HC Deb 02 July 1951 vol 489 cc1953-68
The Chancellor of the Exchequer (Mr. Gaitskell)

I beg to move, in page 2, line 29, to leave out "First Schedule," and to insert: Schedule (Entertainments: Revised Full Rates of Duty). I think it might be for the convenience of the House if we could discuss with this Amendment the Schedule itself, which, of course, appears later in the Amendment paper.

Mr. R. S. Hudson (Southport) indicated assent.

Mr. Gaitskell

I understand that the Opposition agree to what I propose. The House will recall that in the Budget proposals—

Mr. Deputy-Speaker

I gather that the right hon. Gentleman is suggesting discussing the Schedule with this Amendment. I am, of course, in the hands of the House, but I should have thought it might have been more convenient to discuss it when all the figures were before the House.

Mr. R. S. Hudson

If possible, it would be more convenient to deal in one single discussion with the Schedule and the Amendment.

Mr. Deputy-Speaker

I agree, and of course, there will not have to be another discussion on the Schedule.

Mr. Gaitskell

I think it would be convenient if we could proceed now. I am much obliged to you, Mr. Deputy-Speaker.

The House will recall that in the Budget proposals we intended to raise some £10 million in a full year by reason of the increased duty on entertainments, but that, in the case of the cinema industry, it was proposed that some £2,500,000 should, in effect, be handed back to the industry, part of it going to the exhibitors but the greater part going to the producers by means of an extension of what is known as the Eady plan, under which there is a levy on the exhibitors and a sum is paid over to the British producers.

I also explained, when I made this announcement in my Budget speech, that. of course, there would have to be discussions with the industry on the details. of this plan. I might add that in any case discussion would have been necessary, because the original Eady plan came to an end this year and we naturally wished to extend it. Those discussions have taken place, and I am glad to say that we have now reached agreement with all parts of the industry. In effect, the new Schedule does embody, so far as the tax arrangements are concerned, the agreement we have reached with the industry.

In explaining the Schedule, I wish, first of all, to remind the House that here we really have three objects. We want to raise some extra revenue; we want to help the producers, and we want, I think, to do justice to the claims of the exhibitors. Let me say at once that when we entered into these negotiations we contemplated it would only be necessary to allow quite a small sum to the exhibitors; but they satisfied us that they had a stronger case, and, as will be seen when I have explained them, the new proposals give them a great deal more.

The new agreement, to which I will now turn, provides in the Schedule for the following arrangements. First, we are not proposing to impose any duty on either the 6d. or 7d. seats. I am glad that is so, because during our earlier discussions on this matter a number of hon. Members particularly asked that, if possible, we should avoid imposing the duty on these seats. Secondly, we are making no change whatever in the duty on the 8d. to 10d. seats. Thirdly, in the case of the 1s. seats, we are actually reducing the duty by 1d., which sum is going to the exhibitors.

6.0 p.m.

I will not take all the changes, but I will mention a few of the more important. In the case of the 1s. 3d. seats, there is no change in the duty. In the case of the 1s. 6d. and 1s. 9d. seats, the duty is reduced by one-halfpenny. In the case of the 2s. seats there is no change. Broadly speaking, therefore, either there is actually a reduction in the duty or there is no change in the relevant prices up to 2s. The significance of that will be apparent in a moment or two. When we go above the 2s. level, then the duty increases and rises by 2d., 3d., 4d. and 5d. up the scale, the 5d. increase, of course, being for the very expensive cinema seats.

The House will appreciate that in imposing these rates of duty, we do not ourselves here determine the prices which exhibitors, or other proprietors in the case of other entertainments, will charge for their seats. That is a matter they themselves will decide in the light of what they think is proper. They will no doubt do so according to whether they see an advantage in adjusting a particular price for a particular seat or not.

In the case of entertainments other than cinemas, I think it is quite plain that up to 2s. there is no particular reason why they should alter the present prices at all. Indeed, they get certain advantages where the duty is reduced so that the net takings of the proprietors are improved. As to what they do above that level—I am speaking now of non-cinema entertainments, of greyhound racing, horse racing and speedway racing—it turns on what they regard as giving them the best return.

I will return to their position later if I may, and deal now with the cinemas. There is another consideration which has to be borne in mind. It is, in accordance with what I said a little while ago, that we have made arrangements for the Eady scheme to be extended not merely to one year but for another three years. That is a very satisfactory result, because it gives the producing side of the industry a security which it lacked previously.

Under that scheme, above 1s. the levy to be paid to the producer is ¾d. as against ¼d. in the first year that began with the Eady scheme last year. Below 1s. the levy remains at ¼d. as last year. The effect of the levy, taken with the new Schedule, I think will be to induce the exhibitors to raise the prices of some seats below the 2s. level and put them into the next highest grade. I am speaking only of cinemas. It becomes profitable for them to do that because they have to find the extra½d. under the Eady scheme. Otherwise there would be no reason for them to alter prices at all.

That is the reason why in the case of cinemas we may expect an increase not below 1s. but in the 1s. 3d., 1s. 6d. and 1s. 10d. seats. It is because the imposi- tion of the levy for the benefit of the producing side of the industry makes it profitable for them to put up prices, whereas in the case of other entertainments there is no levy and therefore not the same incentive for them to put up prices.

If I may sum up that part of what I have to say as far as prices are concerned, the outcome of all this can be described as follows. Whereas the original proposals would have involved an increase of 1d. on the 6d. and 7d. seats and of 1d. on the 8d. and 9d. seats and 2d. for the 10d. and 1s. seats, there will be no increases in prices at all up to that level but, as I mentioned, in the case of the 1s. 3d. to 2s. 10d. seats there will be an increase of 3d. instead of 2d. In the case of the 3s. to 5s. 7d. seats there will be an increase by 4d. instead of 3d. and above that, in the very expensive seats, by 5d. instead of by 4d. or 5d. as the case might be. As to how the small cinemas are affected—

Mr. Charles Williams (Torquay)

When does the new scheme come into operation?

Mr. Gaitskell

On 5th August. That is the desire of the whole industry and it is our desire as well, because otherwise we lose Revenue.

The House might like to know how the small cinemas are affected. We have done everything we can to help them. I have already mentioned that there is no increase in the duty on the cheaper seats, and, indeed, there are some reductions. Therefore, as far as the general case of the smaller cinemas is concerned—and they are the ones which have the cheaper seats—they have definite net gains under these arrangments. Furthermore, it will be noted that there is no additional levy on seats below 1s. Therefore, on the 1s. seats there is a gain of 1d. which is retained wholly by the small exhibitor.

The arrangement made last year that cinemas taking less than £125 a week should be exempt from the levy in any such week continues and finally—maintaining the position—there is no duty at all on the cheaper seats at 6d., 7d. and below. Therefore, I think we can reasonably say we have taken very great care to help the smaller cinemas as far as we can.

The effect of all this is to bring in an extra £12½ million of revenue as against £10 million in the Budget proposal. virtually all the increases being in the expensive seats, of which the Exchequer receives £6½ million against £7½ million in the original proposals. The producers will receive £2.3 million and the exhibtors will receive gross £3.7 million, or perhaps £1 million less than that after the deduction of foreign film hire. Taking the new arrangements and last year's arrangements, the industry as a whole will have obtained £8½ million more than it was getting before, and the producers will receive £3½ million and the exhibitors, before deducting film hire, about £5 million.

Mr. R. S. Hudson

Would the right hon. Gentleman mind repeating that?

Mr. Gaitskell

If one took the arrangements made last year under the Eady plan as well as the arrangements this year, the industry would be receiving about £8½ million, of which the producers would receive £3½ million. The exhibitors would get the remainder minus the cost of film hire, which is a slightly uncertain figure but which I put at £1 million.

Mr. Hudson

They would be left with £2.7 million?

Mr. Gaitskell

On this year they would be left with about £2.7 million after deducting film hire. I think it is of great importance that we should have managed to reach agreement on the levy scheme and that it should continue for another three years. If there should be any change in the methods of collecting Entertainments Duty resulting from discussions which I said we would have with the industry, it is agreed with all the parties concerned that by some means or other we should secure that that £3½ million, which is the figure for two years taken together, should be guaranteed, as it were, to the production side of the industry. I believe that provides a real opportunity for them to get on to a paying basis without any further assistance from the Government.

I should like to pay my tribute to the four associations in the trade. They have certainly driven a hard bargain with us and we have had a lot of argument about it, but I think it is reasonably satisfactory in outcome, and I am particularly pleased that we are able to continue this arrangement and extend it for the producer.

I should like to refer briefly to the other entertainment industries, They, of course, gain something on the cheaper seats because the duty is reduced on certain of those and not increased on others. What they will do about the prices above 2s. I do not know, but there is no reason why they should lose anything on them. They can, of course, put up the price by the amount of duty precisely and take the same themselves, or they can put it up by more than the duty and take 1d. on each seat if they think it pays them to do so.

I thus claim that the Financial Secretary's promise in speaking on the matter of speedways, that they would not have to put up their prices at all on these lower-priced seats unless they wanted to, is amply borne out, and indeed, more than borne out, by the arrangements we have made. The same, broadly speaking, applies to the other two industries, horse racing and dog racing, though of course I must admit in their case that I understand the prices are generally higher, and therefore the benefit of the reduction in duty on the lower-priced seats would be proportionately less important to them than it is to the speedways.

I would finally remind the House of the undertaking we gave to review the whole structure of the Entertainments Duty between now and next year. We appreciate the difficulties. I would emphasise again, however, that it may not be so very easy to find a simple solution to this problem, but we will certainly do our best in consultation with the various interests concerned.

Mr. R. S. Hudson

I think all quarters of the House must be indebted to the right hon. Gentleman and his officials for having spent so much time in successfully reaching the compromise which is before us today and which has been agreed by all sides of the industry. One might also hope that it is a good augury for the future, for I believe this is the first time in very many years that all sides of the industry have actually come together and have negotiated as a body with the Chancellor of the Exchequer.

As I said when we were discussing this matter in Committee, the difficulty in which the exhibitors have been till now has always been that they could not raise the price to the public by, let us say, 1d. without at the same time incurring a disproportionate liability for increased Entertainments Duty. Although no material increase in the amount the public are expected to pay arises from this compromise, the new arrangement at least gives the proprietors of the cinemas and the producers a substantial part of what they have long claimed to be fair.

The right hon. Gentleman said that this would help the small cinemas. I think it rather depends on the definition of the word "small," because I gather that the proprietors of some of the smaller cinemas, or the smallest cinemas, feel that they are not getting anything particular out of this. For example, under the Finance Act, 1948, exemption was granted in cases where they did not have more than 400 seats and they were in areas with not more than 2,400 population or 640 to the square mile.

I gather there are a certain number of marginal cases which cannot take advantage of that arrangement because the population is slightly greater than the agreed figure, and I am not quite sure even now whether those small cinemas—the smallest of them all—will benefit from these concessions. I have no doubt that the slightly larger ones in the industrial towns will definitely benefit, but I think there are still a certain number of very small cinemas the proprietors of which may find themselves in financial difficulty, or so I am advised.

6.15 p.m.

I am sure that the industry as a whole will loyally do its best to carry out this agreement in the spirit in which the Chancellor has met them, but whether or not the Chancellor gets the money he expects is a matter which only time can tell. He anticipates that the public are going to pay a net increase of £12½ million. There was some talk during the Committee stage of a reduction in cinema receipts following reduced attendances, and it will be remembered that the Chancellor threw doubt on this and said that his figures showed, on the whole, that cinema attendances were being well maintained. Again, we shall only know after the lapse of months.

I think the Chancellor has this point in favour of the position he took up, namely, that if we compare the prices of cinema seats over the last few years with the rise in the prices of most things we have to buy, then cinema seats definitely stand out as not having gone up to anything like the same extent; they are relatively the cheapest things in relation to other goods which we all have to buy, whether necessities or pleasures. They stand out as articles which have not gone up in price in anything like the same ratio. It may, therefore, well be true—I only hope it is true, from his point of view and that of the National Revenue—that the attendances will not fall to the extent that some people think. The test, of course, will come on and after 5th August.

It is quite true that the prices of seats of 1s. or less will not go up, but the prices of seats over 1s. will go up at least 3d. The great question to which cinema owners and the Chancellor will want to know the answer is whether the man who has hitherto paid, for example, 1s. 10d. for his seat is now going to fall back on the 1s. 6d. seat or whether he will be willing to pay the new price for the 1s. 10d. seat, which is 2s. 1d. Only time can show. There is such a thing as the law of diminishing returns. Whether that will apply here, as the cinema industry think it will, remains to be seen. All I can say is what I said a little earlier, that they intend loyally to try to see that this experiment is properly carried out so that the Chancellor can get his money.

As far as the exhibitors are concerned, according to the Chancellor today they will get a net figure of £2.7 million. I confess the arithmetic is very complicated, and I thought after discussion with them that they were going to keep just over £3 million, but if the Chancellor says they will only get £2.7 million, it strengthens what I am about to say. Out of that £2.7 million the first call is to meet the admittedly steadily rising costs to which the exhibitors are subject, and which I think the Chancellor admitted today were definitely items that had to be covered unless a large number of the exhibitors were to go bankrupt.

When that has been met, the next item is the question of increased remuneration and wages for the cinema employees. When we were discussing this in Committee, it was suggested in some quarters of the Committee that the figures were on the low side. I confess that, listening to them for the first time, I wondered, if the figures were really correct and were so low, how in a state of full employment the cinema exhibitors were able to get any staff at all. The solution to the problem, I am told, is that the figures quoted in several sections of the Committee were the minimum figures set out in an agreement already some months or years old, and that in fact over a large range of the operatives concerned the exhibitors already pay more. In any case, £2.7 million is the figure of the total money in the kitty to be divided between increased costs and increased remuneration.

Mr. Gaitskell

I am not quite sure what the right hon. Gentleman means by increased costs. If he includes the cost of film hire, the figure would be £3 million.

Mr. Hudson

We discussed in Committee the question of depreciation and of bringing cinemas up to the necessary standard. I have forgotten the exact figure, but we have been told of the cost involved over the next three years to bring cinemas up to a standard to comply with the new Home Office requirements about safety against fire. Those are the ordinary costs of exhibiting, quite apart from the question of film hire, so that £2.7 million is the net figure after the exhibitors have paid increased film hire to the producers.

There is only one further point I wish to make, and it concerns the right hon. Gentleman's reference to the levy. I think he will bear me out in this; it is essential to bear in mind the importance of the word "only." This is an agreement by the exhibitors to pay the levy for three years, and for three years only. It is impossible to know what the future may have in store for them but, as I understand it, the exhibitors feel—and I think the Government hold the same view—that if the producers are given this figure of something over £2,500,000—

Mr. Gaitskell

£2.3 million.

Mr. Hudson

If they are given this figure between £2 million and £2,500,000 for their share of revenue for the next three years, then, as far as human forecast can go, that should be sufficient to put them on their feet and to make it unnecessary for them to come back, either to the House or to the exhibitors, and ask for further finance. I believe that is the Government's understanding of the position, and that that is the exhibitors' understanding of it; and I can only hope that what is forecast will prove to be the case.

Finally, I should like to repeat what said at the beginning—that all sides are indebted to the Chancellor and his officials for finding this way out of the difficulty, and especially to the Chancellor for reiterating his promise to us to see whether some improvement can be made in the structure of the Entertainments Duty, difficult though all sides of the House realise that to be.

Mr. J. N. Browne (Glasgow, Govan)

I listened with great interest to the Chancellor's speech. Perhaps I should declare an interest in this subject, for some 26 years ago I was the manager of a cinema, and since then I have been connected in some way or another, and still am, with nearly every form of open-air sport on which Entertainments Duty is imposed. I welcome this new scale, especially for Scotland, because in Scotland there is one seat to every nine people, as the Chancellor knows, whereas there is one to every 12 in England; and we were very worried about the effect of the original scale.

We are very glad to see that the lower-priced seats are remaining unchanged. I am glad to see that the Chancellor at last realises what the entertainments industry has known for years that—the whole system of Entertainments Duty is unsatisfactory. In this House and in the country we are accustomed to devices for artificially keeping, alive industries which are being strangled by taxation, and this is only another example.

I want to examine for a minute the causes which brought about this change of heart in the Chancellor. As we all know, the original proposals were savage and unacceptable. As a consequence, the Chancellor negotiated with the cinema industry and studied the special conditions of that industry. As recently as 5th June, 1951, the Financial Secretary to the Treasury said: We have made a counter proposal roughly on the basis that seats up to Is. remain at the pre-Budget price… Let hon. Members mark that—seats up to 1s. The Financial Secretary continued: but that the more highly priced seats go up by rather more than was originally proposed."—[OFFICIAL REPORT, 5th June, 1951; Vol. 488. c. 944.] At that time, as recently as 5th June, the Financial Secretary could not have been aware of the implications of those remarks, because horse racing, speedway racing, greyhound racing and a host of other entertainments are tied to the cinema scale. These entertainments are only occasional, whereas the cinema provides a continuous performance every day. Yet the right hon. Gentleman negotiated with the cinema industry for a scale to suit a great range of entertainments.

The cinema industry is faced with rising costs and more or less static revenue, as the right hon. Gentleman knows. Other entertainment industries which have to pay tax are faced with rising costs and a steadily falling revenue. He could not move any entertainment to the low scale. There is such a wide gap between one rate of tax and another. It is as though the Purchase Tax scale of 100 per cent. then dropped straight down to 33 per cent. The right hon. Gentleman has done his best and the whole industry appreciates it; he has left alone the present rates up to 2s. and has placed what is roughly a 2 per cent. increase on the rest of the scale, but he has left us with what is one of the most astonishing and illogcal systems of taxation which this country has ever devised.

I say to the Chancellor, "Please do not attempt again to revise the scale." In my view there should be at least three scales. There should be one for the cinema industry, with its peculiar conditions of continuous performance, and the Chancellor should quite rightly negotiate on the needs of that industry. There should be another scale for theatres and similar entertainments, where there should be the lowest rate of tax. There should be a third scale, in the middle, for those entertainment industries which are occasional and are limited, like dog racing, horse racing or speedway, by the weather or by circumstances. There should be three scales and not two, and then we should begin to get something like fair treatment in the entertainments industry.

I turn for a moment to the new scales to mention some of the peculiarities which they offer. If a proprietor wants to charge the public 5s. admission, he cannot do it. It is not possible to charge 5s. admission. He must charge 4s. 11d. and, out of the 4s. 11d., he gets 2s. 7½d. Supposing he wants 2s. 8d. instead of that 2s. 7½ He immediately attracts a tax of 2s. 9d. and he must charge 5s. 5d., for there is no such thing as a 5s. charge in Britain.

There is a wide gap in the possible prices available to the entertainments industry, and these wide gaps create serious problems. There is a gap of 5d. between 2s. 7d. and 3s., which are popular prices. Again, on the higher prices, there is a gap of 8d. between 4s. 2d. and 4s. 10d.; and a gap of 11d. between 4s. 11d. and 5s. 10d. Between 4s. 2d. and 5s. 10d. there is a difference of 1s. 8d. and in that great range of prices, in the 1s. 8d., there are only two available prices—4s. 10d. and 4s. 11d., which themselves differ by one penny.

I think it should be possible to charge any admission price. Looking at what I have said in another way, the present position is this. Between the prices of 9d. and 6s. 6d., which is what the great mass of people of this country pay, one would expect to be able to charge admission prices according to the entertainment provided and the show put on. Between 9d. and 6s. 6d. there are 69 possible penny stages. The Chancellor proposes to give us 23 different prices. If these were 23 threepenny stages, people would say that should be all right, but it is not so because there are nine pairs of prices differing only by a penny. In effect, we have only 15 possible prices between 9d. and 6s. 6d. which we can charge in the entertainments industry. Yet the Chancellor has just said that it is left to the industry to determine the price. It is not left to the industry; it is left to the Chancellor of the Exchequer.

I come to my second suggestion about the Entertainments Duty. It should be expressed in terms of a percentage upon the admission price charged, so that any price at all could be charged to the public. Only in that way would the public get the benefit of competition in entertainments, which they do not get under the present system. The Customs should find this practicable. They can collect the total amount of Entertainments Duty paid on the number of admissions for a particular show or for a week. It could be done as easily as the Pool Betting Duty is collected. As far as I can see it presents no problem of administration.

6.30 p.m.

What of the future? If the Chancellor is still the Chancellor next time we have to deal with Entertainments Duty, and if he approaches the problem in the spirit which he has brought to these scales at this time, I can assure him that the whole industry will co-operate with him. The public expect to pay fair entertainment prices; and the people providing an entertainment expect to pay a fair amount of tax, and to get only sufficient for a fair reward and to put on a proper show; all parties know that the country needs the tax. All we ask is that the bungling of the Treasury shall not again be allowed to upset the whole of the entertainments industry. We do not want to come again to the House asking for concessions. We want a new deal.

Captain Duncan (Angus, South)

As I was one of those who raised the question of the cinema industry during the Committee stage of the Bill, I should like to thank the Chancellor of the Exchequer for the way in which he has obtained agreement in the industry which will give it some relief. I am not in a position to say that that relief will be sufficient. My right hon. Friend the Member for Southport (Mr. R. S. Hudson) referred to some of the things that the cinemas will have to do to try to recoup themselves and to recover the position that the cinema industry had before. He referred to increased costs; he referred to increasing remuneration for the workers.

However, the particular cinemas which I know have also got to wipe out losses that they have had in the last few years. Only last week I heard from one group in my constituency who said that they had had such an increase of burdens last year that they were thinking of selling one of their cinemas. It is a more serious position than even I thought or even the Chancellor thought when we started these discussions in Committee. I am glad to note that the right hon. Gentleman did say that he found, on going into the matter—as I have found—that the cinemas were in a more difficult position than anyone had realised.

So we leave it this year, but I make no promise that I shall not return to the charge next year if we find that the reliefs given this year, amounting in gross to £3,700,000, to the exhibitors are not enough. In addition, we shall look forward to any changes in the method of levying Entertainments Duty that the Chancellor can devise and which may prove fair to all concerned. This is a very difficult question. I have always been of the opinion that Entertainments Duty as such has not a high value compared with other taxes where relief is required. I spoke in Committee stage about this only because I was convinced, from the figures that I had seen, that it was urgently necessary for the very salvation of the cinema exhibitors that something should be done. I am very glad that it has been done.

Mr. C. Williams

I shall speak for only a very few minutes on this question, and not from the point of view of the cinema producers in any shape or even from the point of view of the Chancellor. The first thing that I should like to say is that I entirely agree with my hon. and gallant Friend the Member for Angus South (Captain Duncan), in welcoming the fact that those who go into the cheaper seats will undoubtedly not be inflicted at the present time with a new burden of taxation. I should like also to add how very sorry I am that the horse breeding industry—I shall not develop the point—has come out so badly in this question as compared with the cinema industry, and I only wish that horse racing and some of the other sports had had the good fortune of the highly organised cinema industry at the present time.

As far as I am concerned, I always welcome it when any British industry, as in this case, as the Chancellor said, can get concessions out of the Treasury. That is always welcome to me in any way, and the more the better. However, so far as I understood the Chancellor's figures, he expects, out of a total duty of £12,500,000, to get £6 million. Is that right? The other £7,500,000, in one way or another, goes to the industry. I think that is correct.

Mr. Gaitskell

We get £6,500,000, and the other £6 million goes to the industry.

Mr. Williams

Yes, roughly speaking. It is a very near thing. At any rate, something over £6 million really goes in tax, that is to say, that when hon. Gentlemen opposite who can afford, as so few of us on this side can, to go to the dearer seats, they will be paying half of that money directly to the industry. I am not quarrelling with that, except that I do hope that the Chancellor, before he gave this subsidy to the industry, consulted the hon. Member for Wednesbury (Mr. S. N. Evans), because, after all, apparently cinemas are much cleverer at getting subsidies than the farmers, who have not been so lucky as the cinemas have been on this occasion.

I congratulate the cinema industry. I only wish that the ordinary people of this country whom I represent had come off better out of this. I say—and it is the last word I say on this—that I think that the taxpayers of this country, as invariably happens under this Chancellor of the Exchequer, come out of the position very, very badly. They have a new tax, and it has been deliberately put on at about the worst day of the year and at the worst season of the year for those of us—and we run into hundreds of thousands—who wish to try to make this country attractive to visitors from all over the world in August.

Amendment agreed to.