policy to put money into industries, especially industries like this which have no strategic or defence implications. [HON. MEMBERS : "Hear, hear."] The implications behind that statement are appalling. This is philistinism run rampant because it is the policy of the Government, according to the hon. Gentleman, to be concerned only with putting money into defence and strategic industries and to be totally unconcerned with anything outside that sector. I doubt whether others among his hon. Friends will be quite so carried away by his remarks as those present seem to be. Some hon. Members opposite do not follow him in the policy which he expressed in that statement.

This Order has the effect in a minor way of transferring some of the money—failing to transfer it would, perhaps, be a more correct way of putting it—from exhibition into production, which is the effect of the levy. It is a redistribution of money within the film industry. It is in this case a matter not of the Government using public money but of approving the redistribution of money within the industry. The Order provides that a little less money shall go towards production and that a little more money shall remain in exhibition.

In the normal course of events, one might have said that this is a relatively minor matter. But what troubles many people is the odd sense of priorities which the Government show. This in itself is a fairly small change but the hon. Gentleman announced a most major change the other day. He chose to do so in a Written Answer put down by a stooge on the benches opposite. It was a cowardly thing to do and discourteous to the House. By doing it in that way, he succeeded in avoiding a debate on the subject. I shall not be able to travel too far along what should be the real subject of this debate—the bigger change he announced then—because I am bound to confine my remarks very largely to this Order and I do not want to overstrain your patience, Mr. Deputy Speaker, but there should be an opportunity to debate not only this Order but the major change in policy in the decision to withdraw Government finance from the British film production industry. That decision is a very disturbing element and this Order is a small step in the same direction.

Apparently, the National Film Finance Corporation is to be wound up, although it is a most valuable source of finance for British films and has kept the industry alive during a very difficult period and has thus made a valuable contribution to exports. If that is the policy of the Government, then changes such as that announced in this Order will be of relatively minor character because we shall have a position in which the film industry, which has contributed much to our country, not only culturally and artistically but in terms of the balance of payments, will gradually run down.

I hope, therefore, that the Chair will be as kind to the hon. Gentleman as it has been to me when he comes to reply and will allow him to widen the debate, because he certainly should give some explanation of the more drastic change of policy which he has hitherto avoided dealing with in the House. There is a state of considerable alarm in the British film industry. I hope that the hon. Gentleman will try tonight to do something to put at rest the worst fears which he has aroused since he became responsible for expressing Government policy towards the industry.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

By leave of the House, the right hon. Member for Barnsley (Mr. Mason) rightly considered that the yardstick for this change should be whether it is good for the industry. What is good for the industry is what is good for the industry's customers, the cinemagoers, and the ultimate test of whether a policy of protection for the British film production industry is correctly ordered is whether it can secure maximum audiences and thus maximum size and maximum employment against its many dominant competitors, such as television and other forms of entertainment.

In considering whether the exemption limit should be raised, therefore, the first consideration is whether leaving the exemption limits at the present £400 level will cause some cinemas to close, which will be bad not only for the industry, but, equally important, for the cinema-goers. It will, of course, result in a loss of revenue to the industry.

It was for these reasons that the C.F.C. thought that an increase in the exemption limit of the levy would benefit the industry as a whole. This was a unanimous decision by the Council, although it disputed other suggestions and has not passed them on to me. Therefore, if the whole industry is in favour of the change, it is likely to be right.

The right hon. Gentleman asked me what was the rate of closure of cinemas and whether it would be changed by the Order. I confirm his figure, that cinemas have been closing at the rate of about 100 a year. We expect that the Order will mean that fewer cinemas will close in future than would otherwise have been the case. But it would be rash, indeed almost impossible, to forecast numbers, because this depends on the quality of films and the habits of cinemagoers. Indeed, I have never seen a figure that I could suggest to the House.

It is also hard to say how many cinemas the Order will free from paying the levy. This also depends on how many people go to the marginal cinemas in small towns, and that is impossible to estimate. But the effect on the levy is estimated to be small.

In 1964–65 the yield of the levy was about £4·6 million. Following the changes to which the right hon. Gentleman referred, it fell to about £4 million in 1968–69. It has been growing since then, and if no change is made during the current year, we expect it will yield about £4½ million. That is getting near the statutory ceiling of £5 million, and it is likely that this change in the levy will reduce it by—to quote one estimate I have heard—about £76,000, which is tiny compared to the yield. Therefore, I think it will have hardly any effect upon the amount of money which is available to come back to the producers, because the levy is growing not much more slowly than the reduction which the Order will cause.

We have no plans for altering the distribution pattern. It will always be this Government's intention to consult the C.F.C. on matters to do with the levy. We have had the annual consideration of this for this year and I would expect that we would wait for another year before we considered any changes. But, of course, it is possible that circumstances will change rapidly, and I would not preclude the possibility of looking at it again in a year if circumstances are different.

Both the right hon. Gentleman and the hon. Member for Putney (Mr. Hugh Jenkins) favoured the idea of trying to use the levy to keep this country's film industry as large as possible. If the levy is too high on cinema seats, on which it is paid, it will have the effect of frightening off the audience, who might find some cheaper form of entertainment, and that could positively damage the interests of the industry as a whole. So we have to find the right balance between the reasonably priced seat and the need to collect some levy to recycle into the industry.

Both the right hon. Gentleman and the hon. Gentleman seem to think that there is some crisis of confidence in the industry. I do not believe that this is so. If it is, then I do not believe that it is justified. There has indeed been a slight increase in the number of films produced in this country, and prospects are by no means as black as they have at times been in the past. It is always difficult to gauge in an industry which is declining year after year due to losing business to other forms of entertainment, but I see nothing in the present situation which would justify the pessimism and gloom which came from the other side of the House.

Both the right hon. Gentleman and the hon. Gentleman seem to think that the remarkable opportunity which has been given to the National Film Finance Corporation to help the industry is in some way not in its favour. The Opposition are totally wrong about this. Surely, to have a sum, which we hope will reach a total of £4 million, available for financing films is a shot in the arm, not a stab in the back. It seems extraordinary that this should be misrepresented as something which will damage the industry. Indeed, if the total is raised, the N.F.F.C. will have more money than had it drawn the last remaining amount in the Bill which the right hon. Gentleman put through Parliament last year. I do not think that the Opposition's argument will stand up.

I think the whole House will be delighted if the consortium comes into existence and its money comes not from the taxpayer or from the State but from the private sector.

Photo of Mr Hugh Jenkins Mr Hugh Jenkins , Wandsworth Putney

Does the hon. Gentleman not recognise that the Labour Government made available a sum of up to £5 million and that what he is putting forward as an improvement is the decision on his part to make £1 million of that available, and that in itself subject to a condition which did not exist under the previous Administration? Therefore, so far from being, as it were, a kindly uncle, he is regarded in the industry as something in the nature of an ogre.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman is regarded not only in the industry but in this House as somebody who does not do his homework. He should realise that the N.F.F.C. had £1½ million before the consortium came into existence, that it can get up to £1 million from the Government for the formation of the consortium, and that we have also guaranteed £700,000 worth of existing moral commitments for the future. That, if the hon. Gentleman can add, is £3.2 million out of the £5 million which the Labour Government voted the N.F.F.C. to last for 10 years. If that is not generous—perhaps too general—use of the taxpayers' money, I do not know what is.

The hon. Gentleman must also do his homework on the setting up of the N.F.F.C. He will recall that his right hon. Friend the Leader of the Opposition set up the N.F.F.C. in 1948 and issued a stern warning that it was to be an existence for only five years, after which time the film industry had to get its money from commercial sources as there would be no question of continuing its life thereafter. If I am accused of being a philistine, what the hon. Gentleman must think about the Leader of the Opposition I do not know. Perhaps he would care to read the debate when the right hon. Gentleman introduced the N.F.F.C. some time ago.

I do not believe that the industry has anything to fear. The happy marriage of public and private finance in the N.F.F.C. gives it a glorious opportunity to accustom private finance to investing in films and, I hope, make money in the process. I am sure that the House wishes the consortium well.

I believe that this small change in the levy regulations will keep open some cinemas which might not otherwise survive. I believe, too, that it will not affect production, because only a small amount of money is involved. This is what the industry wants. I therefore hope that the right hon. Gentleman will not be so suspicious or unhappy about something which has been brought forward at the request of the industry, and which I confidently believe will be to its benefit.

Question put and agreed to.

Resolved, That the Cinematograph Films (Collection of Levy) (Amendment No. 2) Regulations 1971, a draft of which was laid before this House on 1st July, be approved.