HC Deb 09 July 1964 vol 698 cc683-91

6.36 p.m.

The Parliamentary Secretary to the Board of Trade (Mr. David Price)

I beg to move, That the Cinematograph Films (Distribution of Levy) (Amendment) Reglations, 1964, a draft of which was laid before this House on 30th June, be approved. As the House knows, cinema exhibitors pay a statutory levy the proceeds of which are distributed to the makers of British films. The subventions from this levy, which run at about £4 million a year, are an important addition to the income of our film makers. Under the existing Regulations governing this statutory levy, a producer whose film is booked to television at the time when it comes to be registered at the Board of Trade for cinema showing loses his entitlement. He is similarly disqualified if his film is exhibited to the public on television earlier than twelve months after its registration.

The experimental services of pay-television announced by my right hon. Friend the Postmaster-General on 11th December will be on a restricted scale. Hence, it is unlikely that these services will be able themselves to generate the major part of the material which they will require, let alone all of it. Therefore, they are likely to show a considerable number of cinema films.

However, as these experimental pay-television services will be limited, returns to our film makers from this source are likely to be small compared with those from cinemas. Nevertheless, they will be welcome. Moreover British film makers are keenly interested in the long-term possibilities of pay-television. They think that it will offer them a real chance of regaining their lost cinema audiences.

The disqualification in the existing Regulations to which I referred a moment ago means that the maker of a British film would lose his levy benefits, possibly amounting to £100,000 or more on a really successful film, if it were shown on pay-television before it was a year old. This would make it virtually certain that no reasonably new British film would get on pay-television, while foreign films, having no levy privileges to lose, would not be similarly deterred.

Clearly, this would be in direct contradiction to the purpose of the levy, namely, to help British film makers.

The amending Regulations now before the House, therefore, remove in respect of the pay-television experiments the television disqualification in the existing Regulations, subject only to one condition. This condition is that the film concerned has not been shown on pay-television during the six months before its registration. This condition has to be made so as to discourage any tendency that there might otherwise be for people to get round the Government's arrangements as a whole in respect of cinema films and pay-television.

The House will no doubt wish me briefly to describe these arrangements. It has to be remembered throughout that we are dealing with experiments, and not with permanent services of pay-television. We also have to remember that there is a body of films legislation, none of which was drawn up with pay-television in mind. It is perhaps fortunate that the expiry of this legislation in 1967 should fall more or less at the point in time when experience of pay-television will be accumulating from the pay-television trials.

The arrangements that we are making for cinema films and pay-television during the experimental period are in two main parts; first, certain safeguards for exhibitors in the trials areas and, secondly, a voluntary system for the collection of a levy from the pay-television operators. The safeguards have been drawn up in the light of views expressed in the Cinematograph Films Council on the two occasions when it considered them. The Council also recommended a voluntary rather than a statutory levy scheme for pay-television. Most important of all, the change in the Regulations now before the House is in accordance with the views of the Council, which has been consulted in accordance with the requirements of the 1957 Act.

The safeguards for local exhibitors are, of course, a matter for my right hon. Friend the Postmaster-General, and they were described to the House in general terms on 5th May by my hon. Friend the Assistant Postmaster-General in answer to a Parliamentary Question.

Perhaps I may remind the House that these safeguards include a provision for the withholding of certain types of cinema films from pay-television until the local exhibitors—unless, of course, they agree otherwise—have had six months in which to play them; and a limited amount of compensation in each area against the possibility that a cinema exhibitor can point to the prior showing of cinema films by pay-television and can demonstrate a loss of box-office takings reasonably attributable to that cause.

The Post Office, in consultation with the Board of Trade, is now in the final stages of drafting the detailed rules embodying these safeguards. My right hon. Friend the Postmaster-General will secure any necessary undertakings from the pay-television operators before issuing their licences, and the final texts of the rules will be placed in the Library when they are completed.

Then there is the question of statutory levy. It is our view that during the experimental period the pay-television operators should not be included in the statutory levy scheme, but rather that they should contribute to the fund voluntarily. The reasons for this are a little technical, but I do not believe that the net effect will be very different.

My right hon. Friend the Secretary of State for Industry, Trade and Regional Development has secured an undertaking from the pay-television operators that they will contribute, for as long as he wants them to do so during the period of the pay-television experiments, to a non-statutory levy scheme on a contractual basis. The Board of Trade will shortly arrange a meeting at which we hope to set the film producers, the distributors and the pay-television operators to the task of working out a detailed scheme to which my right hon. Friend can give his approval. He will expect any such scheme to reproduce the main features of the existing statutory one—

Mr. Stephen Swingler (Newcastle-under-Lyme)

It is admitted by the very fact that compensation provisions are to be made that the pay-television operators are in competition with the cinematographic exhibitors. Why should they not be subject to the statutory levy?

Mr. Price

The hon. Member is tempting me to go into the technical reasons. I think that the Cinematograph Films Council came to the same conclusion as ourselves, remembering that this is for the experimental period only. I could go into some of the technical reasons, not the least of which is (hat, at this stage, when none of these trials has yet been done, we have no idea as to the quantity of films they are likely to be playing. We do not know for how long some of these trials; will go on, and the arrangements we are proposing cover the trial periods only. When the trial periods are over we may find, with the experience behind us, that the hon. Gentleman may well be right, and that it might be the proper thing to do, but that will be when the whole country will or will not, according to the results of the trials, be covered by pay-television.

We then come to the further point that when the Cinematograph Films Council considered the proposed levy on the experimental pay-television operators, it recommended that the levy should be collected in respect of all cinema films, even if they were not identifiable as cinema films at the time when they were playing on pay-television. We shall be asking the organisers of the proposed nonstatutory levy scheme to try to work out arrangements to meet the Cinematograph Films Council's point. It seems to us probable that such arrangements would involve some retrospective collection.

Then there is the final matter of what rate of levy contribution it is appropriate to expect the pay-television operators to pay during the experimental period. The Government have decided that since there will usually be a six-month delay in the showing by pay-television of new cinema films, the position of the pay-television operators is more analogous to that of the subsequent-run cinema exhibitors than to that of the first-run.

My right hon. Friend has therefore decided that the pay-television operators should be required to contribute to the non-statutory levy at a rate of 6 per cent. of their gross takings, and this figure has been accepted by them. At that figure they will, we believe, be making an appropriate contribution, since sample figures for the experimental areas show that the average for all cinemas is 7.2 per cent. and, for subsequent-run cinemas, 4.3 per cent.

In the course of our consultations with the Cinematograph Films Council, the Council recommended to my right hon. Friend that the pay-television operators should contribute to the non-statutory fund at a rate equal to that at which the big first-run cinemas contribute to the statutory fund. After mature reflection, we came to the conclusion that this was not entirely the right basis of comparison for what will be, after all, only trials. Therefore, my right hon. Friend, with regret, was unable to accept the Council's advice on this point.

In conclusion, I should like to repeat that we are dealing only with short-term experiments in pay-television. There is nothing here that in any sense commits us beyond the experimental period. I hope that, with this explanation, the proposed change in the Regulations to waive the television disqualification in respect of pay-television will meet with the approval of the House.

6.48 p.m.

Mrs. Eirene White (Flint, East)

We should make it clear that while we would not oppose this Statutory Instrument, we are rather concerned about it. The Minister will himself appreciate that we are dealing with a very awkward situation owing to the experimental period, to the number of imponderabilia, and to the difficulty of forecasting what is likely to happen. Quite frankly, I have a very poor view of the experiment altogether. I think that it is very largely a phoney experiment, and one in which it will be extremely difficult to make a judgment except on narrow technical matters. Owing to the artificial conditions of the experiments agreed by the Postmaster-General, it will mean that in those areas designated, and for the period designated for the experiment, a disproportionate amount of film material will be used on the programmes, for reasons into which we need not now go.

There is also the problem that if certain relaxations are made, as are now proposed for the pay-television experiment, the B.B.C. and the I.T.A. may, in due course, also ask for some re- mission of their obligations. Therefore, although this is a very small and limited change in the Regulations, it causes a great deal of concern, as it might be used as the thin end of the wedge in subsequent periods.

I appreciate that there is no time limit in the Regulations other than by reference to an experimental television service. On the other hand, as the Minister has pointed out, they will lapse automatically with the lapsing of the legislation in 1967 and the two things would roughly coincide. We have, however, just been told that it is likely that the pay-television experiment, instead of starting this autumn, will not start until a good deal later. That is what the trade Press, at least, is saying.

Therefore, we wonder whether it is really necessary in those circumstances to bring in the Regulations at the end of the Session with so many things still not fully determined. We do not know, for example, exactly what the contractual agreement will be between the television operators which will be supervised, I understand, by the Board of Trade. It seems in some ways a pity, if there is to be a revised timetable for the introduction of the pay-television experiment, that the Regulations should be brought forward before those other matters have been fully decided.

This is causing some disquiet in the exhibition side of the industry. The people in that side of the industry would like a statutory levy arrangement for this experiment. For a number of technical reasons which were fully discussed at the Cinematograph Films Council, we came, some of us with great reluctance, to the conclusion that a voluntary scheme would have to be accepted in the initial stages. The exhibitors, however, who would have liked the statutory scheme now, say that the exemption which is being provided for under the Regulations means that the pay-television companies will have obtained the benefit without accepting the specific obligations which should form the other side of the bargain.

We are really put in a position in which we have to take all this on trust, including the negotiating ability of the Board of Trade to produce a form of contract for the pay-television people concerning the levy. We understand, of course, that the other safeguards are being looked after by the Department of the Postmaster-General, but the levy is within the purview of the Board of Trade. Unless an adequate basis can be established, we are being asked in the Regulations to agree to a relaxation which will be for the benefit of certain people without knowing the precise terms of the other side of the account.

I was a little disturbed to find that the Board of Trade has, apparently, disregarded the advice of the Cinematograph Films Council on the percentage of gross takings. At one time, we were talking of something a good deal higher—10 per cent. It has now been brought down to 6 per cent. That is rather unfortunate.

The other thing which worries me is that we should not have had a very firm declaration from the Minister that the films which will be particularly dealt with by the Regulations—those which might be shown on television before they are registered as cinematograph films—will carry retrospective levy obligations. I regard this as vital. We are here waiving a condition and saying that a film which has been shown unregistered, provided that it was six months after its first showing, will be entitled to obtain its cinema levy payment at a later date. One of the great arguments has been that this loophole should be firmly closed. We ought to have been told especifically that there will be retrospective payments.

I do not want to delay the House, because other business is to follow. In the circumstances, it is a pity that we should have to take the Regulations now if it is true, as we are told in the trade Press, that pay-television is not likely to come into operation until quite a time later than we had originally supposed.

6.55 p.m.

Mr. Stephen Swingler (Newcastle-under-Lyme)

We ought to spend a certain amount of time on the Regulations because they have certain important features, especially for those who have been interested in the rather complex system of legislation which has been built up over a long period of years about the cinematograph film industry. I do not envy any of those in the Board of Trade who have to deal with this matter. It is an extraordinarily complex system which has been built up over three or four decades for the purpose of maintaining a thriving British film-producing industry and of trying to maintain a choice for the consumer. The system has many difficult features about it and we have had many complicated and delicate discussions upon it.

The Government must realise that something very important has happened in regard to pay-television. As revealed in the Answers to some Questions which I put down on this subject concerning the right to exhibit cinematograph films on pay-television, the Government have decided in this case to intervene directly to create a privileged position for the pay-television operators. Let us be quite clear about it.

As spelled out in an Answer by the Assistant Postmaster-General not long ago, the use; of cinematograph films by the major television circuits has been a matter of commercial negotiation between the bodies concerned. It has been a matter for the B.B.C. and the independent television companies and, on the other side, the Cinematograph Exhibitors Association and the British Film Producers' Association, who have conducted the negotiations. The film industry has developed a protective skin about the matter. Realising the ways in which its interests might be damaged by the widespread and indiscriminate use of cinematograph films on the television circuits, it has developed an organisation to defend its interests and to lay down certain conditions which hitherto have debarred the major television circuits from getting films that were less than 10, or even 20, years old for exhibition on the television circuits.

As the Assistant Postmaster-General said in reply to Questions, that was a matter of commercial negotiation. It had nothing to do with the Government. The Government, rightly or wrongly, refused to take a view one way or the other about the exhibition of films on the major television circuits. Therefore, the B.B.C. and the I.T.A. have so far been denied the right to exhibit for the benefit of viewers films that were not extremely old.

Now, however, when the Government are bringing forward Regulations of this kind, they have taken an entirely new step. For the benefit of the experimental pay-television operators, the Government have intervened to enable them to get comparatively new cinematograph films. As the Parliamentary Secretary has frankly admitted, they have done it because, otherwise, the pay-television experiment simply would not get off the ground. As my hon. Friend the Member for Flint, East (Mrs. White) has just mentioned, it is a big question today whether the pay-television experiment will get off the ground at all. We should like to know tonight in the reply from the Treasury Bench exactly what is the position.

There are stories in the trade Press of postponements and procrastinations, and it seems likely that the date of the bringing into operation of the pay-television experiment will be considerably postponed. Therefore, the first question that we are raising is whether it is necessary to make any haste at all, in considering Regulations of this kind—

It being Seven o'clock, and there being Private Business set down by direction of The CHAIRMAN OF WAYS AND MEANS under Standing Order No. 7 (Time for taking Private Business), further Proceeding stood postponed.