HC Deb 21 June 1968 vol 766 cc1541-62

2.34 p.m.

The Parliamentary Secretary to the Board of Trade (Mrs. Gwyneth Dun-woody)

I beg to move, That the Cinematograph Films (Collection of Levy) Regulations 1968, a draft of which was laid before this House on 12th June, be approver. It may be for the convenience of the House, Mr. Speaker, if with these Regulations we take the Cinematograph Films (Distribution of Levy) (Amendment No. 3) Regulations.

Mr. Speaker

If that is the wish of the House, so be it.

Mrs. Dunwoody

These regulations are made by virtue of the Cinematograph Films Act, 1957, which provides for the imposition of a levy on exhibitors of films, the proceeds of which are to be used for the benefit of makers of British films. The Board of Trade is required by Section 2 of the Act to make Regulations prescribing the rate and method of collection of the levy, and by Section 3 to make: regulations governing its distribution. Before making Regulations under either of these Sections the Board must consult the Cinematograph Films Council, and such Regulations may not be made until a draft has been laid before Parliament and approved by each House of Parliament.

I will take, first, the draft Collection of Levy Regulations. It may assist if I begin by describing the present method of assessment and rate of levy. The amount of levy payable by exhibitors depends on their box office takings. The first l1d. of each admission charge is free of levy. The present rate of levy is one-ninth of the amount by which each admission charge exceeds l1d. The levy is collected on a four-weekly basis by Her Majesty's Customs & Excise, by whom it is handed over to the British Film Fund Agency, a statutory body set up under the 1957 Act.

That Act requires that in determining the rate of levy, the Board of Trade shall have regard to the prevailing economic circumstances of both exhibitors and makers of British films, as well as the prevailing level of production of such films. Thus, the Board has to keep the situation under constant review and to strike a balance between the needs of the producers and those of the exhibitors. The purpose of the levy is to assist production of British films, but this purpose must be achieved without imposing an undue burden on the exhibitors.

The prosperity of producers no less than that of exhibitors depends on the level of attendances at the cinemas. People no longer go to the cinema as a habit nor, I am glad to say, do they need to go to keep out of the cold, as they often did in the thirties. In order to attract audiences, the industry must produce films that are worth seeing, and they must be shown in pleasant surroundings. It is no use producing films unless there is a reasonable expectation that there are sufficient cinemas, and sufficiently attractive cinemas, at which they can be shown.

The levy brings immediate financial gain to the producers, and is undoubtedly a powerful stimulant to production. But it is a stimulant which, like many others, must be taken in reasonable quantities if it is not to have harmful effect. The 1957 Act recognises the danger of excess either way in that it requires the Board of Trade to fix the rate of levy so that the yield will, in the Board's estimation, be not more than £5 million and not less than £2 million.

The rate of levy has remained unchanged, one-ninth of the amount by which payment for admission exceeds 11d., since 1960. It will, I think, assist the House if I give some figures relating to the industry at that time and at the present.

First, let us look at production. In 1960, 79 British long films were registered, and 77 in 1961, since when the level has remained constant, around the 70 mark. Production this year, 1968, is again running at a high level. When we remember that attendances at the cinema fell from 501 million in 1960 to 265 million in 1967 I think that we can say that the level of production has kept up remarkably well. The yield of the levy was £3.9 million in the year ending in October, 1960, it remained at more or less this figure annually until 1963, and then rose to £4.6 million in 1965. In 1967, it fell back slightly to £4.5 million. We would all, I think, agree that the maintenance of the level of feature film production has been greatly assisted by the operation of the levy arrangements.

At present, the studios are busy. There is no unemployment in the industry, and I believe that activity continues at an exceptionally high level. A high proportion of the investment in film production in this country is made by the British subsidiaries of the big American companies, and this, I know, gives rise to anxiety. But, whatever the future may hold, it cannot be denied that at the present time this country is one of the busiest centres of film production in the world. Production is attracted here not only by the levy but also, and I think more so, by the wealth of artistic talent and technical skill in this country and by the excellent studio facilities which we can offer.

The exhibition side presents a very different picture. The number of cinemas licensed fell by nearly half from over 3,000 in 1960 to 1,772 in 1967. The decline has not yet been arrested. In the past three years closures have averaged more than 100 a year. As I mentioned earlier, attendances in 1967, at 265 million, were little over half of what they were in 1960.

Of course, there are many causes contributing to this decline. The advent of television has led to a spectacular fall in the level of cinema attendances, not only in this country but throughout the world. In 1960, there were 10.5 million current television receiving licences: by January of this year, the figure had increased to 15 million. We now have the added attraction of colour television. But as well as this, the general rise in living standards has meant that many more leisure time activities are available and accessible to the public, and the cinema must fight hard to retain its audience.

It would accordingly be foolish to argue that the burden of the levy has been a major factor in the closure of cinemas. But it would be equally foolish to assert that it has had no effect whatsoever. In order to meet competition from rival attractions, cinemas must modernise and re-equip so that films can be seen in comfort. This needs money, and the levy is a direct drain on the exhibitors' resources. Many cinemas operate on narrow margins and, though there are provisions for relief for cinemas with very low takings, it is possible and indeed likely that in some cases the burden of the levy makes the difference between a decision to close a cinema and one to keep going and hope for better times.

An important consideration is the fact that the average price for admission to the cinema has increased substantially since 1960, when the present rate of levy was fixed. It is of course reasonable that when the price of a seat at the cinema is raised, the levy contribution should go up also. But, because there has been no increase since 1960 in the exempt portion, the l1d. to which I referred, the incidence of the levy has grown steadily. In 1960 it amounted to about 6 per cent, of box office receipts. It is now about 8 per cent,

I think that it is important to retain the arrangement whereby a part of the admission price is free from levy altogether. The original purpose of this device was, of course, to reduce the burden on the lowest priced seats, and this will continue to be our aim.

My right hon. Friend the President of the Board of Trade and I are satisfied that the time has come to afford some relief to the exhibition side of the industry. We are well aware that a reduction in the yield of the levy will not find favour with the producers. But there must be a sharing of burden and in our view the Cinematograph Exhibitors' Association and the Association of Independent Cinemas have made out a convincing case. The Cinematograph Films Council, on which all sides of the industry are represented, which has been consulted as required by the Statute, has recommended that the exempt portion of each seat price should be increased from l1d. to 1s. 6d. The exhibitors' associations had asked for the figure to be increased to 1s. l0d. We are not likely to get unanimity on any figure, and the recommendation of the Cinematograph Films Council seems to me to be a sensible compromise.

It is, of course, not possible to give a firm figure for the effect of proposed change on levy yield. The amount raised by the levy depends on the level of seat prices and the number of people who attend the cinema. In view of their need to attract as many people as possible to the cinemas, I have no doubt that exhibitors will appreciate the importance of taking all possible steps to avoid price increases. But, even so, the size of their audiences will depend on the success of the producers in gauging public taste, on the quality of the rival attractions on television, and, last but not least, on the weather. These are matters on which conjecture is hazardous. But on the basis of past receipts, it seems that the proposed increase by 7d. in the exempt portion of admission prices may be expected to reduce levy yield by about £600,000 to £700,000 in a full levy year.

I have dealt at some length with this question, and I have given it prominence because the proposed change, embodied in draft Regulation 3(1) is by far the most important of the amendments which the House is invited to approve. I will now deal, and deal more briefly, with the draft Regulations as a whole.

The Regulations in force at present were first made in 1960, since when there have been five amending regulations. The opportunity has been taken to consolidate the regulations into one Statutory Instrument. Except in regard to the matters to which I shall draw the attention of hon. Members, the draft Regulations repeat the provisions of the Regulations currently in operation.

There is nothing new in Regulations 1 and 2. I have already explained the reason for Regulation 3(1), which increases from l1d. to 1s. 6d. the exempt portion of admission payments.

Regulation 3(2) introduces an additional form of relief intended to help exhibitors with widely varying box-office takings, for example, those at seaside resorts. At present, an exhibitor is exempt from levy in any week in which his takings do not exceed £400. This provision will remain in operation. But new Regulation 3(2)(b)(ii) provides in addition that an exhibitor will pay no levy when the average of his takings in the weeks in which he has shown films during the levy year does not exceed £400. The effect of this concession on levy yield will be small, but its effect in helping to keep open seaside cinemas may be considerable.

At present, levy must be paid within five days after the end of each con- secutive period of four weeks in respect of which it is payable. Regulation 4 makes things a little easier for the exhibitor by increasing this time of grace from five to 10 days.

The only provision in the old Regulations omitted from the new is that which provided an alternative method of calculating levy. It limited an exhibitor's liability to the level of levy plus Entertainments Duty chargeable in 1960. Entertainments Duty was abolished in the same year. This provision, which has apparently never been invoked, is now an anachronism, and it has accordingly been dropped.

This is the full extent of the proposed changes. I believe that they are in the best interests of the industry as a whole and I commend them to the House.

I now turn to the Cinematograph Films (Distribution of Levy) (Amendment No. 3) Regulations. The Distribution of Levy Regulations provide, as their name implies, for the sharing out among producers of eligible British films, of the proceeds of the levy. Levy is paid in proportion to films' rental earnings, and, as I explained earlier, payments are made by the British Film Fund Agency, a statutory body to which Her Majesty's Customs, after deduction of expenses of collection, hand over the levy proceeds.

The amendments which are now proposed are five in number. The first of these concerns newsreels. Under the existing regulations, the earnings of short films are multiplied by 2½ for the purposes of calculating their levy entitlement, and the earnings of newsreels are multiplied by two. At one time, a news-reel formed part of every cinema programme, but the greater immediacy of television has in recent years gone a long way towards pushing the newsreel off the screen. But although I understand that newsreels have now disappeared completely from the cinemas in America, two British newsreels continue to be shown at cinemas in this country; and not only in this country.

Throughout the world, newsreels play a part in projecting the British way of life and in proclaiming British achievements. There are extensive arrangements for exchange of material with foreign newsreel companies, and the British news-reel companies produce weekly newsreels for the Central Office of Information. In these ways about 70 countries throughout the world regularly see British newsreels. This is an important "shop window" for Britain.

I think that the newsreel companies deserve some measure of encouragement. The average life of each issue of a news-reel amounts to only four three-day bookings, each print having an average of four runs during its two-week life. It can expect to earn rentals, and so levy, only during this short period.

My right hon. Friend consulted the Cinematograph Films Council on this question and the Council recommended that the earnings of newsreels should be multiplied by 2½, instead of by two as at present, for the purposes of calculation of levy earnings. The extra amount which will thereby be earned by the two surviving newsreel companies will not be large. I cannot disclose figures without running the risk of revealing details of company earnings from the levy. But I can assure the House that the effect of the change, though of real value to the newsreel companies, will in relation to payments from the levy taken as a whole be small.

The second change concerns "low cost films". At present, a "low cost film" is, for levy purposes, defined as a long film the labour costs of which do not exceed £20,000. Levy is payable in respect of such films at two and a half times the standard rate until their rental earnings reach £15,000 or their labour costs, whichever is the lower. On earnings above the limit levy is paid at the standard rate. The amendment in the new regulations increases the first of these figures from £20,000 to £25,000 and the second from £15,000 to £18,750. These increases afford some recognition of cost increases in recent years and at the same time impose the need for efficiency and economy on the producer who wishes to qualify for the higher rate of earning.

The third change affects the eligibility for levy earnings of non-standard films, for example 70 mm. films. The intention has always been that the levy-earning life of such films should be the same as that of British quota films, which is prescribed in the present Regulation 6(3)(a). The new Regulations provided a redraft of the present Regulation 6(3)(b), which will remove any doubt or obscurity there may have been in the earlier wording.

The fourth change concerns the use of derivative material. Section 20(3) of the Films Act, 1960, provides that where parts of a film are derived from another film and the playing time of these parts exceeds 10 per cent, of the playing time of the whole film, the film shall not be registered as a quota film except on the recommendation of the Cinematograph Films Council. The proposed Regulation 4 brings the levy Regulations into exact accord with Section 20(3) of the Films Act.

Finally, Regulation 6 makes a small adjustment in relation to the definition of a television film. The definition in the existing Regulations makes a distinction between long and short films, the effect of which is that short films, unlike long films, are ineligible for levy payments if they are shown on television outside the United Kingdom within twelve months of registration. The amending Regulations will put short films on the same basis as long films. They will no longer foreit entitlement to levy payments if they are shown on television outside the United Kingdom.

All of these matters, both major and minor, have been considered by the Cinematograph Films Council, which recommended the making of the amendments now before hon. Members.

I commend to the House both the Collection and the Distribution of Levy Regulations.

2.50 p.m.

Mr. Peter Blaker (Blackpool, South)

As the hon. Lady has said, these Regulations make a number of changes, some major, some minor. The hon. Lady referred to the new provisions in the Collection of Levy Regulations which exempt cinemas with relatively small takings by allowing them to average their takings over a period. She said that the effect of this would be small. It would be useful if she could be more precise about what she means by "small". The word is relative. As she knows the production side of the industry is concerned about the raising of the threshold for the levy from l1d. to 1s. 6d., and it would welcome a little more reassurance from the hon. Lady.

She said that it was her estimate that this raising of the proportion of payments for admission which is not liable for levy from l1d. to 1s. 6d. would reduce the yield of the levy by between £600,000 and £700,000 a year. That is a very substantial sum, approaching 15 per cent, of the total amount of the levy. This will help the exhibiting side of the industry, which has been pressing for such a change for some time. But it is no exaggeration to say that the producing side of the industry strongly objects to it.

In general, all sides of the industry have a common interest in the success of the others. The more films produced here, the better for all, and the more cinemas which remain open and the higher attendances continue to be, the better it is, not only for exhibitors, but producers. But when we come to the question of the arrangements for collection and distribution of the levy, which are set by the Government although the levy does not include any Government money, then we find conflicts of interest between different sides of the industry. We have one here at least when we look at it in a narrow sense. This change in the levy is felt, by the producing side of the industry, to be very damaging. The hon. Lady has explained some of the arguments for making this change. She mentioned the increasing percentage of gross takings which has gone in the levy since 1960, and this is simply a continuation of a trend evident before then. We have even seen a situation in which, if the price per seat below which there is an exemption does not rise when seat prices rise, there is the bizarre result that the gross takings of the exhibitors are falling and yet the amount of levy which they are paying is rising.

The exhibitors made this clear in then-report in 1967. They argue that with this unreasonable burden it is difficult to make a profit and to maintain efficiency. They argue that they are affected by rising costs, S.E.T. and the fact that they have lost investment allowances. All these things have increased costs, while they continue paying the levy. They blame all this for the loss of so many cinemas in recent years, which is indeed very striking and alarming.

Whether the arrangements for the levy have been the only, or the main cause, of this decline in the number of cinemas is doubtful, but it would not be proper to go into that now. I hope that it is one of the questions which the Government are considering in their major review of film legislation. The exhibitors go on to argue that every cinema that goes out of business hits not only the exhibiting side of the industry but the producing side, because the latter loses a greater amount by the closing of the cinema than by an alteration in the rate of levy.

They also argue that devaluation will have helped the producing side by making it cheaper for foreign companies to make films here. These are powerful arguments. On the other side also the arguments are powerful. The hon. Lady said that she considered that the talent, technical facilities and prowess which we have were an even more important inducement to foreign film makers to come here than the levy. That is debatable, and it is not the view of the producing side of the industry. Be that as it may, there is no doubt that the levy has been a useful means of encouraging the investment of British money in the financing of films and, even more important, American money.

The hon. Lady will be aware of the remarks of the Cinematograph Films Council to this effect. It said in its report on film legislation paragraph 7. It appears to us that the British Film Fund is an important inducement to film production. In particular, it is an incentive to United States investment, which accounts for a very substantial proportion of British film production and which benefits the country's balance of payments.

Mr. Speaker

Order. With respect we cannot debate the levy itself. What we are debating are the variations in collecting the levy, and variations in the application of the levy.

Mr. Blaker

Mr. Speaker, the point that I am trying to make is that these Regulations involve very substantial cuts in the amounts of the levy, and it was my view that the fact that the levy is an important inducement to encourage foreign film companies to come here must be relevant when one is considering the effect of a cut of this magnitude.

There are other statements to a similar effect in the report of the National Film Finance Corporation for the year ending 31st March, 1967, in even stronger terms. The producers also say that their costs are up, and that they too are affected by S.E.T. They point out that devaluation, while it may have an advantageous effect to some extent, depends very much for its effect on the particular chemistry of the film concerned. For example, if one hires a star from the United States to play in a film in this country, it will still cost the producer as much, because the star will have to be paid in dollars.

We should remember that 80 per cent, or more of the finance for British film making in this country comes from America. The National Film Finance Corporation has estimated that this year it is likely to go up to 90 per cent, The Americans do their sums very carefully, American producing organisations have made the point that the profitability of film making in this country, compared with that in others—and we have competition from other countries—is very close to the margin. Other countries are becoming more attractive and because of of the cost making the films here is becoming less attractive.

It is also pointed out by producers that British films have a greater box office appeal for audiences in this country and therefore it is in the interests of exhibitors that as many films as possible should be made here. They feel that it would be wrong and short-sighted to make a change of this magnitude at a time when we need every encouragement to help the balance of payments and to maintain the prosperity of the producing side of the industry. These also are powerful arguments.

I accept that it must be difficult for the Government to decide exactly where to draw the line. It is very much a question of degree. The object to be kept in mind is encouragement of production without damaging unnecessarily other parts of the industry. It may be that from time to time as circumstances change it is right for the Government to put their weight in the balance on one side or the other depending on the circumstances. At present, I believe there is a case for altering the arrangements for the levy somewhat in favour of exhibitors. I believe that the production side of the industry would accept that proposition, but it disputes how far the Government ought to have gone.

This leads me to the question of the method which has been adopted. The hon. Lady did not discuss this. She has made a simple increase in the threshold figure from l1d. to 1s. 6d. She will be aware that some members of the Films Corporation have criticised the present method of imposing the levy as inequitable. She should explain why she has adopted this method. It will give relief to some cinemas which, even by the admission of the Cinematographic Exhibitors Association, do not need relief. Should she not have considered whether a different method of changing the levy could have been adopted which would give relief particularly, and perhaps more selectively, to cinemas in the middle range of profitability and attendances which need to modernise in order to retain their audiences

The major criticism which can be made of the Government in connection with these Regulations is on the question of consultation. These Orders affect very severely the producing side of the industry. Members of that side feel that they have not been adequately consulted. They have said to me that the Regulations came to them as a surprise and a shock. I hope that the hon. Lady will deal with this important question when winding up the debate. I understand that a cut of this order was proposed by the exhibitors in February, 1967 with other alterations in the levy. The producers claim that the proposal at that time met with no support from other sections of the industry and was not pursued.

Then, in May, 1967, amending Regulations in connection with the collection of the levy were introduced. They met two of the proposals made by the exhibitors, but did not make recommendations on this point. In July, 1967, the exhibitors repeated their proposal for a rise in the figure from l1d. to 1s. l0d. The proposal was again opposed by the Film Production Association. At that time the Board of Trade asked for the Associations's opinion on the matter. I believe that in the past it has been the practice of the Board of Trade to consult various associations and the unions regularly before action was taken. It is true that the Films Council gave the film producers indirectly some warning that this matter might again be raised, because in their review of films legislation they stated, in paragraph 7: We consider that the levy on exhibitors should not be unduly onerous and propose to consider at an early date whether the rate should be lowered. That report was published in March of this year, and I suppose that it can be said that it might have been taken by the production side of the industry as a warning that something was in the wind. But I am informed that no approach has been made by the Board of Trade to the Film Production Association this year about this proposal. Although earlier this year the Board of Trade asked them for their views on two other matters—second feature films and newsreels—they were not asked about this proposal. I am told that when the hon. Lady met officers of the Association on 13th May this year she touched, only briefly on the size of the levy and gave no indication that further Regulations on the topic were imminent.

Moreover, what has been said by the Government in recent months about films legislation would have led a reasonable man to believe that a change of this magnitude was not in the wind. The hon. Lady told my hon. Friend the Member for Walthamstow, West (Mr. Silvester) on 29th May, in answer to a Parliamentary Question about American investment in the film industry: …. we are examining the whole question of films legislation and it would be unfortunate to prejudge the matter."—[OFFICIAL REPORT, 29th May, 1968; Vol. 765, c. 1814.] It is true that she was then being asked about the renewal of the mandate of the National Film Finance Corporation.

Mr. Speaker

Order. The hon. Member may not discuss all the matters which are not in the Regulations.

Mr. Blaker

I am making the point, Mr. Speaker, that on my information the Government have failed to consult an important section of the industry about the Reflations. I am saying that the Government have made statements, in answer to Questions and elsewhere, which have taken the line that they are examining the whole question of films legislation in a comprehensive way.

Mr. Speaker

Order. They may be doing so. The hon. Member may criticise them for not consulting about the variations made in these two sets of Regulations. But we are discussing only these two sets of Regulaions.

Mr. Blaker

With great respect, Mr. Speaker, perhaps I could explain that I am criticising the Government for making these Regulations.

Mr. Speaker

Order. I understand that the the hon. Member wants other Regulations and other legislation, but he cannot debate that on these Regulations.

Mr. Blaker

with respect, Mr. Speaker, I am not asking for other Regulations. I am questioning whether the Government are right to make these Regulations in advance of the comprehensive legislation which they have promised. I am not criticising their promise to bring forward comprehensive legislation, I am criticising them for singling out this topic in advance, contrary to what they publicly said they intended to do. I think that the producers have been entitled to assume, as my hon. Friends have assumed, that it was their intention not to single out this topic, which is relevant to other aspects of finance for the film industry, and to legislate on it in isolation. We cannot separate this aspect sensibly from other aspects of film finance. It its Annual Report for 1967 the Exhibitors' Association assumed that the Government would not deal with this aspect separately and in advance of other legislation, but would reserve it for their comprehensive package legislation.

The hon. Lady has said that the Films Council favoured the change that is being made, but I am sure she would agree that that does not remove the necessity to consult the trade associations and the unions, as I understand has always been the practice in the past. What consultation has taken place recently—not in July, last year, because that was a long time ago—with the trade associations and the unions? What were the views of the trade associations and unions affected?

There has been a substantial failure on the part of the Government to consult those parts of the industry which are vitally affected. They have gone back on their remarks, which led the House to expect that they would not single out this aspect of the problem for legislation in advance. I hope that the hon. Lady will explain why they have done this. I know of nothing to suggest that it is demonstrated that the size of the levy is the key to the profitability of cinemas. Many other questions are referred to in the Report of the General Secretary of the Exhibitors' Association which bear on this matter, and what we need is an explanation why this one should be selected for legislation in advance.

The film industry is concerned about the future, and pending the legislation which the hon. Lady has promised they want to be consulted and to know that their point of view is being properly hoisted in by the Government. They will not feel confident about the future unless the Government take more trouble about consulting them on all aspects of the activities of the industry in the future.

This alteration in the levy represents a severe reduction in the amount of money available to the production side. These Orders were published only on 12th June, and do not come into effect until 14th July. I hope that the Government will use the interval to have consultations with the production side of the industry, and take the opportunity to bring their views up to date.

But the Government should go further. If, in spite of such consultations, they decide that the Orders should come into effect without change, I hope that the hon. Lady will be able to assure us that her Department will keep careful watch for any adverse effects that the Orders may have on the producing side of the industry and will take those indications into account when making their decisions about future legislation.

3.14 p.m.

Mr. Frederick Silvester (Walthamstow, West)

I want to make a few points about these Regulations and the consequences which will flow from them. The motive power behind them is an attempt to assist exhibitors. There is great support for that idea on this side of the House. We all have constituencies in which cinemas which were once the key power in the life of the local community are closing down. The Exhibitors' Association put forward four points originally. One, concerning the business of the £400 threshold, another, the attendant transitional arrangements, and a third, the introduction of seasonal clauses—which are in the Regulations—have all gone through with support from both sides.

The question turns upon raising from lid. to 1s. 6d. the portion of the payment for admission which is not liable to levy. There is great sympathy for the exhibitors, but we would be wrong to give our sympathy expression for the wrong reasons. I will explain that. The exhibitors argue that their share of the gross takings of the cinemas has fallen from 63 per cent, in 1957 to 58.6 per cent, in 1966. This is not limited to exhibitors; it is a common feature of post-war retailers of all kinds that their margin has been squeezed.

Looked at in another way, taking the average income per extant cinema, recognising that a number have fallen by the wayside, the average earnings have risen from about £10,000 per cinema in 1957 to nearly £19,000 per cinema in 1966. That highlights the difference between the attitudes of the exhibitor and the producer. The exhibitor is concerned with the profitability of a specific cinema, which might be made profitable by closing it down for site value or for some other reason. The producer is concerned with the overall income of the cinema industry. To put it in another way, the share which an exhibitor has of the income of a cinema or group of cinemas can fall, yet his income can rise, but if the total income of the cinema industry falls and the producer's share remains static, his actual income can fall.

Thus the comparison is not a fair argument. What matters is the absolute level of the levy and the income available to the producers. I have calculated on the figures available that between 1957 and 1966 the average earnings per extant cinema have risen by about 90 per cent,, from £10,000 to £19,000. Comparing the total amount of film hire with the total number of British and foreign films registered, the amount of film hire paid to the producers has risen by something like 10 per cent, This gives an understanding of the pressures behind the producers' complaint on these Regulations.

I have spoken of the absolute level being important. In the Annual Report of the C.E.A., Rank and A.B.C. both say that, although they do not dissent from The Order, they strongly feel that the total subsidy ought to be maintained at approximately the present figure. We are now in the position where the producers say that something must be done for the exhibitors, but they also agree that the absolute level of the levy must be maintained as closely as possible to the present figure.

The Regulations make an arrangement whereby, irrespective of the profitability of the cinema, it will automatically gain and, as I understand it, it is possible for some of the most profitable cinemas to gain the most. This has to be put in the present psychological atmosphere in which the cinema industry is undergoing a great change while the review is going on. I will not go out of order, Mr. Deputy Speaker. They do not know what is ahead for the N.F.F.C. They are worried about the restrictions which President Johnson is imposing and about S.E.T. The hon. Lady is taking off some 15 per cent, of the levy to which they have been accustomed, and she should understand the pressures behind the objections.

It is difficult for a back bencher to make the calculations, but doubtless the hon. Lady's Department can provide them. My estimate is that approximately one-quarter of the cinemas paying about one-third of the levy are in difficult straits in regard to profitability and income. Therefore, we are concerned not with the blanket levy that she is putting before the House, but with a change in the format of the levy which would make it easier for these cinemas to invest in improving themselves. The question therefore is muoh bigger than is posed by the levy.

It is a great pity that the hon. Lady decided to introduce a reform of this magnitude at this time. Certain modifications are necessary, but, as I understand it, her major proposals, covering much bigger matters like siting, investment and barring agreements, are due out in the next year or so—and I hope that it will be in the next year—for us to discuss. The levy forms an important part. To make a 15 per cent, change at this stage of the game is very unwise, particularly since the producers believe that they have not been consulted properly.

I hope that the hon. Lady will consider again whether it is possible to rejig the Regulations in such a way that the main assistance goes to the middle band of cinemas and less of it is lost to the most profitable.

3.20 p.m.

Sir Lionel Heald (Chertsey)

I realise that other important business is to be done, but this is a very important matter and I regret to say that it appears that the hon. Lady the Parliamentary Secretary is not taking it very seriously.

I feel a deep sense of responsibility, because some time ago I was requested to assist British Lion Films, which, after all, is the biggest British independent production company, with a view, in particular, to ensuring that British films did not go out of existence and that the company was prevented from being induced or compelled to leave the British production field. I feel that it is my duty, on the information which I have received in that capacity, to point out that there has not been consultation in this matter as there should have been. My view is that this Order should be postponed until there has been consultation. We do not know what the hurry about it is, except to get it through before people realise what it is all about.

I am told that the Parliamentary Secretary met officers of the Film Production Association on 30th May and gave no indication that this Order was coining. As a result, the Director of the Association arranged with the President of the Cinematograph Exhibitors Association on 11th June to meet to see whether they could arrive at some arrangement. The answer of the Ministry was to produce this Order the next day. It seems to me rather remarkable. Why is it not possible to allow the discussions to continue and to postpone introducing the Order? I challenge the hon. Lady to say why it is necessary for this to be done in such a hurry, unless it is that no consultation is wanted.

I shall not take up time by dealing with the importance of the matter; I think that that is realised. However, the hon. Lady has said that it was considered that it was time to put forward some relief. She was well aware that what was proposed would be unwelcome to the producers, and it is difficult to draw the line. In such circumstances, what could be more plain than that there should be consultation? I do not think that the hon. Lady and the Department are giving that attention to British film production which they should give.

3.25 p.m.

Mrs. Gwyneth Dunwoody

Hon. Members opposite have waxed extremely eloquent on a brief obviously provided to them by some of the interested parties. I strongly resent the implication that I am not taking this matter seriously. I do not accept that there has not been consultation with all sections of the industry. I myself have seen the Film Producers Association, the C.E.A. and the unions, and they have been fully consulted also through the Cinematograph Films Council.

This change has been under discussion and the subject of consultation for more than a year. It is not true that the Film Producers Association was given the impression that the whole thing had been dropped. In fact, the Association was asked for its representations. It has twice expressed itself to be in total opposition. I quite understand that it is concerned about anything which will alter the size of the levy. Nevertheless, I must emphasise that its allegation about lack of consultation is one which the Association has dragged in recently. It is not true that the Association has not been asked for its opinions.

I have had occasion recently to look at the minutes of the meeting that I had with representatives of the F.P.A., because they obviously went away with a totally erroneous impression. Hon. Members have expressed concern about the whole question of films legislation, which is under review. The reason why we have given the non-committal replies referred to by the hon. Member for Blackpool, South (Mr. Blaker) is that this whole legislation is of such importance and of such scope that it is still under review.

It was represented to us more than once over the past year by the exhibitors themselves—I am now talking of the whole of the Cinematograph Exhibitors Association and not of the large circuits; I am talking about the independents, which are in considerable straits; the figures prove this—that this is a question of great urgency and not a question of hanging on for yet another year until they get the final legislation. We must try to keep these things in some sense of proportion.

I have said that it is difficult for me to give any exact estimate of the reduction in levy yield because of the way that so many imponderables enter into this and because of the way that the levy is calculated. I should be very foolish indeed if I were to give any figure today. We have gone into this very carefully and we are convinced that it will be, compared with £4.6 million, which was the size of the levy, a small reduction. If I were to make a personal estimate, I would say that we will still be talking in terms of the levy running to at least £4 million in future years. I have already said that, if it reaches £5 million, we shall be under statutory obligation to do something about reducing it. It is not quite as simple as the film producers would have us believe. This method gives much greater relief to lower price cinemas than it does to expensive places. This is one reason why it is considered to be exactly the right way of doing things.

I realise that those members of the Film Producers Association who are concerned about the situation that exists in the industry are likely to look at any change with a leery eye. This is not under discussion. It is because we are concerned with all sections of the industry that we had to consider whether we should do something to assist those exhibitors who might go out of business before the end of another financial year, because the number of cinemas In Britain has been halved since 1960.

The hon. Member for Walthamstow, West (Mr. Silvester) said that, because of the site values, if exhibitors sold their cinemas they would still retain their income. This is one point of view. If a man sells his means of earning a livelihood, although he would retain assets I do not think that he would regard this as being the ideal solution to his problems. The exhibitors themselves consider that they should be given a chance to continue in the business, and I am now speaking very much of the independent exhibitors, the people about whom we are concerned.

Briefly, as I know that hon. Members wish to get on with other business. I must return to the question of consultation with all sections of the industry. The Cinematograph Films Council is established so that, when full consultation takes palace, all interests may express a view. There has been an enormous amount of discussion within the Council about the size of the alteration. I have already stressed that we have not given the exhibitors all they asked for.

The film producers are just not right when they say that this alteration has gone through without their being fully consulted. Because I was so concerned about the erroneous ideas which they seemed to take away on certain other matters of films legislation, I have recently looked at the record of the meeting which we held. I say firmly that, although I understand their fears, I believe them to be misplaced on this occasion.

This country has a fund of imagination and talent which will attract film makers here for many years to come. The levy is only one of the factors. Let us not talk as though we are doing away with the entire amount. There will still be a considerable sum available to film producers. Having looked at the whole situation, not just at one sectional interest, we feel that we must alter the levy and alter the exemption level. We are saying to the industry, "We believe that you have a very good future indeed. Nevertheless, we must seek to help not Just those of you who are making films but those who are showing them". This is the point. If there is nowhere for people to show their films in Great Britain, we shall be furthering the interests of neither the producers nor the people actively employed in the industry.

This is not an arbitrary move. It comes after over a year of discussion, and it comes with knowledge that, although we cannot hope to please all sections of the industry, what we propose is one of the best ways we can find to help the section of the industry which has had a considerable decline in its interest over past years, a decline which still actively continues.

On balance, therefore, we felt that it was right to do something now, in advance of the legislation, because of the urgency which the exhibitors stressed when they visited the Board of Trade. I utterly refute the suggestion that we have not had consultation, and I ask the House to approve the Order.

Question put and agreed to.

Resolved,

That the Cinematograph Films (Collection of Levy) Regulations 1968, a draft of which was laid before this House on 12th June, be approved.

Cinematograph Films (Distribution of Levy) (Amendment No. 3) Regulations 1968 [draft laid before the House, 12th June], approved.—[Mrs. Gwyneth Dun-woody]