CINEMATOGRAPH FILMS (LEVY) (Hansard, 16 April 1959)

§ The Parliamentary Secretary to the Board of Trade (Mr. John Rodgers)

I beg to move, That the Cinematograph Films (Distribution of Levy) (Amendment No. 2) Regulations, 1959, a draft of which was laid before this House on 10th March, be approved. The House will remember that the Cinematograph Films Act, 1957, imposed a levy on exhibitors of cine- 1266 matograph films, the proceeds of which are used for the benefit of makers of British films. Regulations made under Section 3 of that Act provide that the levy should be divided among British films in proportion to their box office takings, but that in calculating the share for short films—that is, films of less than 3,000 ft. — the box office takings should be multiplied by two-and-a-half before making the calculation. This gives them a larger share of the levy and follows the practice of the industry before the arrangements for the film levy were put on a statutory basis.

The first part of the amendment to the Regulations now before the House extends these arrangements to second feature films, although in that case the multiplier is two instead of two-and-a half. It is not easy to define a second feature film. Such a film may sometimes be given a first feature showing in a limited number of cinemas. However, its chief characteristics are that it is a long film made at a relatively low cost. Hon. Members will see that in these amending Regulations such films are referred to as " low cost " films and are defined as long films the labour costs of which do not exceed £20,000". This definition is easy to operate, both for the film makers and the Board of Trade, as details of labour costs have in any case to be supplied to the Board of Trade in connection with the quota legislation.

These second feature or " low cost " films are shown in cinemas as part of the supporting programme. The supporting programme gets a relatively small share of the box office takings, the lion's share of which goes to the first feature, which is the main attraction to the cinema patrons. Since the levy is shared amongst film makers in proportion to the box office takings of their films, the share going to the makers of supporting programme films is proportionally low.

The arrangement I have described for short films did something to redress that, but makers of second feature films have until now had to do without any extra help. However, the situation was reached when the share of the box office takings available for the supporting programme was no longer adequate to maintain the production of second features and their output fell sharply. It is to remedy this 1267 that the amending Regulations provide for the earnings of second features to be doubled in calculating the share of the levy to be apportioned to them.

The Act requires the Board of Trade to consult the Cinematograph Films Council before making new regulations. The Council's advice was strongly in favour of making this amendment. The change appears to have the support of almost the whole of the industry. This is partly because it was felt that a further decline in attendances at cinemas might result if provision was not made to meet the requirements of the customers who expect a double feature programme and partly because the view is widely, though not universally, held that the production of these films is a valuable training ground for producers, directors and technicians.

I ought to add that there is a small school of thought which argues that, since second features could be given a greater share of the levy only at the expense of first features, it is a mistake to increase support from this source, first features being the more important from the point of view of overseas earnings and prestige. This minority does not attach the same importance to the view that second feature production affords a valuable training ground.

I remind the House that the levy, although collected by the Commissioners of Customs and Excise, is not public money. It remains the industry's money which is paid by one section of the industry to another. Whatever, therefore, may be thought about the minority view I have mentioned, or about the advisability of leaving the economics of supply and demand to look after the financial return to second feature films, the Government have thought it right to accede to the majority request of the industry to help second feature film production by means of a larger share of the levy.

The existing Regulations provide that the share of levy to which a film maker is entitled shall be paid to him within three months after the earnings of all eligible films for the 52-week period have been finally ascertained. Consequently, the new Regulations accord double payments to second feature films in respect of their earnings for the whole of the current levy year which ends on 18th October, 1959. The fact that provisional pay- 1268 ments have been made on the existing basis will not prejudice the producers' entitlement to double levy payments in respect of the full year's earnings when the final calculations are made.

The second part of the Amendment restricts the eligibility for a share of the levy to United Kingdom film makers. At present, an eligible film can be made by a person or company incorporated in any of Her Majesty's Dominions. Such a film, if shown in the United Kingdom, would qualify for levy in proportion to its takings here. Not many such films get a showing in this country at present, but there may be a tendency for the number to increase in order to take advantage of the levy.

The trade has pointed out that it is manifestly unfair to allow part of the levy, which is paid by British exhibitors for the benefit of film makers in Britain, to go to the support of Commonwealth producers.

No reciprocal advantages exist for British films which are shown in other parts of the Commonwealth. This Amendment, therefore, limits eligibility for the benefits of the films levy to a person ordinarily resident in, or a company registered in, and the central management and control of whose business is exercised in, the United Kingdom. This change in the definition of an eligible film will only affect films registered after 31st December, 1959. Thus no Commonwealth producer will be affected who may already have embarked on making a film for the British market on the assumption that it will earn levy.

The new definition is adapted from a well-recognised passage in the Income Tax Act, 1952, which provides a test for determining the residence of a limited company. There has been anxiety in some quarters lest it should exclude from the benefits of levy films made by British companies which are subsidiaries of American companies. This is not the intention of the definition. If a company is resident here for Income Tax purposes its films will continue to be eligible for levy.

All the Commonwealth Governments have been informed of the proposed change and no objections have been raised. I should perhaps add that nothing 1269 in the proposed new Regulations will alter the present position in which Commonwealth films count as British films for the purposes of screen quota.

This amendment, as well as the previous one, enjoys the support of the great majority of the film industry and has been recommended to the Board of Trade by the Cinematograph Films Council. In view of the wide desire for these changes in the Regulations I hope that I may look for the support of the House for the amendments.

1 hope, therefore, that the House will give approval to the Cinematograph Films (Distribution of Levy) (Amendment No. 2) Regulations, 1959.

§ Mrs. Eirene White (Flint, East)

I do not think that it is necessary to say very much about these Regulations after the comprehensive and very lucid explanation to which we have just listened. As sonic hon. Members know, I am myself a member of the Cinematograph Films Council and, therefore, have some knowledge of the discussions which took place in the industry before the recommendation was made to the President of the Board of Trade that these Regulations should be introduced.

It is quite true, as the Parliamentary Secretary said, that there is not complete unanimity in the industry on this matter. There are people who consider that second features are not particularly desirable forms of film production and that they do not in fact provide a training ground for our really first-class people who go in for first feature production at subsidiary level and then move up to the top as producers or directors. On balance. it is quite true that second feature production was declining and up against very considerable difficulties including, of course, acute competition from American supporting films which very often could be obtained by the exhibitor almost for nothing as part of the programme with the first feature, and, therefore, the British second feature producers were in great difficulties. Therefore, I think that we are quite justified in giving them the extra help through the levy, or rather in consenting to it because, as the Minister quite rightly pointed out, this is really a levy within the industry and it is only for us to approve the manner in which it is distributed.

1270 There are one or two practical difficulties about any definition which includes the labour cost figure. The figure of £20,000 for the labour cost of the film sounds reasonable enough but we must recognise that if we have a fixed figure of that sort we may come up against difficulties. When the film is considered, it may be thought relatively easy to keep within the £20,000 labour cost figure, but as production proceeds the cost may rise because someone has fresh ideas and, for the quality of the film, it may be desirable to extend the cost a little which would bring it over the level of the £20,000 and outside the scope of the double levy payment. That is one difficulty about having a fixed cost figure.

The other is inflation. What seems reasonable today may not seem reasonable a few years hence. We hope not, but when we look at the experience that we have had in the last few years, it is not unreasonable to recognise that any figure of this kind may prove to be only temporary. However, as we are doing this by Regulations, that is not an insuperable difficulty.

We were glad to have the assurance given us by the hon. Gentleman on the second part of these Regulations—that it is not intended to exclude what we usually call Anglo-American productions. I do not think that Commonwealth film producers will suffer unduly by this arrangement.

Figures for the registration of films in the last quarter of last year and the first quarter of this year show that of the films then registered only one was a feature-length Commonwealth film, although there were a number of short Commonwealth films registered in the same periods. These films will still be eligible for quota, which is a great advantage to them, and I think that the industry in this country was quite within its rights in suggesting that Commonwealth producers have no real moral right to claim the levy as well. On the other hand, it should be made quite clear that if a British producer wishes to produce a film on location in the Commonwealth, that is all right. It remains a British film for purposes of both quota and levy.

I am glad that that is so, because we have a number of British producers at 1271 present who are looking to various parts of the Commonwealth for the location of their films. That is something which we should like to encourage. There is no other comment which I should like to make. On the whole, these are reasonable Regulations and we would welcome them from this side of the House.