CINEMATOGRAPH FILMS (LEVY) (Hansard, 11 July 1960)

§ The Parliamentary Secretary to the Board of Trade (Mr. John Rodgers)
I beg to move, That the Cinematograph Films (Collection of Levy) (Amendment) Regulations, 1960, a draft of which was laid before this House an 21st June, be approved. These Regulations, and the Cinematograph Films (Distribution of Levy) (Amendment) Regulations, 1960, which are the subject of the second Motion on the Order Paper, are made under Sections 2 and 3 of the Cinematograph Films Act, 1957, respectively and amend the Cinematograph Films (Collection of Levy) and (Distribution of Levy) Regulations, 1960.
In presenting his Budget my right hon. Friend the Chancellor of the Exchequer pointed out that the President of the Board of Trade was considering whether any changes should be made in the Regulations governing the collection of exhibitors' levy following the abolition of Entertainments Duty. The changes now proposed are the result of the review of the yield and incidence of the levy which was then put in hand, in the light of the views expressed by the trade associations of both exhibitors and producers and of the advice of the Cinematograph Films Council.
These Regulations make a number of changes. Let me deal first with the collection of levy Regulations. Perhaps I should deal first with that change which is directly consequential on the abolition of Entertainments Duty, namely, the provisions of the amended Regulation 3 (2, a) that ensure that exemption from levy shall continue for those entertainments which were formerly so exempt, as a result of being exempt from Entertainments Duty.
I think no one will dispute that the effect of the abolition of duty should not be to impose an obligation to pay levy on those exhibitors who have previously been exempt both from levy and Entertainments Duty. However, for a rather technical reason, this would come about were it not for the provisions in this Statutory Instrument.
The reason is that the present Regulations provide that exhibitors who are 1124 exempt from Entertainments Duty shall also be exempt from levy. This provision covers such things as miners' halls and cinemas in rural areas. Consequently, if no change is made in the levy Regulations before the Finance Act gives effect to the abolition of duty, these exhibitors will then be liable for levy. Their position has, however, been safeguarded by the new Regulation 3 (2, a) and by reproducing as a Schedule to the Regulations, subject to minor consequential amendments, the Schedule to the Entertainments Duty Act, 1958, which sets out the grounds on which exhibitors are currently exempt from duty. I feel sure that all will agree this is fair and desirable.
Turning now to the major changes to be effected by these Regulations, these are, first, Regulation 3 (1) which now provides that the rate of levy is to be raised from one-tenth of the excess over 11d. of payments for admission to one-ninth of that excess, and second; Regulation 3 (2, b) now provides that the limit of exemption from levy is to be raised from£150 to£250.
This limit of£150 has previously been assessed after Entertainments Duty chargeable was deducted. However, since 1959 exhibitors have been given a rebate of the first£20 of Entertainments Duty chargeable, and consequently for the past year or so the real limit of exemption for many exhibitors has been nearer£170 than£150.
In any review of the yield of the levy the Board of Trade is required by the Cinematograph Films Act, 1957, to have regard to the prevailing economic circumstances of both exhibitors and makers of British films and the prevailing level of production of such films. It is in the light of these criteria that the Cinematograph Films Council, which the Board of Trade has a statutory duty to consult before changes are made in the levy Regulations, gave its advice on these matters to us at the Board of Trade and that the Board has reached its decisions.
Hon. Members will probably be asking themselves what is the prevailing level of production of British films, and what are the prospects. The best advice we have on this is that given to the Board of Trade by the film producers themselves, before the abolition of Entertainments Duty, namely, that the 1125 number of British films likely to be registered in the year 1st October, 1960–30th September, 1961, will be slightly above the level of recent years.
What are the economic circumstances of the makers of British films? Our estimate is that the share of film rentals going to British film producers may increase by about£400,000 to£500,000 in a full year, as the result of the abolition of Entertainments Duty and after making some allowance for decline in attendances which will probably, to some extent, continue. This represents an increase of 5 or 6 per cent. as compared with the total home and overseas earnings, excluding levy payments, of makers of British films in 1959.
An increase of this order does not, however, mean that film production will turn into a highly profitable business. Apart from a few exceptionally successful films, there is evidence that the average run of films, even with the aid of the levy at its present rate, will barely recover their aggregate cost.
What of the economic circumstances of exhibitors? In a full year, the exhibitors' share of the box office is likely to rise by about£4.5 million as a result of the abolition of Entertainments Duty. However, there is no denying that a section of the exhibition industry, particularly the small independent cinemas, has suffered severely in recent years. Moreover, this section of the industry has in recent times paid little or no Entertainments Duty and will, therefore, be no better off as the result of the abolition of duty. There is, consequently, little scope for asking such exhibitors to pay more in levy.
What, then, are the conclusions to be drawn? First, there seems no need to envisage a higher rate of levy to prevent a slump in British film production. Second, while the prospects of British film makers are better than they were, they are not good. Third, while the result of the abolition of duty is to leave some room for an increase in levy from exhibitors, certain exhibitors find themselves facing grave financial difficulties at the present time.
In Regulation 3 (2, b) we are, therefore, helping these exhibitors by raising the exemption limit to£250 while, at the same time, in Regulation 3 (1) increasing the rate of levy so that the 1126 exhibitors who will gain most from the abolition of the duty will bear a greater share of the levy. The net result will be an increase of about£100,000 in the levy fund, that is to say, the fund will yield£100,000 a year more than it would have yielded if the levy had continued as at present.
How much, in fact, the levy will yield next year depends on so many variable factors such as the weather, changes in seat prices, and the entertainment value of the films—none of which is within Government control—that, as I think the House will agree, it would be rash to make too fine an estimate, but it seems improbable that the yield will differ very much from the current year which ends in October.
To avoid anomalies it has been necessary also to provide that no exhibitor will pay more in levy than he would formerly have paid in levy and duty combined. This is the effect of Regulation 3 (4) which will ensure that in no circumstances will an exhibitor be worse off as a result of the combined effect of the abolition of duty and these new Regulations.
Finally, I draw the attention of the House to a further small amendment in Regulation 3 (2, b), namely, that takings at charitable entertainments and children's matinees shall be excluded when calculating whether the exemption limit is reached. This is a minor change which will have no more than a negligible effect on the receipts of the levy fund, but it will remove what can be a disincentive to exhibitors to give charitable performances and children's matinees.
Perhaps I should point out that the Board of Trade has been asked by the producers to increase the levy. We have also been asked by the exhibitors to reduce it. In these circumstances, it is hardly possible to please everybody. But, if the trade Press is to be believed, the Board on the advice of the Films Council has proposed a course which has commended itself as fair and reasonable to most producers and to most exhibitors. It has lightened the load on the weaker exhibitors and increased the levy for those who can bear an increase. So much for the collection of the levy under these new Regulations.
1127 I now turn to the Regulations amending the distribution of the levy. Two important changes are introduced here, both, I am glad to say, rather less complex than the changes in the collection Regulations which I have just mentioned. In the first place, the amended Regulation 6 (1, a) provides that newsreels shall earn levy at the flat rate for first features and not at the enhanced two-and-a-half times rate for other short films.
Hon. Members will be aware that this change fulfils undertakings I gave in the House during the Second Reading debate and during the Committee stage of the Cinematograph Films Act, 1960, in November last year. Section 2 of that Act brought newsreels within the scope of films legislation, but without some amendment to the Regulations governing the working of the levy, newsreels would automatically have the benefit of the two-and-a-half times multiplier appropriate for other short films in calculating their levy earnings, which would give them more than really required.
I said at that time that it would be a mistake to take more than, necessary out of the levy fund since this would be at the expense of other film producers."— [OFFICIAL REPORT, 5th November, 1959; Vol. 612, c. 1265.] At the same time these Regulations provide, in paragraph (3) of the first Regulation of the Distribution of Levy Regulations, that where the British registration of a newsreel is later cancelled, because it fails to include the prescribed percentage of British material, the newsreel shall not qualify for levy. This fulfils the undertaking given by my hon. and learned Friend the Solicitor-General during the passage of the Bill in November last.
We are taking this opportunity to give the British Film Fund Agency, the statutory body responsible for distribution of the levy, power to invest its funds, held pending distribution, in Treasury bills. This is done in the second paragraph of Regulation 1. Under the existing Regulations the Agency has no power to invest, and balances held by it may be placed only on bank deposit. The yield on a deposit account is generally less than the yield on Treasury bills. The main funds available for investment by 1128 the Agency are the balances which it is compelled to retain for up to sixteen months before making final payments, together with the running balance which it always keeps on hand.
To give hon. Members some idea of the sums involved I would say that the 'Agency reports for the first year of operation that bank interest received amounted to£16,630. I expect that investment in Treasury bills will give the Agency an extra£4,000 to£5,000 a year. I feel sure that hon. Members will agree that to allow the Agency to earn the maximum amount of interest consistent with the avoidance of capital loss is in keeping with the best commercial practice, and I feel confident that this change would have the support of the whole House.
The proposals contained in these Regulations have been discussed by the Cinematograph Films Council which, as I said, must, under the terms of the Act of 1957, be consulted by the Board of Trade before regulations are made. These Regulations give effect to the Council's recommendations, and therefore I hope that the House will give them unqualified support.
In conclusion, it is pleasing to be able to observe that, despite the severe difficulties arising from the decline in attendance at cinemas, British films have increased in popularity and their production has been maintained. This would not have been possible without the help of the levy, which plays a big part in the economics of film production. I, therefore, commend these Regulations to the House as the best method, following the abolition of Entertainments Duty, of securing that the burden of the levy is fairly shared and that it does not become an intolerable burden on the section of the trade least able to bear it

§ Mrs. Eirene White (Flint, East)
I think there is very little that I need say about these Regulations. For once the trade seems almost unanimous in its approval, and this is so astonishing that it leaves one virtually speechless. I have here two trade papers issued just after the Regulations were published, with quotations from both bodies of producers and the exhibitors and the independent exhibitors, and all of them seem to think 1129 that they have got just about what they could have expected to have in the circumstances.
It is quite true, as the hon. Gentleman has said, that the abolition—at long last, and much too late in the day—of the cinema tax did not help very much the smaller cinemas, but it did help the larger exhibitors, and, therefore, there is some justice in now so arranging the levy that the greater burden should fall on them. It has even been suggested that we have almost reached the point at which those who pay the levy as exhibitors, namely, the large circuits, in theft other capacity as producers are virtually paying themselves; why, therefore, should we go through this process of having the levy at all? But, of course, that is a slight, over-simplification. We have not quite reached that point, and, of course, the earlier Regulation passed this year, which brings in the non-standard films, Cinerama, and so on, is of considerable value to British film production and means that we have not quite reached the stage where the circuits are simply paying themselves.
I do not think that there is anything I would wish to say on the collection of levy Regulations. The Parliamentary Secretary has explained them very fully. Arrangements have been made for borderline cases in the usual way. I cannot pretend that the Regulations are clarity themselves to those who read them. I have been having a look at Regulation 1 (4). If one did not know what it was all about one would be very much puzzled by the sentence which reads: (4) If the total amount computed in accordance with the foregoing provisions of this Regulation by reference to payments for admission to any theatre in any week exceeds the total amount ascertained by— adding the amount which would have been computed in accordance with those provisions if the rate therein prescribed had been one tenth, to an amount calculated by deducting£20 from one third of the total amount of the sums by which the payments received for admission to that theatre during that week exceed 1s. 6d. I am sure that the House is now fully aware of what the Regulations are trying to do. I have not read the whole paragraph, but perhaps I have read enough to confuse those hon. Members who are not entirely familiar with these matters.
1130 As to the Regulations dealing with the distribution of levy, I am glad that the Government have carried out their pledge about newsreels, which was given only after great pressure during the passage of the last Cinematograph Films Act. As the Parliamentary Secretary well knows, my hon. Friends and I were not at all happy about any levy going to the newsreels. We thought that if this was required it was a matter for which the Government should have taken responsibility, out of public funds where propaganda was required abroad, and that it should not be a charge on other sections of the industry.
However, it was decided otherwise and we are pleased that the Government have carried out their pledge that the newsreels should have only the simple rate of levy and not the two-and-a-half times rate that other short films obtain. We are pleased particularly that if the newsreel does not qualify as a British film it is not entitled to a levy. We are happy, therefore, to find that the pledges given in the debate on the Act have now been carried out.

§ Mr. William Shepherd (Cheadle)
The example of these Regulations shows the House what an extraordinary thing it is when the Government have to intervene in industry. The complexity of these Regulations dealing with what are very minor matters is really astounding, but this is the sort of difficulty into which the Government get when perforce they have to interfere in industry.
I should like to confirm what my hon. Friend the Parliamentary Secretary and the hon. Lady the Member for Flint, East (Mrs. White) said about these Regulations reflecting on the whole the views expressed by the majority of exhibitors and producers. Indeed, this is the only thing that the Board of Trade has ever done for the film industry which has met with almost universal approval. I am sure that there must be a catch in it somewhere which we shall discover at a later date.
My hon. Friend the Parliamentary Secretary was perhaps a little pessimistic about the future of production. It is not only true that the number of films which we shall register in the forthcoming year will be more than the number last year, but, what is more important, 1131 the quality of these films will be very much higher and their cost greater. This is important, because we are now getting what I have been seeking for a number of years and that is to have London as an international centre of film production.
We are achieving this at last. As hon. Members know, some of the most distinguished actors in the world, of American origin, are at present acting in British studios and one large American company has recently produced a programme of twenty productions in this country. We are achieving at long last the ideal of having the United Kingdom as an international centre of film pro- 1132 duction. This is something to which we have all looked forward and it gives us great encouragement for the future. I am convinced that if we achieve this international production we shall raise our own standards, raise our international revenue and bring benefit both to our artists and to our technicians.