§ (1) Section six of the Finance Act, 1943, shall have effect as if for the rates of duty set out in Part II of the Fifth Schedule to that Act (which sets out the full rates of entertainments duty) there were substituted the rates of duty set out in the Schedule (Entertainments—Full Rates of Duty) to this Act.
§ (2) This section shall have effect as respects payments for admission to entertainments held on or after the appointed day, and where entertainments duty has been charged on any payment made before that day, and by virtue of this section the duty should have been charged at a lower rate than at which it was in fact charged, the person by whom the duty was paid shall be entitled to repayment of the amount of the overcharge.
§ (3) In this section the expression "the appointed day" means such day as the Treasury may appoint by order made by statutory instrument.—[Sir S. Cripps]
§ Brought up, and read the First time
§ The President of the Board of Trade (Mr. Harold Wilson)
I beg to move "That the Clause be read a Second time." This Clause gives effect to the undertaking which I gave earlier.
I think it would be convenient if we discussed, in conjunction with this Clause, the new Clause down later in the name of the hon. Member for Caithness and Sutherland (Sir D. Robertson)—(Duty on cinema entertainments.)
§ Mr. Wilson
I am sure that would be for the convenience of the House. On Thursday I informed the House of an agreement which had been reached with the four principal associations in the film industry and I gave an assurance that the Government would put down a new Clause to alter the Schedule and the rates 60 of Entertainment Duty so as to make it possible for some changes to be made in the prices charged for admission to cinemas. This Clause, together with the Schedule relating to it, in fact does that.
I do not think I need explain to the House that this Clause does not involve any change at all in the scope of Entertainments Duty in respect of those entertainments which pay duty on the reduced scale. The main effects are to reduce the rate of duty on the lower priced seats and at the same time to enable slightly higher charges—in fact, charges of Id. a seat more—to be made on the more expensive seats without running the exhibitor into a new and higher rate of Entertainments Duty.
As the House already knows, and I do not think I need go into this part of the matter, the Clause is to facilitate an agreement under which payments are to be made by exhibitors out of their increased box-office revenue to a central pool, from which money will be paid to producers to a total of approximately £1½ million per annum. Of course, the producers will also benefit by the extent of their share of the addition to the net box-office revenue remaining in the hands of the exhibitors.
The effect of lowering the rate of Entertainments Duty on the lower priced seats will, of course, be particularly to improve the position of the smaller cinemas, cinemas in country districts and cinemas which are facing heavy competition from the larger circuit cinemas and it will, we hope, enable the exhibitors in question in due course to improve the quality of the service which they offer to their patrons. I think I should be going very wide if I were to discuss today the agreement or the value of the agreement to the film industry. That matter was fully discussed on Thursday. It would, however, be impossible to work it without the change in the rates of Entertainments Duty in this Clause.
§ 4.30 p.m.
§ Earl Winterton (Horsham)
As I was one of the originators of the proposed new Clause on the Committee Stage of the Bill, which provided for a reduction in the Entertainments Duty on this industry—of course I may refer to the Committee Stage only in parenthesis—and which, it will be recalled, was withdrawn by my hon. Friends and myself on the 61 statement by the Chancellor of the Exchequer that the matter was under discussion by him with the industry, it is perhaps appropriate that I should open the discussion although, like the President of the Board of Trade, I do not think I need say much on this occasion. Indeed, I think I ought to apologise to the House for occupying so much Parliamentary screen time by speeches and interpolations whenever the question of the cinema is under review, especially as I do not profess to have—if I may say so without disrespect—the box-office appeal of my right hon. Friend the Member for Aldershot (Mr. Lyttelton) sitting beside me, or of the President of the Board of Trade, who is—if I may say so without offence—so nostalgically reminiscent of another Harold so well known on the screen.
The Government have been compelled—I must say "compelled": there is no other word that can be used—again tardily to make a reduction in the tax on the cinema industry—but a very meagre one—by a great weight of evidence including the views of two official Committees. I think it is fair to say—and I do not think it is being unduly conceited if I say—that it was my hon. Friends and I who forced the matter to an issue by our new Clause. I always feel—I have always felt since I first entered this House 46 years ago—that one in Opposition should not say, when a concession is made, that it is worthless. I think that is ungrateful, if a concession if of some value; and I will frankly admit that this concession is of some value. But it is much too meagre, and I should infinitely have preferred the proposals in the new Clause of my hon. Friend and myself.
I think it will be in order if I give one or two examples of how, in my judgment, it is too meagre. I know how strictly curtailed we are on the Report stage of the Finance Bill, or indeed of any Bill. One cannot expound a subject as one can on Second Reading or in Committee; but I think it would be in order to draw attention to one or two examples of how still today—or tomorrow, or whenever this reduction comes into operation—how still the cinema will be at a great disadvantage in the matter of tax compared with the live theatre. I shall give only one or two examples.
For instance, on the 1s seat the cinema pays 3d in tax and retains 9d.; the live 62 theatre pays nothing on that seat and retains the full 1s. I can give several other examples relating to seats of different prices, but I shall give only a few. The 1s. 10d. seat in the cinema will be taxed at 9d. and the cinema will retain 1s. 1d; and the live theatre on the same price seat will pay tax of 2d. and the amount retained will be 1s. 8d. The amount the cinema pays on a 2s. 4d. seat is 11d. and the amount retained 1s. 5d.; and in the live theatre the tax is 3d. and the amount retained 2s. ld.
I fail to understand—although I recognise that this is not the occasion when one can go into details—I fail to understand why the cinema should still, under these arrangements, be put at a tax disadvantage compared with the live theatre. Of course, the live theatre is of some export value—in the case of some plays that are exceptionally successful, and in the case, for example, of a British company that is producing a Shakespearean play and may go to America and earn dollars; but when it comes to a question of financial comparison between the dollar earning or dollar paying by the live theatre and by the cinema, and what we have to pay for American films, the sums are infinitely greater in the case of the cinema than they can be in that of the live theatre. Therefore, it seems to me that the reasons for encouraging the cinema by a tax remission are greater than they would be in the case of the live theatre. Yet, as I have shown, the amount of tax paid by the live theatre is less.
I have only two other points which I want to put. I wonder—of coarse, it would not be possible for the Government to give an answer—but I wonder what those who produced these two excellent Reports, the Report of the Working Party on Falling Production Costs, and the Command Paper on the Distribution and Exhibition of Cinematograph Films—I wonder what they, the members of those Committees, considering the points which they made, would say of this concession. I should like to read out what they said, because so far as I know it is a long time since any industry has had two separate official bodies—committees of inquiry or working parties—considering its position, and each report- 63 ing in favour of making a concession to it in the matter of taxationBritish film producers"—says the Working Party's Report on page 6—
have always been faced with the competition of a vast import into this country of American films, the cost of whose production has been recovered by exhibition in the United States.That is the point I have just tried to makeThese conditions have been greatly worsened by the heavy increase of Entertainments Duty which took place in the war years when attendances at cinemas reached peak figures.What does the other Committee say? They are equally strong on the subject, and they say:Entertainments Duty at the existing rates is too great a burden.I have only one other remark to make before quoting to the House a statement, which is not confidential though I think it has not been made public, about the industry's attitude towards the reduction. The only other point I want to make is in case any hon. Gentleman is unfriendly to the cinema industry and may want to make the charge that has been made in previous Debates, namely: Why has the industry suddenly become so hot and bothered about the Entertainments Duty in the last year or so, and did not complain before then? Well, for one or two very good reasons. First, because it had the backing of the Reports of these two Committees to which I have referred, and the Reports showing that in their opinion the industry is too highly taxed; and secondly, it must never be forgotten that there was only a short time ago an ad valorem duty, which, however, created an entirely fictitious and temporary advantage of British in relation to imported films.
It would be grossly out of order now to go into the extraordinary story which my right hon. Friend related in the previous Debate of the Government's handling of the industry during these past three or four years—of their changing from hot to cold, and boxing all around the compass. However, those are the reasons why the matter has become much more urgent in recent years; and also—which, I think, would be confirmed by anyone knowing anything about any 64 branch of the entertainments industry—there has been a falling off in the number of people going not only to the cinema but to other forms of entertainment. Therefore, as is shown by the opinions of these bodies, the tax is felt more today than it was a few years ago.
I will now quote this statement which was made by the representatives of the industry who had discussions with the President of the Board of Trade. They issued a long statement, but the gist of it, so far as their attitude towards this amendment of the Duty is concerned, is contained at the end, and they say:The Associations whose signatures are attached accept the agreement as a whole as an interim measure, and will do their very best to make it work to the best advantage of the industry, but at the same time they place on record their considered view that the agreement is not adequate to put the industry on a reasonably sound financial basis, and nothing in the agreement can be regarded as restricting the freedom of the associations and the industry to continue to bring to the notice of the people and Parliament their desire that the heavy burden of Entertainments Duty on the industry shall be reduced.That was signed by the British Film Producers' Association, the Cinematograph Exhibitors' Association, the Cinematograph Renters' Society, Ltd., and the Association of Specialised Film Producers.
Therefore, it is the case that the industry accept this arrangement for the time being but will continue to bring to the notice of the House, when opportunity occurs, the fact that this industry, in the view of those who are engaged in it—we may be wrong, but there is a great weight of evidence on our side—is too heavily taxed, and is more heavily taxed than its competitors.
§ Sir David Robertson (Caithness and Sutherland)
Like my noble Friend, I take the view that this relief is far too little. I feel that the Treasury have succeeded in negotiating a very clever agreement, which causes the Government to give up only £300,000 per annum out of the millions they receive from this industry, while by raising prices to the public the industry will benefit by £3 million. I wonder whether the Chancellor realises that the greatest urge from the exhibiting side has been that the diminishing takings, which must be well known to him, which have prevailed for some considerable time—
§ The Chancellor of the Exchequer (Sir Stafford Cripps) indicated dissent
§ Sir D. Robertson
The Chancellor seems not to agree. I would point out that in my constituency, which comprises two counties in the North of Scotland, there are only two cinemas that keep their doors open all the year round, and there is a grave danger that they will be shut in the very near future. One of them is losing money heavily and the other is just paying its way. Goodness knows, the duty imposed upon the industry before the war was heavy enough. It was increased during the war but the industry loyally put their backs into it and put their prices up only a little, although not enough to recover all the duty. Undoubtedly the increased turnover and the false prosperity which prevailed during the war enabled exhibitors to carry some part of the duty, and the sellers' market afterwards enabled it, I suppose, to be carried for a period longer.
The fact is—and it can be borne out by evidence from all over the country—that the sufferer will be the smaller cinema, which is almost the only form of public entertainment in our country, for only a minority of towns have theatres or music-halls. The cinema is the people's entertainment, and in my opinion there is no hope at all of placing the burden of this £3 million on the backs of the people. I do not think they can stand it, and if they cannot stand it they will have to give up the cinema, or give up something else. Looking at the queues, where there are any, outside cinemas in London today one finds that people are queueing for the cheaper seats. Scottish Unionist Members were informed by a deputation who came to see them a month or two ago that because of the increased cost of living those people who once went into the dearer seats now go into the cheaper seats.
I regret that the temptation to carry out a very clever agreement with this industry was succumbed to. The House has heard what my noble Friend said about the views of the industry. They regard this as a palliative for the time being, but have the greatest apprehension about their ability to continue to pay their way. When we recall that something like £36 million per annum is taken from this industry or from the public in the form of Entertainments Duty, it is shameful to think that a greater contri- 66 bution than £300,000 could not have been made. It may be a very short-sighted contribution. It may be that the diminishing returns will close cinemas and cause unemployment, so that instead of a gain to the State, a very heavy loss will be sustained.
§ 4.45 p.m.
§ Mr. Oliver Lyttelton (Aldershot)
I do not want to detain the house for more than a minute or two, because we expressed our criticism of the general situation relating to this industry—if that is the right appellation—only last Thursday, and my noble Friend has already explained why he does not consider these concessions to be enough. This really goes far beyond an expression of view of those engaged in the industry itself, because the Plant Committee, which was set up by the Government, proved conclusively in their Report that even after these concessions in Entertainments Duty there is still a certain loss to British producers on the average production costs. That is the first reason why we must regard this concession as only an interim measure. I do not think that it will prove to be enough unless accompanied by other measures. I think that the gap cannot be closed, not only on the opinion of the industry but on the opinion of an independent Report.
The only other matter to which I want to refer—and I think I am in order in doing so—is the Schedule. I do not know whether I am quite wrong, but it seems to remove any suspicion of uniformity or plan in this. It appears to be a series of figures which have relation to one another because of reasons which are not at all apparent to anybody except the people who wrote them down. Would it not be much better to get a greatly simplified Schedule of these things and base the Entertainments Duty on an ad valorem duty, even if there were three separate rates? I suggest that the effect of the present Schedule is that, whenever an exhibitor thinks he can get another penny out of the public and not have falling attendances it is necessary for him to negotiate with the Treasury, otherwise these rather wayward and fitful rates of Entertainments Duty apply.
I should be quite content if this afternoon the President of the Board of Trade would say that this subject is being examined with a view to reform. What I 67 think all desire is to see a great measure of autonomy—if that is the right word—given to the industry, so that they themselves can decide what the relative prices should be, and then the Treasury should take an ad valorem "rake off," even if the rates of Entertainments Duty apply in three different categories. It is extremely difficult for a layman—and I suspect even more difficult for the professionals—to understand the principle underlying all this. I do not want to detain the House any further but those two points are, I think, very germane to this subject.
§ Mr. H. Wilson
I can reply only by leave of the House, but if the House will give me leave, I should like to take up one or two points that have been made. The main point, I think, made by the noble Lord and taken up by his right hon. and hon. Friends, was the suggestion that the amount of the concession is inadequate. If one looks at the different sides of the industry, I should think it would be possible to demonstrate that there is no ground for that belief. In the first place, taking exhibitors in general—I shall refer in a moment to the special cases mentioned—I should have thought that exhibitors had been doing pretty well for the last three or four years. Certainly there have been no signs of poverty or hardship over a wide section of the exhibiting side of the industry, and cinemas have been changing hands at a very profitable figure.
As for the suggestion of the hon. Member for Caithness and Sutherland (Sir D. Robertson) about the falling attendances, I can tell him that box office revenue has been very fairly maintained over the past year or two. In fact, receipts from Entertainments Duty in the first five months of this year have been running at the rate of £3.3 million against £3.2 million in the same period of 1949.
§ Mr. Maudling
While that is true of the global total, is it not the fact that the receipts from larger cinemas have been increasing while the receipts from the smaller cinemas are definitely lower?
§ Mr. Wilson
If the hon. Gentleman had been following what I said, he would have heard me say that I wanted to come to that point in a moment, because it was the particular point made by the hon. Member for Caithness and Sutherland. It 68 is true that some of the smaller cinemas—some, but by no means all—have not done as well as the rest. The hon. Gentleman will have noted that in the new scales which we propose there is a definite gain for the benefit of the smaller cinemas which will enable them, without any change whatsoever in the prices charged for admission, to retain a bigger proportion of the box office receipts.
If one looks at the other side of the industry, the producing side, it will be remembered that in this House we have spent many hours debating the difficult financial position with which the producer was faced. He is, in fact, the principal beneficiary in the agreement, to give effect to which is the main purpose of this new Clause. He gets something between 15 and 20 per cent. extra on his net revenue from the production, and, as the noble Lord implied, that is something which is definitely worth while even if the noble Lord feels it does not go as far as it ought to. The noble Lord always shows a dislike of too many references to a certain organisation with which he is connected, but if I may refer to the recently-published accounts of one large group in the industry—the Associated British Picture Corporation—which were published, I think, on the day that we had our Debate last week, they showed profits for the year ended 31st March, 1950, for exhibition, distribution and production of £2,206,000 compared with £2,039,000 in the previous year—an increase of 8 per cent.
I do not know the full details, although I noticed that the City editor of "The Times" said that presumably the increase had come from the production side of the business. That may or may not be so; but it suggests that even on the present rates of Entertainments Duty it is possible to operate without making heavy losses. That particular company—and I agree with the hon. Member for Barnet (Mr. Maudling) that this company owns a number of large theatres—has been able to increase its profits even without the concessions of this new Clause.
I should like to refer to the suggestion made by the right hon. Member for Aldershot (Mr. Lyttelton) in his remarks this afternoon. He made the same point in his speech a few days ago when he commented on the rigidities and difficulties of a form of Entertainments Duty 69 operating on this kind of scale, and he felt that an ad valorem duty ought to be put in its place.
§ Mr. Wilson
That has been considered a number of times, although I can assure the right hon. Gentleman that we have had no official request or demand either from the organised representatives of the exhibitors or any other representative body in the trade for an ad valorem scale of duty or a series of ad valorem scales of duty. I do not feel that anyone would suggest that there should be a single ad valorem percentage applied, because the essence of the present scale is that it is not a proportionate system of taxation but a highly progressive one in the fiscal sense.
In the new proposals which we have put before the House this afternoon, the percentage rises from 11 per cent. on the cheapest seats through 15, 25, 30, and 36 per cent. to a maximum value of about 46 per cent., and I am sure that the right hon. Gentleman would want to see that increasing proportion maintained by whatever system was introduced.
§ Mr. Lyttelton
I can accept that, but my difficulty is concerned with the ls. 9d., seat, for instance, where it is necessary for the industry, if they want to charge the public more than Is. 9d., to negotiate with the Treasury, and I should like to see the scales operate more automatically and with less negotiations.
§ Mr. Wilson
This question has been considered, and the trade have shown no real sense of wishing to do that. If a case were made out it could, of course, always be examined, but that has not been the predominant view of any responsible side of the trade. Up to now, if there were an ad valorem duty of that kind there might be a bigger increase in the seat prices than those occurring at the present time. I think it is no secret that a large section of the exhibitors want the Treasury to alter the Entertainments Duty scale in such a way that they can increase seat prices by very much more than a penny and maintain the whole, or a considerable part of the increased revenue themselves. If the right hon. Gentleman's suggestion were adopted—which we are not debating this afternoon—it would leave the exhibitors much 70 freer to put up their prices to the detriment of the consumers, whereas there is some element of protection for the consumers in the scale at present before the House.
§ Earl Winterton
I have not heard it discussed before, but perhaps the right hon. Gentleman could tell me why there is such a disparity between the live theatre and the cinema.
§ Mr. Wilson
I think that question has, been discussed on countless occasions in this House, and the House came to a decision about it. As the right hon. Gentleman knows, the proposals which we have put forward this afternoon are not related to the general question of the size of the Entertainments Duty; they are a by product of an agreement under which changes are being made in the Entertainments Duty and the distribution of box office revenue for a specific purpose—that is, to make film production more a paying proposition without losing a great amount of Government revenue to parts of the trade which do not really need it, particularly a large proportion of the exhibitors and the producers of foreign films.
§ Lieut.-Colonel Sir Thomas Moore (Ayr)
I do not think that anyone on this side of the House denies that the Government have made a concession by this new Clause, but it seems to me that it is a very unwieldy, complicated and inadequate method of dealing with a very simple issue, namely, to reduce the duty on the most popular seats in the cinemas. In the country particularly, the most popular seats are the 1s. 9d. seats and below. Why, therefore, have this complicated process which does not even reveal what is to be left to the exhibitor? Why go through this complicated process to achieve so very little?
Like my hon. Friends I know—although the President of the Board of Trade seems to deny it—that many of the single owned cinemas in my constituency are on the verge of bankruptcy. We must allow them to have money left in their tills, after they have paid expenses, to enable them to carry on. The method proposed by the hon. Member for Caithness and Sutherland (Sir D. Robertson) suggests a penny off the whole range of cheaper seats at a cost to the Treasury of something like £6 million, but that 71 £6 million would be bread on the waters, because I am sure that the increased revenue which would be gained by the Board of Trade as the result of this concession would far and away make up for whatever was given away in the current year.
Therefore, I suggest that this matter will have to be dealt with again. The new Clause is only tinkering with the matter, and sooner or later we shall have to deal with the whole question of cinemas in a big way and recognise their needs and the needs of the British public, of which we are all members. Believe me, the right hon. Gentleman will benefit himself and the public if he sets his mind to seeing how this matter can be cleared up for the benefit of us all.
§ Mr. Maclay (Renfrew, West)
I want to take up what the hon. Member for Ayr (Sir T. Moore) said on the question of the near bankruptcy of many of the smaller cinemas from one special point of view. The thing which is worrying us particularly in Scotland is that smaller cinema owners, with their regular losses, are unable to keep their cinemas in good condition. It is extremely serious for the smaller cinemas even in the poorer parts of the big towns if their standard of maintenance goes down. I could give five examples, but I shall give only one. This one happens to be in my own constituency. The other four examples are scattered over the industrial belt of Scotland.
This cinema lost over the year £1,500 and during that period the Entertainments Duty paid was £4,300. It seems fantastic that such figures should be allowed to go on. The President of the Board of Trade pointed out that special attention was being given to the cheaper seats in the smaller cinemas by the reduction proposed in the new Schedule, but they do not stand up to the figures which I have given. The other examples which I could quote are nearly as bad.
I wonder if the authorities have really studied the Scottish problem as distinct from that in other parts of the United Kingdom, because even in the matter of cinema going Scotland is different. The climate particularly in the West of Scotland probably causes people to go more often to the cinemas than it does in other 72 parts of the country. People cannot afford to go now, and the rates are falling off as a result. The cinemas are having to face the fact that they now have smaller audiences, and unless they can get a greater return, then the position in regard to the maintenance of equipment, decorations and decent standards will be very serious indeed. I am sorry that the right hon. Gentleman and the Chancellor have not seen their way to go further to meet this urgent need.
§ 5.0 p.m.
§ Mr. Maudling
All those Members who have in their constituencies, as I have, a substantial centre of film production will be glad to hear that the Government have introduced this scheme to assist the film production industry in its very great difficulties. This is a concession on the part of the Government, and we are grateful for it, but it is important we should realise its scale. At present, the total size of the Entertainments Duty is about £38 million to £39 million a year. This concession, as I understand it, is to cost the Government £300,000 a year, or less than I per cent. of the present rate of Entertainments Duty.
It means that less than £1 of every £100 now collected in Entertainments Duty is all that the Government are prepared to concede. On the other hand, for every £1 coming from the Treasury, £9 is to be taken out of the cinema earnings. The total sum to go back to the production end of the industry is £3 million, that is, £300,000 from the Treasury and £2,700,000 from the consumer. I wish to make the point that in arranging, quite rightly, as the Government have done for a larger sum to flow back to the film production end of the industry to let it prosper, far too large a burden is being put on the consumer and far too little is being done by the Government.
§ Mr. C. Williams (Torquay)
I welcome this concession, which may be helpful to the smaller film producers. I have had some controversy on this matter in correspondence with one of the Government officials. I should like to emphasise, however, that the complaints I have heard in regard to the smaller cinemas are more than justified. We have already heard details of the position in Scotland and of how difficult it is for the smaller cinemas to get the necessary repairs done. 73 These smaller cinemas are suffering very heavy losses. What has been said about Scotland could be repeated in the West Country and probably in places like Sussex. Although we welcome this concession, I do not think that the Government have met the position of the smaller cinemas, from whom we are perpetually receiving complaints that the burden of taxation they have to bear is out of all proportion.
§ Mr. Pickthorn (Carlton)
I am wondering whether the Treasury Bench has the information to answer the question implied in most of the recent speeches from this side of the House, which I will try to put in a slightly different form. I do not think the distinction is so much between the small cinema and the large as between the provincial cinema and the metropolitan cinema, using the word "metropolitan" both in its fullest sense and in its almost fullest sense, of provincial capitals. I agree that the two things, small cinemas and provincial cinemas, tend to be the same—that you tend to get the small cinemas where there is only a thin population. The question I want to put is this. Can the Treasury tell us whether they have thought this out, or whether we have been deceived by the persons principally concerned in our constituencies—if so, after having deceived themselves—for I am sure any misleading of us is not deliberate?
It is certainly true that in many provincial areas, including some where there is a considerable thickness of population, it is believed that this sort of concession will not be enough to enable them to pay their way. I ask whether that would not be considered to have very unfortunate social results. If the tendency is for the cinemas in London to prosper and the cinemas in the country not to prosper—and in the provinces rather those in the great towns than those on the outskirts of the big towns, or those in mining areas, for instance, where there is a considerable but not very great thickness of population—I wonder whether that is no socially highly undesirable. I should have thought that Members opposite would have considered that as undesirable as we do. I wish to ask the Treasury Bench whether they have information on this point.
We have done all this business in rather an odd kind of way. When we first approached the question of the Entertain- 74 ments Duty we were told that less said the better, that cleverer chaps, persons better informed, officials in the Treasury and chaps making, or losing, money in the industry, were having conversations, and the less said in the House of Commons the better. I am not now arguing that that is not true—that the less said the better—perhaps it is generally true, and also that what is said should be said by the Front Benches.
Then we had a Debate last Thursday in which I gather there was a good deal of information about taxing cinemas—not all of us, naturally, being present all the time—whereas today we have no indication from the Government what will be the effect of the change now proposed in the Finance Bill, either upon the money receivable by the Government, or upon the money collectable from the public by or through the industry. We have had no indication about that at all from Ministers, but we merely gather that there are these two figures of £300,000 to the industry and £3 million from the public.
If we analyse the matter as between parts of the country, is it clear that the effect of these two figures is not to be an excessive burden upon the provincial cinema as against the London cinema, and inside the provinces an excessive burden upon the cinema not within, say, a two mile radius of the town hall? It may be that there is not sufficient information in the Board of Trade for the right hon. Gentleman to know the answer to that question, but the question ought to have been considered and if the answer is guessed ought to be given to us, for us to know whether the Clause proposed is the best possible. If the answer is available, then it should be fairly given now to the House.
§ Mr. Eric Fletcher (Islington, East)
No one will pretend that this is a very clever scheme, or that it is anything more than a temporary and makeshift expedient for dealing with the problem. The real criticism about it is that it does not really give the maximum relief where maximum relief is needed. The problem is this: The Treasury have been receiving something in the order of £38 million or £40 million a year by way of Entertainments Duty from the film industry. On the other hand, certain elements in the industry find themselves in need of relief. For a long time past there has been agitation 75 on the part of various sections of the industry to reduce Entertainments Duty or divert some of this money to those places where it is most needed to enable the industry to flourish.
The solution proposed by the Government has several disadvantages and all the marks of being a very hasty and ill conceived expedient. It is far from being an ideal or satisfactory solution. It is well known that it has been received by every section of this industry with a good deal of lukewarmness and a good deal of reluctance. As hon. Members have pointed out, instead of the Treasury making a concession to the industry, what.they are really doing is foregoing some £300,000 a year—that figure is based upon a lot of assumptions—and making the consumers—that is the British taxpayer—face a burden of a further £2,700,000. That is one aspect of it.
The other aspect is, where is that £3 million going to? We have not heard very much about it. This is the position. Of that £3 million, £1½ million is going directly to aid British producers (and the method of division will require careful examination). The other £1 1/2 million is being retained by exhibitors, subject to their existing contractual obligations for division between themselves, distributors and producers. This will mean in practice that the total of British exhibitors will retain approximately £900,000 of it, and the balance of approximately £600,000 will be divided between American producers and British producers in the proportion of roughly 75 per cent. to 25 per cent., with the result that some £450.000 of this additional money that the British taxpayer is being asked to find will go to the American companies.
The extraordinary thing about it is that the President of the Board of Trade is at this very moment in the midst of negotiations with Mr. Eric Johnson to limit the amount of money, which the American companies can take out of this country year by year, because the existing Johnson Wilson agreement recently came to an end. These negotiations have been largely directed to fixing the total sum 'which the American companies will be able to take out of the country in dollars 'during the next few years. Whatever sum is fixed it will leave a certain amount of 76 surplus earnings to the American companies as "frozen" or "unremittable" sterling.
One curious effect, therefore, of this particular method suggested in this Finance Bill of giving relief to the British producers and exhibitors is the payment by the British taxpayer of a sum of nearly £500,000 to the American producers, who are not allowed to take it out of the country. That is the most anomalous result. Why does that result occur? It is either, rightly or wrongly, because of the interpretation which is given by the Government to the Havana Agreement. It is high time we appreciated the implications of this Havana Agreement, both—
§ Mr. Fletcher
I understand there is some dispute whether it is the Havana or Geneva Agreement and whether it is ratified or not, but, whatever it is, this international agreement stands in the way of the Government doing the direct sensible thing to solve this purely domestic British problem. The sensible course where the Government takes £40 million out of an industry, some sections of which are in the state approaching bankruptcy, and where the Government want to give help to those sections of the industry, would seem to be to give it to those sections of the industry which need it.
Instead of doing that, we find this rather comic, very complicated, and I think quite speculative arrangement, which whatever merits it may have, involves the diverting of about £500,000 of the British taxpayers' money to people who do not want it, or if they do want it, by another action the President of the Board of Trade is taking, are not allowed to have it. That seems to me a perfectly absurd situation, which is only justified 77 by the argument that the Havana or Geneva Agreements—which either have or have not been ratified—prevent a more direct solution
I am not sure how far those agreements are binding on His Majesty's Government, but if they are, then presumably they can be waived if necessary by any other interested party to the convention, and the only other party which can have any interest in this convention in this respect is the United States of America. Neither the French Government nor the Italian Government for example are interested to any large extent in the earnings of films shown in this country. The American Government is rightly and properly interested, and it is quite proper and natural that there should be negotiations between the British Government and America with regard to how much the Americans are to have from the earnings of their films in Britain, for the British industry is so largely dependent on them.
§ Earl Winterton rose—
§ Mr. Fletcher
If I may, I should like to finish my sentence. If this convention stands in the way of the Government giving direct relief to the British industry out of the Entertainment Duty, then the Government ought to be able to negotiate with the Americans, with whom they are negotiating anyhow on this particular matter—
§ Mr. Deputy Speaker (Major Milner)
The hon. Gentleman is going far beyond the purview of this new Clause. I cannot see how these considerations could possibly arise out of it.
§ Mr. Fletcher
I should have liked to develop the point, but in deference to your Ruling, Mr. Deputy-Speaker, I will not pursue the matter any further. I think perhaps I have said sufficient to indicate to the Government my suggestion. I promised that I would give way to the noble Lord, the Member for Horsham (Earl Winterton).
§ Earl Winterton
I was going to say that we on this side of the House were going to raise these considerations on the Committee stage, but that we withdrew our new Clause in response to the Government's request.
§ Lieut.-Commander Braithwaite
My right hon. Friend the noble Lord, the Member for Horsham (Earl Winterton) and other hon. Members have covered a very wide area in their plea for a more generous concession in this matter. I only rise to put a very narrow point, and to submit to the President of the Board of Trade an anomaly to which I think he may well have had his attention called. It is somewhat ironical that this anomaly arises from an attempt made by this Government in a previous Budget introduced by the right hon. Member for Bishop Auckland (Mr. Dalton), when he endeavoured to give relief to cinemas in the rural areas.
The House will recall the efforts by the Government to deal with this matter, and the President of the Board of Trade will remember that there was some difficulty over the definition of what, in fact, comprised a rural area. It was eventually resolved by a population quota of 640 persons to the square mile. In this concession which we are now discussing on the taxation of cinemas, the anomaly which I have to submit to the right hon. Gentleman arises out of that one very narrow point. This example has been handed to me from the west country and concerns two resorts, both of which will be familiar to the House—Exmouth and Sidmouth. Sidmouth qualifies for the exemption because of its larger area and because it comes within the definition of a rural area, under which one of its cinemas gets relief under the previous concession.
The hon. and gallant Gentleman must satisfy me that his remarks have some relation to this new Clause. At the moment quite frankly, I cannot see it.
§ Lieut.-Commander Braithwaite
I will endeavour to assist your observation on the matter by respectfully pointing out that my hon. Friend the Member for Caithness and Sutherland (Sir D. Robertson) was allowed to discuss an Amendment and was enabled to put a case for the cinemas in the rural areas. I am merely endeavouring to point out one anomaly which has arisen, and I hope that I shall be able to satisfy you completely that the argument is within the area of the discussion now taking place. There is in Exmouth a group of four 79 cinemas. I find that they have contributed Entertainments Duty—
I am sorry but the hon. and gallant Gentleman has not satisfied me that his remarks have any application to the proposed new Clause. There may be cinemas in Exmouth and elsewhere. Does the proposed new Clause affect them?
§ Lieut.-Commander Braithwaite
With the greatest respect, Mr. Deputy Speaker, I am endeavouring to point out, in connection with a question of relief, that Mr. Speaker did kindly allow not only this new Clause but a new Clause in the name of my hon. Friend the Member for Caithness and Sutherland to be taken at the same time. The new Clause to which I refer is entitled:Duty on cinema entertainments
I do not see that there is any reference to rural cinemas at Exmouth or elsewhere.
§ Lieut-Commander Braithwaite
Am I not entitled to ask whether the relief being given to cinemas in rural areas is sufficient, and to argue by illustration what might be done to assist in this matter? Am I allowed briefly to submit that to the Chancellor of the Exchequer?
I doubt whether the hon. and gallant Gentleman is so entitled. The new Clause refers to the criterion of gross takings, not rural or other areas.
§ Mr. J. N. Browne (Glasgow, Govan)
I rise to support arguments made on this side of the House in regard to items affecting Scottish exhibitors. I am sure hon. Members know that the trade agreed to the present arrangement with considerable reluctance. It was simply told, "Either this, or nothing" The concession does not go far enough, and I fear that the form of it will hasten the drift to the lower priced seats which is happening to the cinemas in my constituency. Hon. Members have used the word "concession," but the hon. Member for Islington, East (Mr. E. Fletcher) called it a comic arrangement. Is it a concession at all? Is it not a device whereby the Chancellor of the Exchequer kindly per- 80 mits cinemas to change their prices? I ask the President of the Board of Trade whether this pattern of concession is temporary or whether this new idea—it is a new idea—of tax relief is to be continued as a permanency? If it is, it may be a very great mistake for the trade to accept this principle of tax relief at all.
§ Question put, and agreed to.
§ Clause read a Second time, and added to the Bill.