FILMS BILL

HC Deb 02 February 1970 vol 795 cc76-143

Order for Second Reading read.

5.27 p.m.

The Parliamentary Secretary to the Board of Trade (Mrs. Gwyneth Dunwoody)

I beg to move, That the Bill be now read a Second time.

It will, I think, assist the House if I give a brief account of the background to the present proposals. Since 1927 the basic instrument of Government support for the film industry has been the screen quota. This country was among the pioneers of film production in the early years of this century, but the 1914–18 war dealt our industry a severe blow, and by the mid-twenties less than 5 per cent. of the films shown to the public were made here. The 1927 Act required exhibitors to devote a minimum proportion of their screen time to the showing of British films, and this arrangement has ever since remained the main protective measure. The proportion itself is prescribed by order of the Board of Trade, and an order varying the percentage requires the approval of each House of Parliament.

The proportion, expressed as a percentage of screen-showing time, was at first a small one, because of the need to develop film production here. It reached 30 per cent. for first-feature films in 1950 and was set at 25 per cent. for supporting programmes in 1948. These percentages have remained unchanged since then. There is provision for exemption for cinemas with low weekly takings and for cinemas in special situations. By and large, the requirement has not been onerous. Quota achievement has regularly been somewhat above the prescribed minimum. Thus, achievement in 1966, 1967 and 1968 was 39.2 per cent., 39.7 per cent. and 34.2 per cent. respectively for first features, and 33.3 per cent., 34.8 per cent. and 36.2 per cent. for supporting programmes. The returns for 1969 have not yet been fully analysed, but preliminary indications suggest that the percentages may be slightly higher.

The second main instrument of support for film production is the British Film Fund. This is an arrangement whereby exhibitors are required by law to pay a small proportion of their box-office takings into a Fund, which is then distributed to the producers of British films in proportion to those films' earnings in this country. This arrangement began as a voluntary scheme in 1950, and was made statutory in 1957. I would like to make it clear that this is not a Government subsidy. It is a scheme for redistribution of the industry's own income, and since the expenses of running it are met from the fund itself, there is no charge on the public purse.

The third instrument of Government support is the National Film Finance Corporation. This was set up in 1949, at a time of severe shortage of finance for film production, to lend money to prospective film producers. I shall say something about its history and prospects when we come to those sections of the Bill which provide for its continuance.

Thus, for many years now Government support for this industry has been threefold—that is to say, legislation has provided for the screen quota, the levy on exhibitors' takings, and the National Film Finance Corporation. The enactments which embody these measures of support are the Films Acts, 1960–66, the Cinematograph Films Acts, 1957 and 1966, and the Cinematograph Film Production (Special Loans) Acts, 1949 to 1966.

The most important provisions in these Acts were due to expire at the end of 1967. It will be recalled that in 1965 the subject of the supply of films for exhibition in cinemas had been referred to the Monopolies Commission, and in order to allow time for a comprehensive review of films to be undertaken in the light of the Commission's report, a Bill was brought before the House with the object of extending the life of the then existing films legislation for three years. This Bill became the Films Act, 1966, which prolonged the life of the legislation until the end of 1970 as regards the N.F.F.C. and Quota and until October, 1970, as regards the Levy, and at the same time made one or two minor amendments.

The promised review of legislation has now been completed, and the present Bill is the outcome. The purpose of the review was, of course, to consider whether all or any of the present measures should be continued after 1970, either in their existing form or subject to amendment, and the first question which we had to consider and to which the House has to address itself, is whether it matters if this country has a film industry or not.

Of course it matters. Although, because of the growth of television, the cinema has lost a good deal of its former pre-eminence in the field of mass entertainment, it is still a powerful medium of communication across the world. The film is a means whereby British culture and British ideas can be spread throughout the world, and though some might argue that the more extreme films can hardly be said to make much of a positive contribution in this direction, by and large the film continues to be a valuable means of presenting Britain to the world. And not only that.

The film industry makes a considerable contribution to our export earnings. In 1967, overseas transactions in respect of cinematograph films resulted in a surplus of £24 million over payments, and the corresponding figure for 1968 was £23 million. These figures show a notable improvement over 1966 and 1965, when the surpluses of overseas earnings over expenditure were £9 million and £6 million respectively. A healthy balance of payments is of course vital to the future prosperity of this country, and I am confident that this industry, by its efforts in export markets, will continue to make a direct and substantial contribution. Nor must we overlook that there is undoubtedly also an indirect contribution. We cannot measure this, but it is still true that, to some extent, trade follows the film.

Mr. John Hay (Henley)

It would help if the hon. Lady would go a little slower, particularly in dealing with some of these figures.

Mrs. Dunwoody

I am sorry. The second question we have to ask is whether the industry needs Government support. Would it continue to be active and be able to make its contribution to the national effort if all forms of Government support were withdrawn? We think not yet. The American industry has a home market many times the size of ours, and this enables it to offer powerful competition. Most Western European countries have found it necessary to afford support to their native film industries, and we in this country are especially vulnerable because we share with the Americans a common language.

The third main question is whether the industry has shown itself, by its efforts to improve productivity and contain costs, to be worthy of support. Filmmaking—this is worth emphasising—is an art as well as an industry, and we cannot expect the mechanical production methods of a factory. But the very fact that the industry has this dual nature makes it more than ever important to ensure that economies are made wherever this can be done without impairing quality. I myself visited the main studios and I have impressed upon the managers the need for the most efficient use possible of both manpower and equipment. I am glad to say that the industry has shown itself to be aware of its responsibilities in this connection.

The activities of the Productivity Committee of the Film Production Association, the organisation of, and the success of the International Film and Technology Conference and Exhibition known as Film '69, are evidence that the industry is fully conscious of the need to keep down costs and at the same time to stay in the forefront of modern technological advances.

Another criterion by which the performance of any industry must be judged is its contribution to overseas earnings. Here again, the industry can I think be said handsomely to earn its keep. As I have already said, its overseas receipts in 1967 and 1968 were substantially higher than in previous years. British films are increasingly making their way in world markets and I am confident that in the coming years they will make a growing contribution towards the solution of the vitally important problem of the balance of payments.

Finally, we must always bear in mind the cost to the public purse of maintaining Government support measures. The House is, of course, aware of the continuing need for economy in public expenditure, and members will accordingly be glad to know that the expenses involved in licensing exhibitors and renters, in registering films and administering the quota provision, are met from fees charged under the Act. As regards the levy, administrative expenses are a first charge on the Film Fund. Thus the industry itself pays the cost of administration of these two support measures.

Nor is there any element of grant or subsidy in the finance made available to the N.F.F.C. The Corporation has a duty to pay its way. It is true that it has lost the greater part of the £6 million advanced to it in its early days, but if we exclude the losses attributable to the loans made at the Government's behest to British Lion in and immediately after 1949, the loss, over twenty years, has been only about £3 million or an average of £150,000 a year.

Bearing in mind the near total collapse of the British film production industry in 1949 and contrasting it with the high level, both of activity in the industry and as regards the quality and popularity of British films in recent years, I think that it can be said that the money has been well spent. There is every reason to hope that the Corporation, with the increased scope proposed in this Bill, will in future years at least break even.

In the Government's view, therefore, this industry is one which merits continued support measures. In our review of the working of the existing legislation we had naturally to consider whether the measures, all of which have now been in operation for many years, are still needed and are still appropriate. We have come to the conclusion that they are both necessary and appropriate. They have stood the test of time and have worked well. This country is now without doubt one of the major centres of film production in the world, and the industry has won this position for itself against the background of the present support measures. There is no virtue in change for the sake of change, and the broad proposal in this Bill is that the life of the present legislation should be prolonged for another 10 years, that is to say until the end of 1980. This is an industry in which technical advances can bring about fundamental changes. We have only to remember the advent of "talkies" and later of colour. We would not therefore think it right to prolong the life of the legislation indefinitely. No doubt before it is due to expire, the Government of the day will conduct their own review of its operation during the 70s so as to decide what will be suitable in the years after 1980.

I should like now to tell the House how the review of legislation was conducted. All organisations in the trade were invited to let us have their views and suggestions on future legislation, and there was a ready—nay, a voluminous—response. All the representations which we received were made known in full to the Cinematograph Films Council, which then made its own review, and its findings and recommendations were summarised in a Report of the Council which was published in 1968 as Command Paper 3584. Eight out of the 22 members of the Council signed a Minority Report, the text of which was included in Cmnd. 3584. I would like to take this opportunity of thanking the Chairman and members of the Council both for the thoroughness with which they carried out their task and for their continuing service. Except for a small remuneration paid to the Chairman, the members are unpaid, and I am most appreciative of the time and energy which they devote to this work.

Broadly, the Council recommended that the life of the present support measures should be prolonged, and, as I have said, the Government propose to accept the Council's advice. The Council has also recommended a number of Amendments to the present legislation; for the most part these are of a technical nature. None of them in any way affects the basis or method of operation of the support measures. In only one instance does the Bill reject the advice of the Council. The functions of the Council are set out in Section 41 of the Films Act, 1960. Among the duties there set out is that of keeping under review the progress of the film industry in Great Britain, and the Section continues with the words: … with particular reference to the development of that branch of the industry which is engaged in the making of films". The Council recommended that these words should be deleted from the statement of its functions. I do not think that such deletion is necessary or desirable. Ever since 1927, the basic purpose of our films legislation has been to encourage the development of a film production industry in this country, and I think that the Council's terms of reference should stay as they are. This is of course not to say that the Council should in its deliberations overlook the problems of renters and exhibitors. Although there may be differences between the sections of the industry as to the best way of tackling particular problems, it remains true that fundamentally all three sections have the common interest of maintaining and, if possible, increasing the level of attendances at the cinemas. Everyone in this industry depends on the money taken at the box-office. It follows that, in considering the industry's problems, the Council is bound to pay proper regard to the interests of all three sections of the industry, and examination of its annual reports and its special reports over the last 20 years will show that the Council has in fact done this. I propose therefore to leave the terms of reference of the Council as they stand. In this matter, I share the view expressed in the Minority Report which was appended to the Council's Report on the review of films legislation.

It will perhaps be convenient if, at this point, I deal also with the question of the constitution of the Council. In the course of the review, we had several proposals for changes. Not unnaturally, each section of the industry would like its own representative membership to be increased. The unions would like to have more employee representatives, the producers more producer representatives, and the renters asked for increased renter representation. We have given very careful consideration to this problem, and our conclusion is that no convincing case has been made out for any change. The Council at present consists of 22 members, of whom seven, including the Chairman, are independent, five are representative of exhibitors, four of producers, four of employees, and two of renters. I think that this is as appropriate a constitution as can be devised, and I am fortified in this view by experience of the working of the Council. I believe that, over the years, the Council has avoided bias one way or the other and that, almost without exception, its recommendations have been in the best interests not of any particular section of the industry, but of the industry as a whole.

It is of course not possible to prove that the present constitution of the Council is ideal, but one test which can fairly be applied is the progress of the industry. The constitution has been unaltered since 1948, and during the last 20 years the Council has kept the progress of the industry under constant review and has made numerous recommendations for changes both in the law and in the regulations made pursuant to the legislation. As I have said, almost all of these recommendations have in fact been accepted and acted upon by my right hon. Friend the President of the Board of Trade and his predecessors.

It seems to me that one reasonable way of assessing the Council's performance is to look at the progress made by the industry during the last 20 years. In 1948, the film production industry in this country was on the verge of collapse. It was to avert disaster that, on the proposal of the present Prime Minister, the National Film Finance Corporation was established. This, together with the introduction, on a voluntary basis, of the levy on box office takings and maintenance of the quota, did the trick. This country is now without doubt one of the major centres of film production in the world. There have been setbacks, and there are signs at the present time of some falling-off, which we all hope will be only temporary, in the high level of activity of recent years. But the total record is one of progress and a growing reputation for excellence of production. Films made in this country have in recent years won many Oscars and have carried off numerous prizes in international film festivals. We enjoy now an enviable reputation for the excellence of our actors and actresses, technicians, script-writers, musicians and all who participate in the making of films. Our studios are among the best equipped in the world and have kept abreast of, and in some cases led the way in, the practical application of modern technological advances.

This achievement is all the more remarkable because, mainly owing to the advent of television, there has been a very big decline in the number of attendances at the cinema. In the years following the end of the war, there were around 1,500 million attendances a year. By 1960, the figure had fallen to about 500 million, and in 1968 it was about 250 million. It is remarkable that, against this background of declining audiences, production of British feature films has remained comparatively steady, and for each of the last seven years roughly 70 have been registered.

The legislation and regulations made by the Board of Trade after consulting the Council have, of course, a controlling influence on the activities of the industry, and in my view the Council's advice has served the industry well. We do not intend to tamper with its constitution.

In brief, therefore, the effect of this Bill is to prolong for another decade the present measures of Government support for the film industry. Exhibitors are to continue to be required to devote a minimum proportion of their screen-time for the showing of British films. Secondly, the arrangements for imposing a levy on exhibitors' takings and for distributing to producers of British films the resultant fund are to be continued. Thirdly, the National Film Finance Corporation is to be re-financed and its powers are to be somewhat widened so as to afford it the maximum chance of operating profitably.

There are a number of minor changes, most of which are of a technical nature and suitable for discussion in Committee. I do not propose at this stage to weary the House with a full explanation of the effect of these changes. They concern, for example, length of quota life of a British film, extension of quota life, treatment of late-night showings when calculating days on which British films have been shown, relief from quota obligation, determination of labour costs for the purposes of deciding whether a film qualifies as British, penalties for infringements, and fees payable for licences. We shall have full opportunity to examine these proposals later on. For the present, I assure the House that none of them in any way affects the main purpose of the Bill.

I should, however, mention three Clauses affecting the levy which are of rather more than a technical nature. As I have already said, the levy is not a subsidy. It is an arrangement, begun on a voluntary basis in 1950 and made statutory in 1957, for re-distributing part of the income of the industry. A levy is imposed on exhibitors' takings at the box office, and the money is paid into the British Film Fund, which is administered by the British Film Fund Agency, a statutory body created by the Cinematograph Films Act, 1957. The Agency distributes the Fund to film producers in proportion to the earnings of their films at the box office. The money is not public money; the expenses of the Agency and of Her Majesty's Customs and Excise, who collect the money from the cinemas, are a first charge on the Fund, so that the scheme runs at no cost to public funds. The levy has undoubtedly made a substantial contribution to the industry and to the emergence of this country as a major centre of world film production. The Bill will extend the relevant provisions of the 1957 Act for another 10 periods of 52 weeks—that is, until 20th September, 1980—subject to three amendments which I will now explain.

In the present legislation there are statutory limits on the yield of the levy in any one period of 52 weeks. The lower is £2 million and the upper is £5 million. These figures were included in the 1957 Act as an assurance to producers as to the minimum amount available for distribution and to exhibitors as to the maximum burden which the levy could place on them. The Board of Trade regulations governing the collection of the levy must provide for a rate of levy estimated to achieve a yield within the limits.

The Cinematograph Films Council recommended that the legislation should continue to prescribe a maximum and a minimum for the yield of the levy, but did not express a view on whether the present limits are appropriate. It is possible that, within the life of new legislation, the present limits may become outmoded, and Clause 5 of the Bill, while retaining the existing limits, provides that the Board of Trade, after consulting the Cinematograph Films Council, may amend them by Orders requiring approval of each House of Parliament. This will avoid the need for new legislation if at any time it appears desirable to alter the limits, but it will ensure that no alteration can be made without the approval of each House of Parliament.

The second amendment concerns the proposal in the report of the Lloyd Committee that a National Film School should be established. Section 1(1)(b) of Cinematograph Films Act, 1957, already provides that the Board of Trade may authorise the British Film Fund Agency to make payments to the Children's Film Foundation Ltd. An annual payment has been regularly made to the Foundation, and it has been the practice of the Board of Trade to consult the Cinematograph Films Council on the amount each year. The work being done by the Children's Film Foundation Limited seems to be of an exceptionally high quality of which we should be proud.

Clause 6 will enable the Agency, with the approval of the Board of Trade, to make an annual grant towards the running costs of a National Film School. In its report, the Cinematograph Films Council expressed the view that the B.B.C. and the independent television companies, who would employ graduates from the school, should also contribute to its annual cost. The Council recommended that the running costs of a National Film School should be met only partly from the levy. Clause 6 will enable this recommendation to be implemented. It is the intention of my Department, as in the case of the grant to the Children's Film Foundation to consult the Cinematograph Films Council before authorising the Agency to make the payment.

Thirdly, in relation to the levy, Clause 6 makes similar provision as regards payment of a modest grant from the levy to the British Film Institute Production Fund. This exists to give practical help to new talent and to encourage new ideas in film making. At one time it depended entirely on voluntary contributions, but now it receives a small part of the British Film Institute's annual grant from the Department of Education and Science. Here again my Department will consult the Cinematograph Films Council on the amount of the grant to be made from the British Film Fund.

I should mention that some exhibitor members on the Council dissented strongly from the Council's recommendations for these two additional grants from the levy on the ground that they are opposed to any extension of the purposes to which the proceeds of the levy are devoted. While I fully understand the anxiety of the exhibitors on this score, I believe that it is in the best interest of the industry as a whole that the provisions in the Bill should stand.

I turn now to the National Film Finance Corporation. I have already briefly summarised why we have decided that the Corporation should be refinanced, and I will now go into this in a little more detail. The Corporation was established in 1949, at a time when the film production industry in this country was facing collapse owing to a shortage of finance. Under the Cinematograph Film Production (Special Loans) Act, 1949, £5 million was lent by the Government to the Corporation, whose duty it was to make the money available in the form of loans to film producers or distributors. The figure of £5 million was in 1950 increased to £6 million. The Corporation was authorised to lend only to producers or distributors who, while having in the judgment of the Corporation reasonable expectation of commercial success, could not obtain finance from other sources.

In the Cinematograph Films Act, 1957, these terms of reference were amended by the omission of the requirement that the Corporation was authorised to lend only to producers and distributors who could not get financial facilities from other sources. Since 1957, the statutory function of the Corporation has been to make loans for the production or distribution of cinematograph films to persons who, in the judgment of the Corporation, have reasonable expectations of being able to arrange for the production or distribution of cinematograph films on a commercially successful basis. Thus, there has never been any element of Government subsidy in this arrangement.

To ram this home, the 1957 Act included a Section—Section 11—specifically stating that it was the duty of the National Film Finance Corporation to pay its way. In the last 20 years, about £5 million of the N.F.F.C.'s fund has been lost. But of the loss, we must recall that nearly £2 million represents the net loss on the loan of £3 million advanced, at the Government's behest, to British Lion. Excluding this, the losses of the Corporation have averaged no more than £150,000 a year, and in recent years the bulk, and in the year 1968–9 the whole, of this loss is attributable to the Corporation's liability to pay interest on moneys advanced to it by the Board of Trade, including moneys which the Corporation regards as irrecoverable. The Corporation has always met its obligations in full as regards payment of interest.

As I remarked earlier, in 1949 the film production industry in this country was facing total collapse. At present the United Kingdom is without doubt one of the major centres of world film production. Of course, many things have contributed to this transformation, not least, I think, the levy. But during this period of 20 years, the Corporation has helped to finance over 700 feature films, as well as several hundred lesser productions. It can, I think, rightly claim to have made a substantial contribution to the re-vitalisation and growth of the British film industry.

There is at present nothing like the shortage of finance for film production which led in 1949 to the establishment of the N.F.F.C. But a very high proportion of investment in film production in the United Kingdom in recent years has been supplied by the British subsidiaries of the big American companies. No official figures are available, but the National Film Finance Corporation, in its Annual Report for the year ended 31st March, 1969, estimated that in 1968 the proportion was about 90 per cent., and it expected it to be the same in 1969. I have no reason to doubt that these figures are a fair estimate. In recent months the level of this investment has fallen, and in the Government's view the continued existence of the Corporation is a very desirable measure of support for the industry. I am pleased to notice that recent reports in the trade Press suggest that more finance from native sources is being put into film production. But the Corporation still has an important rôle to play.

Another important consideration is that there is now an established market for British films overseas. I have already referred to the substantial benefit to the balance of payments resulting from the industry's operations in recent years. Much higher foreign earnings would accrue to this country if a bigger proportion of the films which are successful overseas were financed from native sources. The Corporation can help not only by making loans, but also by inspiring confidence and attracting to the industry private investment which might not otherwise be forthcoming.

For all these reasons, we have decided that the public interest will be well served by the re-financing of the Corporation. The Bill provides accordingly for the continuance for another 10 years of the loan-making powers of the Corporation; for the loan to the Corporation of a further £5 million; for relieving the Corporation from its obligation to pay interest on money already advanced and lost; and for an extension in the scope of the Corporation's permitted activities.

As regards the £5 million, I would repeat that this is a loan and not a grant. The Corporation would, under the Bill, continue to be charged with the duty of using its money in such a way as to be reasonably sure of getting it back. Nor will the Corporation get the £5 million at once. Advances will be controlled administratively and will be determined in the light of prevailing economic circumstances.

As hon. Member will recall, there was appended to the Report of the Cinematograph Films Council on its Review of Films legislation a minority report, signed by eight out of the 22 members of the Council.

I have given careful consideration to the Minority Report, and indeed, as I have already explained, I share the view expressed in paragraph 8 of that report that the Council's terms of reference should not be changed. Its functions will, under the Bill, continue to be to keep under review the progress of the film industry in Great Britain, with particular reference to the development of that branch of the industry which is engaged in the making of films.

For the reasons which I have already given, I do not agree with the minority report's contention that the constitution of the Council is unsatisfactory. It seems to me that it represents a fair balance between the various sections of the indus- try. I think that in its main report, the Council tried to steer a course in the best interests of the industry as a whole and to hold a balance between the special interests of the different sections of the industry. I do not think that it is necessary or desirable, as the Minority Report recommends, to reconstitute the Council and then to ask a re-constituted Council to conduct a fresh review of films legislation. In my view, the proposals in the Bill represent a well-balanced compromise between the interests of the producers, distributors, exhibitors and employees, and I am confident that within the framework of this legislation the industry, so long as it continues to pay proper regard to the need for efficient use of both manpower and equipment, can look forward to a prosperous decade.

I commend the Bill to the House.

6.0 p.m.

Sir Keith Joseph (Leeds, North-East)

We agree with the hon. Lady the Parliamentary Secretary that the film industry is very important to this country. We welcome the growth of Britain as an international film-making centre. We recognise the part which British-made films play in presenting to the world different visions of British interpretation of experience of life. We delight in the great range of entertainment and documentary films which go out from this country, and we entirely acknowledge that all this is due to the native talent available here.

We want the industry to be a busy one. We welcome its contribution to the balance of payments. But we recognise that there are difficulties inseparable from the grandiose past of the industry which makes it difficult to be independently profitable. We understand that half the market for films in the free world is in America; that it just is not practicable for a British film industry to pay its way if it serves only a home market. We understand that more and more film makers will have to identify the markets for which they are making films, and that other parts of the industry, particularly those which invest in the exhibition facilities, will have to meet the needs, the requirements, the appetite for higher standards and greater variety, which generally means smaller, more modern, cinemas. All this implies that there should be a healthy financial background.

From reading material about it, those who are outside the industry realise that the film industry, which, as the hon. Lady rightly said, is also an art, seems to lurch from one fashion to another. There is a fashion for the epic, a fashion for the historic film, and then there is a fashion for some other sort of film. I understand that at the moment the new wisdom is to go for high quality, low budget films and that all over the film-making world tycoons are climbing on to motor bikes. Far be it from me, as a layman, to prescribe what the right answer is, but, in general business terms, the only reliable method of identifying the right combination of answers is to use market research, and I understand that this is what the industry is doing more and more.

The hon. Lady referred to the shadow which is over the British industry at the moment. As she rightly said, the huge United States funds which have provided so much of recent film finance in this country through British subsidiaries have for the moment declined. We all know that many American film companies have come into the ownership of finance-minded American conglomerates, no one of whom yet seems to have succeeded in making films profitably. We all hope that American managements, attracted by the talent that is here, and by the share of the levy, will soon restore the full level of finance that was recently available.

The hon. Lady would be wrong to pretend—and I am sure that she would not—that the only shadow over the industry is due to the new American managements of film companies. The fact is that this has combined simultaneously with two other factors. One is the squeeze—and I cannot measure the influence of this—on television companies due to taxation and the television levy. The other is the effect in America and here of high interest rates. Huge sums of working capital are tied up in the stocks of films made in the past, and in the capital employed in making films at the present, and with interest rates as high as they are both in America and here there must be a great discouragement to film making.

Those three factors together have created some slack at the British end of the industry, and fear of a continuing slack. I have only the film Press to go on, but I hope that the quality of our talent, our facilities, and the share of the levy, plus the hope that United States managements will get their own problems under control, will lead to a revival of American investment. We do not want to cast any doubt on either the levy or the quota. We accept both. I do not say that in Committee my hon. Friends will not have comments to make in detail, but in substance we accept both.

I understand from reading about this industry that its finance is very strange. I read recently a description, which may be familiar to hon. Members, that film production is like a mouse which carries an elephant on his back. For every £ that goes to repay production costs, E6 have to come into the box office. We have, therefore, to try to understand the factors at work in financing films.

There is, first, of course, the exhibitor who rightly takes the first slice of box office money, a substantial slice, subject to the levy. We cannot accept that it is right further to reduce the money going to the exhibitor by adding to the levy that goes to the producer, and which the exhibitor has come to accept as part of the necessary payment to keep a viable industry, a further sum which will go to the themselves admirable projects, the British Film Institute, and the National Film School, which come much more closely within the province of the Minister of State, Department of Education and Science, whose presence today we welcome. I am almost a lifelong member of the National Film Institute. It does a spendid job, but I cannot see that the exhibitor should be expected to pay the extra moneys, and I warn the hon. Lady that in Committee my hon. Friends will make strongly the case which the exhibitors have put.

There is, second, a slice, smaller than that of the exhibitor, which goes to the distributor, who, in the ultimate, when he has provided a guarantee, takes the risk to the extent of that guarantee. The distributor gets a share of the last one-third of the box office takings, to which he adds his own expenses, and at the end of that operation there is left only about 15 per cent., on average, for production finance.

To the layman, the extraordinary thing is that despite this elephant on the back of the mouse, within the mouse's own sphere there is still great extravagance. I do not presume to judge extravagance for myself. I get it from the reading and listening that I do to those in the film world. I mean no disrespect to the hon. Lady, but I do not think that her homily to those in the studio that she visited will turn the tide of history.

Mrs. Dunwoody

Is not the right hon. Gentleman aware of the enormous breakthrough in electronic equipment in this industry, so that increasing investment in new equipment is making it not only more efficient to make films but saving a lot of money on products costs?

Sir K. Joseph

I am sure that that is true. I am only aware, however, that a secretary who works for a film company is likely to get several times the reward available for working in some more prosaic occupation. There is some legacy from the golden era, no doubt. I am sure that there is an infection of high costs from American standards, and also an atmosphere that a film may make a fortune for the people producing it, or a loss. In such an atmosphere of risk-taking I can imagine people saying to themselves, "What is another few pounds a week?" But there is clearly scope for financial invention and initiative in this industry.

We recognise that the levy is vital to producers, but I wonder whether the hon. Lady, or whoever replies, will explain to those of us who do not fully understand how 70 British feature films attracting, in a recent year, about £4 million in levy, can be said to be getting, through that levy, as much as 50 per cent. on their other production income. I believe that I have the figures right. Perhaps the hon. Lady will explain what proportion the £4 million payable to producers of British feature films bore to the income they received through the linkage and ultimately from the box office.

I now turn to the principal feature about which we wish to comment—the National Film Finance Corporation. The hon. Lady made it very easy for me to state our position. We recognise that this corporation was originally intended to be temporary. It was a bridging operation until private enterprise finance from this country came into the industry. What has happened is that British risk capital has not come in in nearly sufficient quantities to maintain a successful film industry, but American money has.

We believe that it is healthy for an industry to have a variety of sources of finance. We are therefore glad to welcome the hon. Lady's assurance that the corporation intends to continue to be a catalyst in bringing in private enterprise money by its best efforts. We do not wish to hamper the corporation in this work. We realise that any thought of ending its operation abruptly—particularly at present—would be entirely wrong. But we still adhere to the hope with which the right hon. Gentleman the present Prime Minister founded the corporation, that in the right climate the film industry will be self-financing from private enterprise sources largely—not entirely, because we welcome money from outside as well—from this country.

But we should like to know to what extent the corporation is shifting its financial operations from what I understand is called "end money" to less precarious financial arrangements. We understand that the corporation is not intended to finance non-commercial films. Perhaps the hon. Lady will correct us if we are wrong about that. We understand that anything for non-commercial films would have to go through the Department of Education and Science budget. We acknowledge what a difficult task any investor in films has, whether it be private enterprise or the National Film Finance Corporation, but we believe that private enterprise in this country should be able to provide a far larger proportion of the money needed for a flourishing British film industry, gradually coming in to offset American money.

There are hopeful signs. A considerable programme has been announced by E.M.I. with Bryan Forbes in charge and there is the continuing production programme of British Lion. There is the new initiative from London Screenplays and the de Grunwald programme backed by Morgan Grenfell. We were glad to know that this operation seems to have got an American outlet—albeit not a major one—through the Winthrop Lawrence connection.

We do not oppose the Bill, but we want to make it clear that when we are in office we shall examine the whole position. We shall examine the performance of the corporation and the prospect of adequate private enterprise finance coming from this country and America to maintain a flourishing British film industry. If, as we hope, the prospects are good, we shall—subject to due warning—phase out or taper off the corporation, or in some other way—we shall not tie our hands—move progressively from taxpayers' to private risk capital. We shall do nothing abrupt. We shall take carefully into account the various prospects of finance for the industry. In the meanwhile we wish the corporation and the entire industry well.

We have some detailed points to raise in Committee, but we shall not oppose Second Reading of the Bill.

6.16 p.m.

Dr. David Kerr (Wandsworth, Central)

I am at a loss to understand the plea for a new policy which seemed to be about to come from the right hon. Member for Leeds, North-East (Sir K. Joseph). The film industry is readily able to command sources of private capital. The National Film Finance Corporation exists as an insurance against its inability to command this risk capital. Although the Opposition, if fortunate enough to command a majority in the House after the next election, may re-examine all sorts of policy, I cannot see how the corporation can be phased out save by the film industry itself achieving such success in commanding private investment resources as would allow the corporation to disappear from sheer inanition.

The right hon. Member also forecast some opposition to the provision that the British Film Fund Agency's Eady money should now be allocated, presumably at a fairly low level, to two major developments in the film industry. One of them—a new development—the National Film School, to whose inauguration we all look forward with interest and enthusiasm. This might well contribute an indirect subsidy to the industry by providing some of the much needed staff within the industry from funds which are available currently only for direct production purposes.

But the specific objection which the right hon. Gentleman raised—and he warned that there might be some discussion in Committee about it—was the allocation of funds to the British Film Institute's Film Production Board, which is a transmogrification of the Institute's old Experimental Film Board. It now merits recognition as a small but integral part of the film production industry and is no longer to be thought of—if, indeed, it ever was justifiably thought of—as a "way-out", heterodox group of wild youngsters led by the wildest of all youngsters, Sir Michael Balcon, busily engaged in producing something which is not the least interesting to film audiences.

I will cite only one example, namely, the success everywhere of the Film Production Board's "Herostratus" which has achieved commercial showing all over the world and is widely recognised as an important contribution to cinema techniques and to the art of the cinema. It was a feather in the cap of the Film Institute to have had some responsibility for it.

So, for this reason, it will be very difficult to argue that the Film Production Board should not have at least a bite at this cherry. Sometimes I feel that the British film industry is never so busy as when strangling itself in the strings of its own money bags. The new developments in film mean a new kind of audience. I am not talking about the much larger audiences who, in ever-increasing numbers, are staying away—this is something of a problem for all of us—but of the new kind of audiences who are not seeking the great epic or the heavily-costumed, under-scripted historical film. They are interested in new kinds of realism.

Nor are they so interested in the way that Britain mirrors herself to the world, so much as the success and the impact of the way in which our films reflect us to ourselves. This is what is important about the cultural aspect of a film industry, and to this the Bill contributes more significantly. It is greatly to be welcomed.

I have two points to make on the cultural aspect of films, as opposed to the commercial, which has occupied the discussion up to now. First, as I said a year ago, when I introduced my Films (Statutory Deposit) Bill, I welcome the decision not to extend the money available under this Bill for statutory film deposits. Anxieties were expressed that the money coming either through the Film Fund Agency or possibly being made available to the N.F.C.C. might be diverted to statutory film deposits. I would oppose this, and I hope that the industry's fears will have been given the quietus by this Bill.

There is a reference in Clause 6(d) to the allocation of money to a film school. It refers to carrying on "any school" and not specifically to the National Film School which we hope will be set up as a result of the Lloyd Committee's report. I wonder whether this may mean that money will be made available for the Royal College of Art's film production unit, which has produced some first-class stuff, or the Polytechnic's unit, or to University College. This is of some significance, since, by a curious paradox, hand in hand with the decline in film audiences, we are watching a growth of interest in the production of films by academic and even non-academic groups.

The second question which should be raised is the way in which the money to be allocated to the British Film Institute for its Film Production Board should be treated. At the moment, the B.F.I. has to deal with a global budget and allocates part of it to Film Production Board purposes. Will we have the benefit of the "Eady money" going to the B.F.I. without affecting its global sum, or will the global sum from the Department of Education and Science be reduced by the equivalent of the "Eady money", which I would vigorously oppose? If the latter is to be the case, and my vigorous opposition is unsuccessful, how will this be decided between the Department of Education and Science and the Board of Trade?

Another matter dealt with by the Bill is the acquisition of copyright by the National Film Finance Corporation. This bothers me a little because the copyright of films is such a vexatious question. I hope that we may have a socially expert departmental committee to consider the whole question. At the moment, copyright exists for 50 years in any film and there is a suspicion that some of the film distributors—not so much the producers—would like to see that copyright term extended, because some 50-year-old films whose copyright should have expired are achieving a new market thanks to their exhibition on television. Copyright questions could well be examined closely and the appropriate report made.

In the last couple of weeks, there has been one important disappearance from the film industry. That is the sad demise of Pathé News. This is perhaps significant and I should like to refer to Pathé News in the context first of the rôle of short films in film programming. In the first place, the Monopolies Commission Report made some useful reference to short films. In what way is the report being implemented by the industry, and could anything more usefully be done to stimulate its co-operation?

But there can be no doubt that this search for high quality short films is vain. Nor is this surprising: they are remarkably effective instruments for losing money. No one wants to show them, and, perhaps, the better they are, the less likely they are to command audiences. This is a responsibility which the industry itself must face—assured that the Government understands the problems of short film makers and will do everything possible to co-operate with the industry to make short films a thriving part of it.

The disappearance of Pathé News may be only one pointer. Another aspect of the disappearance of this always valuable and amusing part of a film programme is the archiving of material. This is not the moment to seek more help for archiving, except to remind the House that this is one of the most important functions of the British Film Institute. My hon. Friend the Parliamentary Secretary will know this, because she opened the new buildings to house the archives some months ago. At the British Film Institute, this is regarded as a very important historical and social contribution. With the disappearance not only of Pathé News but, perhaps more important, of black and white material, as television goes highly coloured, we may face considerable difficulties in collecting the socially important material which should be going into the archives. I have no ready solution within the context of this Bill, but I hope that this will be remembered in the discussion between the two Departments, so that more can be done.

There are important omissions from the Bill. A considerable school of thought is that the Sunday levy could be abolished. Although the British Film Institute benefits from it, I know that it will support its disappearance. I enter an emphatic plea that—not in this Bill but in one to come in a few months—the question of Selective Employment Tax as it applies to this industry should be reconsidered and the industry regarded as a manufacturing industry, particularly bearing in mind its contribution to exports.

Reference is made in this welcome Bill to the importance of maintaining outlets for the films produced. The plain fact which the industry and all of us concerned with film exhibition must face is that distribution outlets are slowly and quietly folding their tents and stealing away. A very minor measure to offset that has been the success of the B.F.I.s regional theatre development programme.

To suggest this may be to invite a series of hands raised in horror, particularly among hon. Gentlemen opposite, but if Eady money were appropriately devoted to the production of films, might we not spare a thought to the usefulness of producing films and, perhaps, of using Eady money to support cinemas which are in danger of closing? If it could be shown that a cinema was in danger of closing—if this could be proved by any set of rules which the industry and the Government might lay down—perhaps that cinema could be exempted from the Eady levy. This should particularly apply to well-populated areas which have only one cinema.

What about using Eady money directly as a subvention to cinemas that are in danger of closing, perhaps in collaboration with local authorities which would use those cinemas for educational purposes? They could make a direct grant from the rates so as to maintain the continuation of an important cultural activity.

Mr. John Hay (Henley)

The hon. Gentleman will appreciate that the Eady levy is a levy on money taken at the box office for exhibition. The proposition which he is putting would, therefore, lead us into some strange byways.

Dr. Kerr

I accept that it is a contentious and complex suggestion, but I do not think that either should force us to dismiss the idea straight away. Indeed, if Eady money were not used in this way, I would favour a local authority direct grant, in collaboration with exhibitors, with a guarantee that that grant would attract a Government block grant as part of local authority expenditure.

These are ideas which the industry should not be afraid of expounding. They may get kicked around a little in the process of discussion and become rather bruised, but they could be important. These, among other ideas for maintaining distributive outlets, should be discussed; and it would be helpful if we could have that discussion in the context of this Measure.

I congratulate, and to some extent sympathise with, my hon. Friend for what is, considering the Bill, a stupendous production. Unfortunately she made her speech at rather great speed. I welcome the terms of the Bill and, in common with the views expressed by the right hon. Member for Leeds, North-East, I am sure that my hon. Friends are anxious to ensure every possible means of having a prosperous and tasteful film industry.

6.33 p.m.

Mr. John Hay (Henley)

According to its Long Title, the Bill is concerned with the "financing and exhibition of films". I have an interest to declare, which is not a direct financial one in either production or distribution, in that I am a director of a company which is engaged in the film trade, but in ways which I will not weary the House by explaining.

The Bill comes forward at a moment when the British film industry as a whole is talking about crisis. If one reads the trade Press one sees the word "crisis" used frequently, but I believe that that is an exaggeration. The industry is at present undergoing exactly the same kind of change which is affecting many other industries throughout the world, particularly in the film industry in North America.

These changes are occurring in several related areas. There is a change in the methods and type of production. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) pointed out how big American conglomerates now have a financial interest in a large number of film production companies, and this has led to what is called the "slide rule approach". The days of the old-fashioned film maker who backed his hunch and either made a million or lost it have gone. This is a vital change for the British film industry because American financial interests in this country's film industry are substantial.

A change has occurred in the method of production. People are getting away from the idea of making films largely in studios. In the past it was customary for a film to be made virtually almost entirely inside the studio, with some of the exteriors being shot on location. Today, because of the high cost of studios, it is becoming normal for films to be made basically on location, with the number of studio scenes being kept to a minimum.

Another change in the method of production is that in the past the big film companies employed executive producers whose job it was to put a film together for them. Today there are far more independent film producers who collect an idea or buy a "property", as it is called, and, having assembled the necessary parts, take it round to various big companies—for example, to all the major American production companies—and sell it. This is a trend which I believe will develop in the next few years.

In this country there has been a substantial change in the method of distribution. The Parliamentary Secretary did not refer—perhaps this subject is not entirely relevant to the context of the Bill—to the Report of the Monopolies Commission on this subject. A number of criticisms of the methods of distributing films in Britain were made in that Report, and most of the recommendations have been implemented on a voluntary basis by the various renters. There is not complete unanimity among renters, or distributors as they are called, and exhibitors, who own and run cinemas, but a good deal of change has taken place, and more change can be expected.

Many changes have also occurred from the exhibition point of view. As the Parliamentary Secretary reminded the House, we are in the presence of a picture of declining attendances at the box office. The hon. Lady quoted the figures. As the hon. Member for Wandsworth, Central (Dr. David Kerr) pointed out, the type of audience has changed. Far more young people are going to the cinema these days and because of this—this applies not only here but on the Continent and in the United States—more films are being made with that type of audience in view.

This is, in some ways, unfortunate because it keeps out many of the "mums and dads" who would prefer not to see the more with-it and modern types of film but something of an escapist nature. The producer who wants to make a film with a message should sometimes pay attention to the famous words of Sam Goldwyn, "If you've got a message, send a telegram". Unfortunately the effect of this change is that many people are being driven away from cinemas because they do not get what they expect from them. They find that they are watching films that have been made in a particular way on subjects about which they do not particularly care.

The type of cinema in which films are being shown has been changing, I think very much for the better. We have what is known as the "twinning" arrangement and in some cases the "tripling" of cinemas by converting vast old picture palaces which used to contain up to 2,000 seats into smaller cinemas with a smaller number of seats but with an atmosphere which is more attractive.

Another big change—this is all part of the background to the Bill—is represented by the important technological developments that have been taking place. For example, we have what is called the "cassette" development which involves the possibility of using electronic means for recording a film in a closed plastic container and playing it back through one's domestic television receiver.

This is a big development, if it comes about on anything like the scale that is envisaged, because it means that by selling or renting cassettes a film producer may be able to recover world-wide in one night the many millions of pounds that he may have spent making a film, instead of having to wait perhaps years to get his money back. There is also the development of super-8 mm. film which, I believe, will in the next ten years be another method of competition with television; of seeing entertainment in one's own home.

A further change which has already been referred to in this debate, and which is an essential part of the background to the Bill, is the reduction in the quantity of American money which is being put into production in the British film industry. We must keep this matter in perspective. The amount of American money which has been going into British films in the last few years has been quite substantial, principally because of the effect of the quota and the levy. As far as I can measure it, the reduction is still very small in cash terms but, as it used to be said at one time, "When the dollar catches cold, the pound catches pneumonia." What to the Americans is a comparatively small reduction in overseas spending on making films represents a very substantial amount to us in Britain.

I had the opportunity in October of a business visit to the United States, where I was able to discuss the continuance of American film production in Britain with a number of leading figures in the industry there. Almost unanimously they said that provided Britain continues to give the excellent facilities that we do provide, that the quality of our artists and technicians remains as high as it is, they will go on wanting to make films here. They do not intend to withdraw completely from making films in Britain, but they place a very high priority upon the continuance of the quota and the levy. I am glad to see, as my right hon. Friend has said—and as all of us, I think, on this side feel—that the levy and the quota are being continued. I make my necessary genuflections in the direction of Sir Arnold Plant who did not like the levy when it was discussed in the Cinematographic Films Council.

Let us consider what we are aiming at. There is a risk here that we may, when saying to ourselves that we must have British production, be meaning two different things. If we are talking about making British films which, as the hon. Lady said, try to represent Britain and the British way of life; which are made exclusively in Britain, with British artists and writers, and so on, and with, as it were, the Union Jack put upon them, that is a very different thing from the con- tinuance of British film production or the continuance of support of the British film production industry. It seems to me that however one may wish for some degree of patriotism to be involved in this matter, our basic function and duty must be to ensure the continuance of employment in the British film industry of the people in the studios and the artists, and also, as far as we can, the continuation of films being made here which might otherwise be made elsewhere.

Looked at against that background, we need to consider each of the points that the Bill makes. I do not intend to go into detail over the various Clauses, but the reason for the levy and the fund is, in my opinion, that they continue to be not only a powerful inducement to American producers to make films in Britain, but are a very convenient method, to put it no higher, of siphoning off to the production area money taken at the box office.

I wonder why the Government, in drafting the Bill, chose to ignore the advice from several sections of the industry that the Board of Trade should take power at a suitable moment, and if it were necessary, to suspend the operation of the quota? The plain fact of the matter at the moment is that any film made in a British studio stands a very good chance of being shown in British cinemas. The demand for "British product", as it is called, is very great, and the trouble with those of us who have to book films is that we cannot get enough British films. We would like to have them shown, but not enough of them are being made.

When one talks of British films one needs to put the word "British" in inverted commas, because the very nature of the levy and quota is that a film which any of us may regard as British is regarded on the other side of the Atlantic as American, because 80 per cent., or perhaps more, of the money that has gone into the making of the film originally came to these shores from American sources. The film may count for British quota, may meet all the statutory tests and get the levy, but to us it is British, while to the Americans, since they have financed it, it is American. I do not think that there is anything we can do about this aspect in the Bill, but we must bear it in mind when we talk about "British" films.

The hon. Lady the Parliamentary Secretary will doubtless agree that the National Film Finance Corporation is the heart and centre of the Bill. It is really a kind of bank of last resort for the film maker who finds that he just cannot raise the extra 10 per cent., 20 per cent. or perhaps 30 per cent. of the money he needs to make his film in Britain. The idea that one can have a bank of last resort of this kind is attractive, particularly to the man who has a product which is not readily commercially viable.

I realise that the legislation contains all the necessary qualifications to which the hon. Lady drew attention; that the Corporation, when making the loan, must have regard to the commercial viability of what it is asked to lend on, but one has only to look at the various appendices in the reports of the N.F.F.C. for the last few years to discover quite a number of films mentioned as having been supported or as having been considered by the Corporation for assistance which one does not ever remember seeing in the commercial cinema. They may have been films which were short and which, perhaps for the reasons mentioned by the hon. Member for Wandsworth, Central (Dr. David Kerr), have not easily secured a showing, but, on the other hand, there are quite a number made with N.F.F.C. support and help which seem never to have seen the light of day, except perhaps for registration, because they were not really commercially viable product.

That leads me to an important matter which I want briefly to mention and which I urge on the hon. Lady. It is the recommendation she has heard of from the Film Production Association—and, I think, from the K.R.S. and the C.E.A. as well—that further thought should be given to the composition of the N.F.F.C. itself; that it should be more representative of the practical and commercial people who are involved in the film trade. I mean no disrespect at all to the people who at present run the Corporation—I think that, within their limits, they have done an extremely good job—but we are being asked to continue the Corporation for another ten years, to 1980, and I believe this to be an appropriate moment to suggest that, if possible, it should be arranged that slightly more commercial management should be given to the N.F.F.C. The Bill gives the Corporation greater powers, greater flexibility, wider opportunities: should not those powers and opportunities be matched by a more commercial approach by those who actually preside over its affairs from day to day?

I back up what my right hon. Friend has said about the need for a review. Because of the changes that are taking place in the industry, a review of the Corporation's position in the next few years, whichever party is in power, makes a lot of sense. It may be that in a different economic and financial climate in Britain the place of the N.F.F.C. will become no longer nearly so important as it now appears to be. If, for example, American and even continental money came back into this country for film-making on a very large scale, the need for a N.F.F.C. might speedily disappear and therefore. I support what my right hon. Friend said. It is important that we should keep under constant review the activities of the N.F.F.C. and confine it to its job of finding the bridging finance between production guarantees and the box office end product.

Mrs. Dunwoody

Is the hon. Gentleman arguing, on the one hand, that the N.F.F.C. should be more commercial and, on the other, restricted to bridging loans?

Mr. Hay

The hon. Lady has misunderstood me. First, its position should be reviewed. Secondly, it should be more commercially managed. It should be able, because of the greater commercial management proposed, to identify, somewhat more successfully than it has been able in the past, what are likely to be box office winners to back, providing the bridging loans against that background. Basically the job of the Corporation is to provide something like a bridging loan. In effect, its function is as a bank of last resort. That has been its function since 1949. That is what the Corporation itself says is its function in its Report and Accounts. That is why it has incurred the loss of money and arrears of interest which we are being asked to write off.

There has been a report in the trade Press recently that discussions are going on between the Ministry of Posts and Telecommunications, the Board of Trade and, presumably, the Treasury, to see whether some of the television levy should be siphoned off and given to the N.F.F.C. There is nothing about that in the Bill and I would be glad if the hon. Lady could tell us what truth there is in the report. If some of the absurdly high amount of money raised at present from the television business is to be siphoned off into the N.F.F.C. it puts a different complexion upon both the rôle of the Corporation and what we are asked to do in the Bill.

There is another matter which I hope we will have the opportunity to probe a little further in Committee. It depends on what view the Chair will take of the scope of the Bill as outlined in the Long Title. This is the composition of the Cinematograph Films Council. The hon. Lady referred to the recommendation made by various trade associations in the industry that the composition of the Council should be altered because, it was said, as it stands it is unbalanced. I had hoped that she would go a little further than she did and explain why the Government came down against a change in the composition.

The situation is in some ways farcical. On that august body, one of the representatives is a representative of Associated British Picture Corporation, which at the moment is very much engaged in production. It is also engaged in exhibition, owning a chain of cinemas. But the person who represents the A.B.P.C. on the Council is there in title of an exhibitors' representative, whereas the balance is tilting inside that company towards production more than exhibition. The other side of the coin is that another representative sits on behalf of the Rank Organisation, which is now engaged only minimally these days in film production. But he represents producer interests whereas everyone knows that the Rank Organisation is principally involved in exhibition.

It seems nonsensical to people outside, and will continue to do so when they read the hon. Lady's words in HANSARD, that no adjustment has been made to this situation. It would surely have been sensible to allow the major circuits—Rank and A.B.P.C.—to be represented separately and also to concede the request of the Kinematograph Renters Society for one additional seat, because the renters are under-represented. We may be able to deal with this in Committee. I hope so. We shall certainly want a better explanation than the hon. Lady gave today.

This is a fascinating and in some ways a crazy industry. Everyone connected with it always says that. But this is a useful Bill in many ways. Its success in the future will be something we cannot prophesy. We can only say that we believe at this moment of time that we propose to continue the arrangements which have been very successful in the past. As my right hon. Friend has said, we on this side must reserve our position, particularly vis-à-vis the N.F.F.C., and see whether it continues to fulfil the task for which it was originally set up. What we can be sure about is that it still will be, whatever statutory arrangements we make, very much to the advantage of film-makers to make their films in Britain, and I hope that people will continue to come from abroad, particularly the United States, to make their films in Britain because of the excellence of what we do.

6.56 p.m.

Mr. Hugh Jenkins (Putney)

To describe this Bill as being useful in many ways, as the hon. Member for Henley (Mr. Hay) did, seems to me to be damning with faint praise what is an extremely good Bill. I shall be suggesting that this is the best piece of films legislation this House has ever tackled. It is not without fault, and I shall have certain proposals to put in Committee, but it is worthy of being described without qualification as a good Bill. I believe that my hon. Friend the Parliamentary Secretary to the Board of Trade who, in the course of producing the Bill, may have had her problems and difficulties in getting it as good as it is, deserves personal congratulations upon it.

The hon. Member for Henley declared an interest in the film industry. I sometimes feel that it would be a good idea if we could get that certain document wherein we could state our interests, because that would save me from telling the House, as I so often have to do, that I was a full-time official of British Actors' Equity Association and am now a part-time officer, and might reasonably be regarded, therefore, as having an interest on the side of the employees of the industry.

The Bill is not perfect, but my hon. Friend is right in saying that she has kept in close touch with all concerned in the industry in preparing it. I am not saying that in doing so she has taken all the advice tendered to her. In some cases that is regrettable and in other cases I think it fortunate. I found myself in agreement with what the hon. Gentleman said at the beginning of his speeoh—he has a great knowledge of the industry, which he correctly described as fascinating—but I found myself parting company with him on most of the specific proposals he put forward.

I agree, incidentally, that probably the Cinematograph Film Council's membership should be looked at again. But I have a feeling that if he and I put forward proposals as to how changes should be made we might find ourselves proposing different changes. We may have the opportunity of discovering that in Committee.

If the Minister had not been persistent, she might have found herself left with the sort of proposals which I suspect the hon. Member for Henley would put forward if, unhappily, he were in charge of the Bill, namely, to diminish the rôle of the Government in relation to the film industry, which he would regard, I think, as a good development. This is unlikely to come about, whether good or bad. I do not favour a diminution of Government interest in the industry. On the contrary, the right development, and indeed the inevitable development in the sort of society in which we are living, is towards increasing Government involvement in the industry.

I therefore welcome without qualification the proposals in the Bill to give the National Film Finance Corporation a wider and more useful and less restricted rôle. I do not support the view of the hon. Member for Henley that the Corporation has thrown money away. By and large, its money has been invested correctly and properly, although I think that everyone who knows anything about the industry realises that from time to time it is almost inevitable that mistakes are made. The only way to prevent mistakes being made is by doing nothing at all, which would be a poor rôle for the Corporation.

My hon. Friend the Minister could have put forward proposals which would have pleased the Treasury and perhaps the exhibitors but no one else. I am glad that she has not done that but has put forward a Bill which keeps the balance fairly between the various interests in the business, and, above all, does a service for the industry. The broad outlines of the Bill are generally acceptable, but it requires some amendments and additions. I hope that my hon. Friend will prove to be as open to conviction in Committee as she has been convincing, if somewhat rapid, in her presentation of the Bill today.

Broadly, the Bill implements in part the recommendations of the majority of the Cinematograph Films Council and in at least one or more important respects takes something from the minority Report, which was I think presented to us in 1968. The fact that there was a minority Report of the Council indicates that the constitution of this body needs looking at. The fact that it split in two suggests that everything is not well on that body, and changes have taken place in the industry which render it desirable to look at it again. If I have the opportunity, I shall at a later stage put forward specific proposals to that end.

The Bill enlarges and makes possible Government support for the industry at a time when the continuation of the flow of dollars from Hollywood has been held to he in question. We should not regard that flow as being turned off. There is no need for such an alarmist approach. There is likely to be some diminution, but in recent years the graph has gone up all the time. There must come a time when it is desirable from the point of view of the British film industry as well as inevitable from the point of view of the American industry that a plateau is reached. I hope that a similar plateau will he found before long in cinema attendances and that the drop in attendances will stop.

The Government have demonstrated their confidence in the British film industry. As the right hon. Member for Leeds, North-East (Sir K. Joseph) pointed out, E.M.I., among others, has evinced an intention to bring forward British private capital. I welcome that. It is a healthy development. We must hope that other people will follow this example.

Business confidence is an irrational and almost hysterical element in a market economy. Anyone who seeks to undermine business confidence must be careful lest in raising a wind of doubt in order possibly to bring pressure to bear on the Government he ends by reaping the whirlwind and he finds himself on the rocks. The Government should look carefully at any concession on the point of allowance in the way of the levy. It was suggested by an hon. Member opposite that some arrangement might be made whereby the I.T.V. levy found its way into the film industry.

Mr. Hay

I did not make the suggestion. I asked the Minister to comment on reports in the trade Press that the Government are discussing this possibility.

Mr. Jenkins

The Government can speak for themselves, but my impression is that this proposal emanated, not from the Government, but from the industry. If this were to occur, the Government would have to be absolutely sure that any such levy was ploughed back into film production and was not merely added to the profits which are still made in some parts of the film business.

Attention is sometimes drawn to the huge sums received by famous film stars. Although there is, of course, no specific reference to it in the Bill, it should be mentioned in passing, because it is part of the atmosphere of extravagance which is generally held to characterise the industry. If one goes shopping in the international market for a Burton or a Taylor, one has to pay the international price for the article. But most players receive much more modest payments, and many of them would prefer to receive their money as the film is shown throughout its life provided it could be expressed as a percentage of the gross takings and not as a percentage of profits, which have a curious habit of disappearing when anyone has a claim on part of them.

The House will recall that it has been suggested that the I.T.V. levy should be charged, not, as at present, on the gross income of the companies, but on the net income after production costs have been met. In case anyone should think that the point I have just made is an argument against this proposal, may I point out that the Government are in a much stronger position in relation to the programme companies than is the ordinary featured player in relation to the company owning the film, which may not be, and indeed is even unlikely to be, the company with which he has a contractual relationship.

If there were any suggestion of television money going into the film industry, the right recipient of it would be the British Film Fund Agency, which receives the Eady levy. The fact that there was a minority report of the Films Council reflects the weakness in the composition. I believe that the Films Council is over-weighted on the side of distribution and exhibition.

Equally there are no proposals in the Bill to deal with the problem of the vertical integration of the industry, which will still be in two main groups which substantially control production facilities as well as distribution and exhibition. It might be said that the exhibition monopoly is changing and that it is showing some signs of fragmentation in the process.

We shall want to look at these matters in Committee and shall also want to look to what degree the recommendations of the Monopolies Commission have been met by the companies chiefly concerned. Even the recommendations themselves do not seem, to me at any rate, to go as far as the findings of the Monopolies Commission.

The Bill says nothing about the recommendation of the minority of the Films Council on the question of reciprocity in relation to Commonwealth countries and Eire. For example, a film made at the Ardmore Studios in Dublin or in Canada can qualify for aid from the British public as cinema goers through the Eady levy and as taxpayers. But there is no reciprocity. There is no Irish or Canadian money coming into the British film industry or any levy from exhibition in Commonwealth countries.

Again, when British companies receive returns from the British Film Production Fund, what do they do with the money? There is no statutory obligation that it should be reinvested in production. Perhaps there should be. There seems to be no reason to exclude 70 mm. films from the quota. At present the main West End cinemas need never show a British film. Should that be the case? Those are some of the questions we shall need to examine.

I should like to dispute one point in the document circulated by the Film Production Association in which the Eady levy is referred to as industry money. I suggest that it is public money in the sense that it is money paid by the public for compulsory redistribution within the industry, and it does not become the property of the industry. The British Film Fund agency is not, I think, a trustee in that sense and, so long as it operates within its terms of reference, I do not think it can be answerable to the industry which I am afraid, left to itself, would long ago have killed the production goose which in its time has laid many golden eggs as well as a few eggs which, as the hon. Member for Henley (Mr. Hay) suggested, might be described in more ecclesiastical terms.

It is rather sad that British film distributors and exhibitors seem to be a little unconcerned with British films production as such. If a proposal is made to reform the British Cinematograph Films Council I shall certainly support it, but it may well be that the nature of a reform will be a matter which we shall wish to talk about.

With those additions and one or two other changes, I think this will become the best piece of film legislation that we have had. I look forward to its return to the House and a National Film Finance Corporation which, being invigorated and with more flexible powers, will play a growing rôle in a medium which remains the main source of collective entertainment experienced by our people.

This is an important matter which has hitherto not been stressed. The cinema is still the main place to which people go for collective entertainment at least indoors. I do not share the view that television will become all-embracing. It will certainly continue to be our daily bread and butter source of information and entertainment and perhaps education. But people have always needed to go out, to assemble together to enjoy something larger or something more concentrated than can be encompassed within the small screen or can be enjoyed amid the distractions of home life.

Just as the theatre is a permanent institution and a necessary part of our activity which, whether we attend it regularly or not, we know must be available somewhere within range, the same is true of the cinema.

I think the cinema will change. I believe that the great mausoleum will become—and it is already becoming—the multi-cinema with two or more auditoria, or what the hon. Member for Henley referred to as the twin cinema, or what the President of the Association of Cinematograph, Television and Allied Technicians referred to accidentally recently as a "sin twinema", perhaps an understandable slip of the tongue.

But in whatever form it comes I think it will remain, for humanity is fundamentally gregarious and if we are confined too much within our four walls, we tend to mope. The weekly football match and the occasional visit to the "flicks" are occasions which become part of our pattern and we should feel sorely deprived, and we would be sorely deprived, without them.

So what was said by the Palache Committee in 1944 is still relevant. The Committee said: The view is held in some quarters that the British cinematograph business is to be regarded merely as one business among others, which may claim no special consideration, and that it is out of place for Parliament to show special concern for its conduct and future development. We do not share that view, and we are confident that Parliament will continue in its endeavour to safeguard its future by means of special legislation not applicable to industry in general. A cinematograph film represents something more than a mere commodity to be bartered against others … the screen has great influence both politically and culturally over the minds of the people. Its potentialities are vast, as a vehicle for expression of national life, ideals and tradition, as a dramatic and artistic medium, and as an instrument for propaganda. That is still true. No one who saw that magnificent French film about Greece called "Z" at the Curzon cinema, a film which I understand—and this is to the credit of the British distribution industry—is to have a general release can doubt the continuing power of the film. I conclude with the words of the Palache Committee: We have therefore approached our task in the belief that Parliament will insist that the Government shall exercise continuing vigilance over all developments in this industry and take prompt measures to preserve and foster its independence from sectional and foreign control. In our opinion, a healthy British film industry can be built up from the remnant existing at present —and this was in 1944— only on condition that independent production remains in being and is properly safeguarded. It is in the belief that my hon. Friend the Parliamentary Secretary and the Government have carried that pledge forward into 1970 that I welcome the Bill.

7.20 p.m.

Mr. Michael Shaw (Scarborough and Whitby)

When one has listened to the hon. Member for Putney (Mr. Hugh Jenkins), one always has the feeling of having listened to someone with great knowledge of this subject. Whilst both sides of the House are in general agreement about the Bill, his speech brought out the underlying differences in approach between the two sides.

I do not accept that we have to assume that for all time it will be necessary for the Government to protect and support this industry. The hon. Gentleman claimed that the pattern was for there to be more Government involvement in industry, that that was the way things were going. I agree that it is the way in which we are going, but my hope and conviction is that we shall soon be in a position to alter that. I hope that it will be possible in future to find this industry able to stand on its own feet.

The Bill is mainly to renew powers which have now existed for some time, to prolong the rights of the National Film Finance Corporation to make loans, to continue the levy on exhibitors and to continue the quota system, all this for another 10 years. My first reaction to the Bill, as to any Bill of this sort, was to ask why the industry should continue to enjoy this special assistance. Why should not the normal forces of competition be allowed to work in this as in other cases? Why should the N.F.F.C. lend money when usual commercial sources of capital were unwilling to do so? These are the sorts of questions which immediately come to mind.

My hon. Friend the Member for Henley (Mr. Hay) called the National Film Finance Corporation a bank of last resort. The hon. Member for Wandsworth, Central (Dr. David Kerr) said that he could not understand our qualms about the Bill, because he felt that the N.F.F.C. would disappear if there were found to be enough finance available from other sources. My hon. Friend brought out the point very clearly when he referred to the corporation as a bank of last resort, namely, that there are occasions when commercial sources conclude that a project is not likely to be successful. In such circumstances, those responsible for the project would turn to the N.F.F.C.

I do not believe, however, that we must for ever perpetuate these powers to lend money if in general circumstances there proves to be money available for most projects, which would be a matter of judgment. Then would come the time to review the situation. Of course there would be borderline cases, and if the lending powers of the N.F.F.C. were removed, some projects might be left out for lack of finance which under the Bill would have gone ahead. But that is a normal commercial risk which must be taken. At present, even projects which would appear to be reasonably viable have no possibility of attracting sufficient commercial money, which is why the lending power of the N.F.F.C. should continue in present circumstances.

Certain special difficulties face the industry. They are partly historic and partly self-created. It would be a great pity if the British industry failed and we ceased to have a film industry in this country. It has a valuable contribution to make in the pattern of our life and economically in our trade throughout the world, and it is therefore right that it should be helped. But I do not see why it cannot be made to run successfully and to stand on its own feet in the long run, and we should therefore emphasise that we are giving it a helping hand and not a wooden leg.

A major problem has been that 90 per cent. of British films have been made with American money. The American industry is now suffering heavy losses and, as a consequence, has to make significant changes in its own financial arrangements, and to make big economies, which appear to be more than overdue. That is bound to have a significant effect on American investment in the British industry. If the Americans alter their policy by only a minor extent, "minor extent" in American terms can mean a major change, almost a disaster, for the British industry.

Another important factor is that of costs. There must be a permanent change in the industry's outlook. It is a curious feature that people in the industry can earn tremendous sums of money for playing a part or directing a film, and yet at the end of the day their salaries represent only a small part of the total costs. To pursue a metaphor which has been used earlier, the vast elephant of the production section of the industry depends on the mouse, and a little extra for the mouse, if the production is successful, means that the mouse can support the large elephant of overheads. Therefore, curiously enough, the mere fact that a star is paid a million dollars does not make the difference to the cost of the whole effort which one would normally expect it to make.

If in the mind of the producer the whole operation depends upon one star, it can quickly be seen what leverage that star has to get the sort of remuneration that he or she wants. Once one starts talking in these large terms, it means that everyone else connected with the industry begins to think along the lines of the same magnificent remuneration. We thus get inflated costs running all the way through the industry. It is little wonder that merchant banks and the more traditional sources of capital have been chary of investing their money.

Incidentally, I fully accept Clause 3 of the Bill, which relieves the National Film Finance Corporation of the liability to pay interest on advances made to it by the Board of Trade in the period to 1964. What is now being done is to acknowledge that advances made prior to that date have been lost. Whilst the N.F.F.C. must take the rough with the smooth, in its general investment policy there comes a time, as in any business, when it must be accepted that the capital has been lost and has to be written off. Otherwise, the picture is completely false and one cannot form an accurate view of the current operations of the Corporation.

It is interesting to note that as my right hon. Friend mentioned, British finance is now appearing to become more interested in the film industry. This in itself gives a clear indication of confidence in the industry's future. I want to see that confidence growing and a greater willingness by financiers to invest in the industry.

We in this country have built up a very deserved reputation for the quality of our productions. Quality is not dependent solely on the size of budget that goes into a production. The realisation that there is no inherent right for all those engaged in the industry to earn fees quite out of proportion to those earned by other people and that costs in the industry matter should give confidence that our industry not only can lead in quality, but can, at the same time, be a paying proposition.

The industry is a curious one. It is a complex of art and commerce. We have the actors, we have the producers and we have the writers. We also have, in normal times at least, the commercial resources to back up their efforts. What the artists, on the one hand, have to realise is that while they must be creative and are not merely bound by the dictates of commerce but have to fulfil their art, they cannot act regardless of commerce. There is an end product which must pay off.

So, too, the commercial sources have to accept that while they want to profit, they are doing more than simply earning a profit: they are fostering an art that is of real benefit to the country and to wider audiences outside the country. They have to work together; and to work together they must have confidence.

I believe that confidence is growing and I hope that the time will not be long distant when the Government, in reviewing the situation, will be able to say, "You are now a strong and independent industry, fully viable and now able to stand on your own feet."

7.35 p.m.

Mr. Joseph Ashton (Bassetlaw)

The hon. Member for Scarborough and Whitby (Mr. Michael Shaw) said that the industry has the necessary actors, technicians, producers and other requirements. He omitted one important category, and that is the necessary customers to visit the cinema.

I am not an expert on the financial or commercial set up or even the artistic set up of the cinema, but I speak from the consumer's point of view. During the last eight days, I have been to the cinema three times, which is not unusual. On Sunday a week ago I went to see "Midnight Cowboy", on Wednesday I saw "Hang Them High" and last night I went to see "Women in Love". On Friday I went to the theatre and on Saturday I went to see a team at the bottom of the First Division playing football. I am, therefore, the biggest sucker in the business in supporting lost causes.

One of the things which has not been emphasised tonight is the position of the consumer. I have listened with great interest to the experts, and I value their knowledge and know-how of the business, but what I do not accept is that the Bill will do a great deal to benefit the customer.

The quota system in the Bill is a very good one and I recognise that it is necessary to protect the industry and to perpetuate for it a fair share in the showing of films. The quota system should, however, be changed so that it is a quota system for new films. All too often, cinemas get round the quota by showing at midnight on Friday and midnight on Saturday films like "Horrors of the Black Museum" or something like that, 10 years old, which have no interest to anybody. They seem to be put on at that time simply to fill the quota system or to satisfy the few customers who want somewhere to go when the "pubs" shut.

It is not a quota system which is fulfilling what it should be doing to help the genuine film makers in the industry. All too much of the Bill will have virtually no effect on the distribution or exhibition of films against the monopoly set-up that prevails in this country. It is the monopolies of Rank and A.B.C. which dominate the industry, particularly outside London.

Many hon. Members who have spoken tonight, who live in London or represent London constituencies, seem to forget that the situation in the rest of the country, particularly in the North, is very different from what applies in London. A cinema-goer in London tonight might have the choice of 50 or 60 different cinemas showing 20 or 30 different films. In the North, in cities the size of Leeds, Sheffield, Nottingham, Newcastle or places which are not villages but which have a population ranging from 300,000 to half a million, we are now down to perhaps seven or eight cinemas, of which three or four will be showing exactly the same film. There is, therefore, virtually no choice for the customer. Competition between distributors and exhibitors virtually does not exist. It is a monopoly situation.

Hon. Members tonight have spoken of the changes in the industry whereby cinemas which used to be huge mausoleums are now being converted into a double cinema set-up. This makes hardly any difference. I am sick to death of my local Gaumont trying to charge 15s. for films like "The Jolson Story" and "Ben Hur", which are 15 to 20 years old, and thinking that they can get away with that sort of price simply because they have converted the cinema and spent a lot in redecorating it. They will not convert me to going back to see those films at those prices, but there are some people who go simply from lack of choice, if only because courting couples, for example, like courting couples through the ages, have to go somewhere to get out of the snow and the rain and, therefore, go to the cinema.

We have the set up that people who run the monopolies dominate the choice of what the customer has to see. If he does not like it, he can watch television. We are setting up a system whereby the goose that lays the golden eggs will be killed.

The Bill will help to produce good-quality small films, films probably like "Kes", from a very fine book, about a young boy in Barnsley who owns a kestrel. Every critic who has seen the film says that it is a small masterpiece. I have heard experts on television say that it looks very good, but there is virtually no chance of cinema-goers in Barnsley seeing the film because the moguls who control the industry say that it is not sufficiently commercial. It is a fact that people in Barnsley, even Councillors in Barnsley, who tried to arrange for some sort of choice and film exhibition found the film industry dominated by the people in Wardour Street who said, "Oh, no, they are not going to see that; they are going to see 'Carry On, Doctor' for the fifteenth time." This is what is the trouble with the industry.

I do not expect the Government or any public body to plough millions into an industry which is obviously in a state of decline, but what I am saying is that there are other avenues through which films can be shown, and avenues which have been stopped from the start. Working men's clubs are very popular institutions in my part of the world, and they provide such entertainments as bingo, and also live entertainments presented by artistes in person. Two or three years ago an experiment was started for the showing of films at the clubs, and films to which it was appropriate to take the kiddies. One could have a pint of beer and watch a film being shown. The experiment at first proved very popular, but it died a natural death because the distributors would not allow those people to have films it was really well worth while seeing, because, they said, the clubs thus provided a form of competition with the cinema set-up. The only films which the clubs could see were old Laurel and Hardy epics, and so on, which, anyway, can be seen on the television.

Exactly the same thing happened when there were mobile cinemas. A mobile cinema would go round the mining villages and mining towns, places in which there was no other form of entertainment, but the mobile cinemas were restricted as to what films they could show—restricted, again, by the people down in Wardour Street, who said, "You are not going to show the latest James Bond film, because if you do you will compete with the cinema in the town 15 or 20 miles away."

It is a greedy industry, a very greedy industry, in which the greed stems from the top, with the film stars, and extends to the distributors who think they are entitled to take these kind of profits out of a smaller capital layout despite the fact that the industry is declining.

This is a small Bill. As I say, I welcome it as a Measure which will help artistic producers who are at present short of money; it will help them to get a start in the industry. However, it is a Bill which will not have the greatest possible effect. The right hon. Member for Leeds, North-East (Sir K. Joseph) said that only one-sixth of the money which comes into the box office goes towards the cost of making films; the rest goes to distribution and exhibition. If we want to see the cinema preserved in this country it is that other five-sixths which must help, and we must take the industry by the scruff of the neck and insist that there is a quota system on distribution, not only of British films but of all new films, to ensure that competition is true competition, so that the industry is efficient and can survive, and so that it is not only the monopolies which survive simply because they have the power. To this end we have to explore other avenues of film making and distribution.

The hon. Member for Henley (Mr. Hay) said that it was time that some of the television levy should go to the film industry. I agree. Television is making fantastic profits out of films. There was a very good article in Private Eye last week which showed that, despite television companies' protests against the levy, they had distributed something like 80 per cent. to 90 per cent. of profits. Certainly the profit from the showing of old films has been very great indeed. We want in the Bill something to say that television, including the B.B.C. if it wishes to take the products of a declining industry, should pay something back to that declining industry.

While the Bill will help new film making it will do nothing to help people like me in the frozen North and other outposts of cinema enthusiasts who will still be condemned to no choice in films but just sharing in repetitious showing of old films.

7.44 p.m.

Mr. Frederick Silvester (Walthamstow, West)

I agree with the hon. Member for Bassetlaw (Mr. Ashton) that this Bill does not touch many of the problems confronting the film industry, but I shall limit myself to remarks about what the Bill does do and come at the end to some of the wider problems with which it should deal but does not. The hon. Member for Putney (Mr. Hugh Jenkins) said it was a good Bill. I would describe it as a good interim Bill. It is a good Bill because while it follows the existing pattern Clause 1, for example, makes the N.F.F.C. better than it was before, but it is an interim Bill because it simply prolongs something which we have historically got use to but which I am not sure nowadays meets the situation.

We begin the debate, as is right and proper, with acclamations of the way in which the British film industry is conducting itself, saying how proud we are of its record of achievement, and so on. I agree with all that, but it does not follow that every part of the existing set-up is equally responsible for that success. We would, therefore, be illogical to say that because we wish to maintain the success which the industry has had we should necessarily retain every part of the present system. I shall begin, therefore, I am afraid, by making some critical remarks on the National Film Finance Corporation.

Before I do that, may I preface what I am going to say by saying that I do not detract in any way from the very important part which the Corporation played when it was set up. I fully appreciate that in the years following 1949 when, I believe, unemployment in the studios was 15 per cent. or more, it played a very valuable part, a crucial part, in keeping the industry going. However, this Bill is talking about prolonging the life of this Corporation by 50 per cent. and is extending its life for another 10 years when times have changed, and the question I should like to examine is whether times have changed sufficiently for us to regard this still as a satisfactory solution to the problem.

I acknowledge that most Western countries have some sort of subsidisation for their film industries, but I do not think that this is a proper analogy for this country to determine its policy by, because the size of the industry and its history in this country is somewhat greater than it is elsewhere. Although the hon. Lady's brief said—and I noticed that she pulled a face when she came to the point—that we might, therefore, be said to be vulnerable, it could also be said that it provides us with special opportunities, and I think that that is, perhaps, the more valuable point.

I came to this industry having no interest in it at all other than as a consumer. I had no financial interest and no background in it. My interest arose primarily because, like the hon. Member for Bassetlaw, one was impressed by the way in which the cinema industry was diminishing. Indeed, I am sorry to say that I have no active cinema in my own constituency. So I started with no preconceived notions, and I started in favour of the N.F.F.C., if anything at all, largely, I think, because people I met in the industry supported it with such fervour that I was carried along with them. Therefore, I examined fairly closely some of the arguments which were put to me in favour of the N.F.F.C. and I should like, with the House, to consider in turn some of the arguments adduced.

Some people in the industry support it because—I cannot think of a better word—because it sustains the Britishness of the industry. My hon. Friend the Member for Henley (Mr. Hay) dwelt at some length with that and so I am not going over it all in detail. However, one would expect if that were true, that British influence in films would be greatest when the activity of the N.F.F.C. was greatest, but I think it would be accepted in the House that in recent years the British influence upon the industry has been greatest at times when the N.F.F.C. has been least active. It was most active in the early part of its life when the influence of the British film industry was much smaller. Therefore, it does not seem to me to follow automatically that the N.F.F.C. and the British influence in the film industry go hand in hand. I think that, perhaps, what the people who were speaking to me were thinking about was that if there was American money they might be subject to pressure in favour of the American market and that that would make them alter the tone of their films. I think that this is most unlikely.

The acceptability of Britishness depends not upon the N.F.F.C. but on the fact that British films are fashionable in the United States, where other British things are currently fashionable. It is difficult to say which comes first. It depends on the fecundity of talent in this country and very little upon whether the money which is being put up comes from American or British sources. The point to be watched is where foreign money produces a situation in which the skills which this country would like to retain within its borders are expatriated, but there is no sign of that. The money coming into this country, on the contrary, seems to concentrate the British skills and help them to remain in this country.

The second argument which was put to me was that the N.F.F.C. was essential to maintain the levels of production. I have here some figures which I have worked out from the last printed report of the N.F.F.C. Of the films shown on the two main circuits in 1968, 63 per cent. were wholly financed from American sources, 25 per cent. were American and British financed, 4 per cent. were British financed with the assistance of the N.F.F.C., and 8 per cent. were British independent and foreign. In 1968 the N.F.F.C. was providing finance only for 4 per cent. of the films shown on the main circuits in this country.

We have just been through a boom time in the film industry, some might say an over-extended time. It is clear from these figures that that boom has depended almost entirely, except for 4 per cent., upon sources other than the N.F.F.C. There is a catalyst element to which I shall return later, but in the matter of hard cash the N.F.F.C. has contributed to about 4 per cent. Therefore, in the immediate past, when things have been good, the N.F.F.C. has contributed a small part only.

According to one Press report, in the six months ending April, 1969, the studios were making 27 films, and the estimate for the six months ending April, 1970, is that they will be making 17 films. That is a drop of over one-third. This has arisen because of the retrenchment predominantly of the American majors. If we recover—and the industry seems to think that we shall be back on steam again by June or the summer of this year—it will be in part because of the return of American money and because of the increase in the current interest of British finances in this area. We have already spoken about E.M.I., which is putting £15 million into production. When the N.F.F.C. gets its extra money, it will provide perhaps £3 million out of the £6 million in the first two years. It presumably will not spend all the money at once. I am told that that will provide it with a share of perhaps 18 films. That means that with not all the money but part of the money, something like 20 per cent. of the British films will then be provided, even after the Bill is passed. That will be the scale of the N.F.F.C.'s contribution.

The third argument which was advanced to me was that the N.F.F.C. is getting better. It claims that in 1964–68, on 62 films, 111 per cent. of what had been spent on the films was received back. I think this result leans heavily on a few films, but there is nothing wrong with that, as most companies lean on the ones that do well. We are asked to conclude that this is a spate of progress and that, therefore, the future will be better than the past. But if one looks back over the records, one will find that there were good periods and bad periods. I have not access to all the details, but from the published figures the years 1956–57, 1961–62 and 1967–69 are good periods, and the years 1951–54, 1958–60 and 1963–67 are bad periods. There were alternating good and bad periods, so we cannot conclude that, because the current figures are better, they will automatically remain so. I am not criticising the management, I do not think it is a bad record, but it is silly to dodge the issue that the N.F.F.C. is costing about £150,000 per annum, excluding the British Lion arrangements.

Mr. Hugh Jenkins

Before the hon. Gentleman leaves the N.F.F.C., does not he agree that the rôle of the N.F.F.C. might be regarded as a pump-priming operation and that therefore its value cannot necessarily be measured solely by its financial contribution to the production industry?

Mr. Silvester

I hope the hon. Member will find me agreeing with him. I am not leaving the N.F.F.C., I am going steadily through the arguments which were advanced to me, if he will bear with me.

On the point that the N.F.F.C. is getting better, I applaud the provisions in Clause 1 which will make it easier for it to improve its methods, but it is important to recognise that those who support the N.F.F.C. most strongly do so not so much on the basis of past performance but because of the more commercial operation which they expect to see in the future. Therefore, people are supporting the N.F.F.C. because of what it might do under a different kind of management.

Another argument which was put to me in favour of the N.F.F.C. and which I find the most attractive one is that it has supported new producers. The evidence is that Schlesinger, Rice, Reed and Richardson have all had their first major films supported by the Corporation. In choosing those people I recognise the corporation's skill, but over 20 years, on the law of averages, one would expect the N.F.F.C. to find some leading producers. There are also leading producers who produced their initial films outside the N.F.F.C., so it is by no means a conclusive argument. The Corporation also claims to choose its producers on the basis of work previously done, for example, with the N.F.I. experimental fund, sponsored films, television commercials and so on. It is therefore finding new producers in the way in which any good private company should do, and in which a large number of private companies have done. Although I applaud the skill in doing this, I do not think the N.F.F.C. has done anything which is peculiar to the Corporation and not common to other private enterprise elements of the industry.

I am now coming to the point raised by the hon. Member for Putney. Another argument which was advanced was that it was to act as a catalyst, a pump-primer. This again I think has been true in the past, and I pay tribute to the way in which the Corporation has tried to find other sources of finance. We have been well aware, both in the original debate in 1949 and in subsequent debates, of the temporary nature of the original proposal. An argument may be made for a pump-primer provided it primes the pump and the pump then continues to work. It is extremely difficult to argue for a pump-primer which is still required after 20 years. The Corporation has tried. It has done a good deal of work with British Lion and has had a joint financing scheme with Ranks, which I understand has not been particularly successful.

I believe from the trade Press that the Corporation is interested in the first two films to be made by the new E.M.I. Group, and the 1966 report states that it has had some success in enabling producers to obtain up to 100 per cent. finance from British sources, or a mixture of British and United States sources, for individual films without it having to pursue complicated negotiations with a variety of financing parties. That argument still holds good. I personally have not rejected it, since it still seems to be valid out of all those I have examined.

These arguments leave the N.F.F.C. in an impossible position. It is being asked to do two conflicting things. In the first place, it is being asked to justify its future particularly on the basis that it will be commercial, profitable and prudent in studying the previous work of producers and directors whom it wishes to support. It is then being asked to work as a profitable commercial organisation and in these circumstances it is talking itself out of a job. Given the right pressure, these are things that can be done by private resources. On the other hand—and this is where the dilemma arises—it is regarded as a friend in time of trouble, as a supporter of new and worthwhile projects which do not ultimately command popular support. It is as my hon. Friend the Member for Henley (Mr. Hay) said a bank of last resort.

These are not the sorts of things that a commercial organisation will undertake and this dilemma bedevils the whole situation. It confuses the whole problem of films policy in this country and also affects another part of the Bill.

I turn my attention to the diversion of levy to support the National Film School. Here again is a confusion of the two elements. The levy was originally a voluntary subscription agreed to by exhibitors for the assistance of British film productions.

Mr. Hugh Jenkins

indicated dissent.

Mr. Silvester

The hon. Member for Putney does not agree, but that is what universally I am told and I understand that it is agreed to by all the members of the Film Industry Committee. We are therefore asking Parliament to take from that which is now admittedly a statutory levy, but which originally was a voluntary levy, for the purpose of diverting it to another purpose. This can be done with the agreement of the people concerned, but it is improper for this House to divert money intended for film production and the commercial side of the operation, to the training and arts side and the bringing on of new people. This dilemma is a danger running through the whole Bill.

I am not enamoured of the National Film School, and it would be out of order to discuss that matter at present. However, this matter causes a great deal of trouble. It could be argued that it would be more suitable for all training in the film industry to be done under the provisions of the Industrial Training Act, which would enable feature films, television, educational films, as well as the B.B.C., to contribute.

As I have said, I feel this to be a good interim Bill and therefore am happy to support it because not to do so would create an undesirable vacuum. It is up to us who argue that private resources could provide the money to see whether or not they will. It is important to take the catalyst argument. It must be the first duty of the N.F.F.C. to use its remaining life to work itself out of existence and to use its experience and expertise to bring together financial resources and an understanding of films. This could be done at a time when the British films industry is widely accepted and at a time when the American majors are not in good shape, with corresponding opportunities in the American market. I hope that within three or four years they will seek to achieve this task. I feel that, in doing so, they will do much better to spend their efforts and experience rather than their money.

8.6 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

We have had a very good debate on the complicated and difficult subject of the film industry. I have spent quite a lot of time in the last month or two exploring the industry, which I began on a basis of practically zero knowledge. I must continue to talk with the greatest of hesitancy and delicacy, because this is one of the most complicated subjects I have ever encountered, in an industry which relatively is of small total size.

So far as I can make out a producer is a director, or the other way round, contrary to the situation in the theatre. Each project is a separate enterprise on its own. Each film is a separate profit-making centre. But the most complicated parts of the industry are the endless quotas, rules, laws, regulations, levies which surround the two main stages of production and exhibition. It is an example of the extent to which once government gets involved in an industry intervention feeds on itself and the matter becomes more and more complicated and involved.

I feel we should look at how in the years to come we can simplify the involvement of government even if, as the hon. Member for Putney (Mr. Hugh Jenkins) thinks, it will always be necessary for the Government to be involved.

Mr. Hugh Jenkins

The complication of the film industry is by no means the creation of government. It exists even in the United States film industry where government intervention is much less.

Mr. Ridley

That may well be true, but it is a little unwise, and this is a moral we should perhaps draw, to ask Parliament, which is not well versed in these matters, to make frequent value judgments in an industry in which the complications are very great. This is one of the difficulties that confronts us.

As my hon. Friend the Member for Henley (Mr. Hay) said, the industry has been going through a series of dramatic changes. He described the new situation with great accuracy. In the course of the debate there emerged a basic thread of disagreement between the two sides of the House. On the one side hon. Gentlemen opposite tend to want to apply the resources of the film industry to purposes, however worthy, such as cultural films, or the British Film Institute, or the National Film School, or the sorts of projects mentioned by the hon. Lady the Parliamentary Secretary, whereby the British way of life will be rammed down the throats of everybody, whether they want to see them or not—a sort of Union Jack attitude.

My hon. Friend the Member for Walthamstow, West (Mr. Silvester) mentioned the fostering of new producers. All of these sorts of aims and ambitions, worthy though they are, are not strictly speaking the responsibility of the commercial part of the British film industry. We on this side of the House would like to see those aims supported. But we believe that those who wish to see them supported should be made responsible for paying for them in the long run, rather than that they should be put, as it were, as burdens on the commercial viability of the film industry itself.

The hon. Member for Bassetlaw (Mr. Ashton) hit the nail on the head. He said that his interest was just that of a consumer. Of course, in every industry the consumer's interest counts first. The discipline of the box office is the surest financial discipline that can ever exist. We must be very careful indeed if we are to depart from that.

That seemed to be the background of the debate. There was the basic feeling among hon. Members opposite that from the film industry there should be split off certain subsidiary aims which the Government would control. We on this side of the House felt that, on the whole, the film industry should be made to be commercial and to earn its living, and that those who wanted to pursue these objects should be asked to pay for them.

Coming first to the financing of the film industry in the future, there have been two major developments in the last few months. The market has been definitely inflated by the Americans who have financed 90 per cent. of British films for some time past. Now, due to changed circumstances on the other side of the Atlantic, they are tending to regroup and change their attitude to a small extent. Whether they come back later remains to be seen, but certainly there has been a major change. While the Americans were financing British films with their vast profits from real estate in Los Angeles and other such places, there was a swarm of money available for making films.

The second factor which was touched upon by my hon. Friend the Member for Walthamstow, West was that the National Film Finance Corporation ran out of money. We had these two recent developments in the last few months whereby the Americans pulled out and the N.F.F.C. got rather short of money. As a consequence of that withdrawal of alternative sources of finance, there has been a dramatic increase in the amount of private finance which has been made available. There may be no connection between the two. It may be pure coincidence. But I doubt it. My right hon. Friend referred to the very big programme which E.M.I. and A.B.P.C. have put together. Morgan Grenfells are currently supporting about 10 per cent. of the British home-made film industry. On top of that, there are no fewer than four merchant banks which have recently shown interest in financing British films and which already are signing cheques to start an experimental period of investing in films.

That is a big contribution in toto, and I hope that it will continue. However, one is a little inclined to wonder whether it is not caused by the withdrawal of finance from other sources which has made it a useful and profitable opportunity for the commercial interests. Talking to a merchant banker who has managed to finance films, I was interested to hear the conditions upon which it is worth investing in films. They are as follows.

First, there must be tight budgetary control. The estimate of cost of the film must be prepared carefully and stuck to. Therefore, he makes sure that the control of the costs of making a film is handled by experienced people.

Secondly, there must be extremely good selection of the sort of film which is to be made. This is the most risky part of the business. Unless the selection is based upon its commercial prospects, having in mind particularly the American audience, he is likely to get a greater share of the duds than he can afford.

Thirdly, the risk must be spread over several films, and it is not profitable to put all the eggs in one basket. Several eggs must be put in at one time.

Fourthly, the whole attitude of the past about inflated wages and film stars' salaries must be abandoned. Films must be produced at economic minimal costs if they are to be profitable in the future.

It is a fairly tight definition, and it amounts to good sound financial practice in the hard competitive commercial world. This basic standard is what will be necessary to make the film industry commercially profitable with private money. If we are to get the taxpayer out of a direct involvement with film finance, we have to allow these commercial criteria to run, otherwise it will always be more attractive to go to the slightly "softer" money which might be available from other sources, especially that of the N.F.F.C.

I do not deny that the various worthy objects of the British Film Institute, the National Film School and many others should be pursued by the State. However, I believe that the basic economic management of the investment policy of the industry should be separated from these other activities, and that the latter should be financed by the Minister of State at the Department of Education and Science, if she believes that they are activities in which she should indulge. If that were done, there would be no need eventually for direct State finance.

We all have a slight worry that taxpayers' money will find its way into the inflated salaries of film stars and technicians, who receive far higher levels of remuneration than many others in the economy. That aspect would be taken care of if the way of running the investment that I have suggested was borne in mind. My hon. Friend the Member for Walthamstow, West pointed to this dilemma in his very interesting speech. He came down on the side of saying that the N.F.F.C. should be used to promote these extraneous activities and should not try to be a purely commercial organisation.

Mr. Silvester

That is not quite what I said.

Mr. Ridley

I apologise to my hon. Friend if I have got him wrong. In that case, it will be very difficult to lay down criteria when the Corporation itself is trying to be a merchant bank financing films. In view of that, it is right that we should plan to phase out its activities and require it to be entirely commercial meanwhile so that, when the time comes, it will be a painless operation both for the N.F.F.C. and for the film industry.

I am certain that it can act as a catalyst in bringing in private finance. The industry is short of people who know about film making and which films to back. I am certain that this is the most useful function which it can perform. My hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) discussed this point and was convinced that the N.F.F.C. could use its expertise to help those in the City without it to get used to investing in films. I am sure that he is right.

There is one dilemma which seems to be unresolved. My hon. Friend the Member for Henley suggested that the N.F.F.C. should be used as a bank of last resort, whereas it is clear that if it is to pursue a purely commercial policy, it may be to some extent in conflict with being a bank of last resort which is providing bridging finance at the end. Where-ever possible, it should provide the first slice of finance rather than the last slice. I hope that the hon. Lady will be able to say which it will be asked to do.

It is our hope that, gradually, the N.F.F.C. will bring itself to the position where it becomes a commercial profit-making investment organisation which can be merged generally into the pattern of City investment so that we no longer have to require the taxpayer to put up more money to finance it. I am sure that that was the original intention. Although the pump has been being primed for a long time, we hope that the next few years will be enough to have the pump properly primed.

Turning to the distributing side of the industry, my impression is that the Eady levy has general agreement and acceptance on both sides of the House and also on both sides of the industry. There is no great strength of complaint of any kind. However, we will want to pursue strongly, in accordance with our philosophy, the siphoning off of money to the British Film Institute and to the National Film School from the levy. The Minister of Technology is always talking of Government and industry being hand in glove. This seems to be an instance where they are hand in pocket.

The hon. Member for Bassetlaw (Mr. Ashton) raised some interesting points about the Monopolies Commission's Report into the whole structure of the exhibitors' side of the industry. I have read the Report, and I was impressed by the clarity with which it went into the matter and the strength of the arguments both ways concerning alleged monopolies. The argument boils down to whether the vertical integration with a strong sector of market power is something that we can tolerate, despite the fact that it is the most successful way and has saved the industry from severe depression in the past.

The Monopolies Commission concluded that machinery should be set up to deal with complaints about allocation of product. Action has been taken, and the exhibitors have set up such machinery. I wonder whether the poor level of films produced by the cinemas in Nottingham could be referred to this machinery. Perhaps the hon. Gentleman would like to refer his complaints to the machinery to see whether something can be done about his disappointing evenings. Incidentally, I was impressed by and even envious of the number of evenings that he was able to spend in the cinema.

The Monopolies Commission suggested that a system of competitive bids by exhibitors for films should be examined. A far as I can make out, no action has been taken on this by the industry. It was a purely voluntary suggestion. There was nothing mandatory about it. But I wonder whether the hon. Lady will tell us what the Government's view is about the proposal for a system of competitive bids by the film industry. We know the difficulties. On the other hand, it would be interesting to have a statement of Government policy on that recommendation of the Monopolies Commission.

There has been a period of sharp decline in the film industry, caused by television and all the other factors which hon. Members have mentioned. Indeed, we do not know whether we have hit the bottom. It seems that there is now a famine of films and there will be a shortage of good new films in the first half of this year.

No industry ever achieves stable conditions. It is either going up or going down; doing better or doing worse. I think that a stable level of employment, production, profits or anything like that is unthinkable. We can only react to the situation as it is when we have to legislate upon it. However, it would be nice to get back to conditions where the normal criteria can apply. If, as I think the whole House hopes, the industry has ceased to decline in size, it might be that a period of growth and prosperity lies ahead. That would be the period when the market could take responsibility for the financing of films and when the complexities of this whole subject could be slowly and gently unravelled. The public would be beneficiaries from that as well as the taxpayer.

We view the Bill as making a good holding operation at a time when it is still necessary to make a holding opera- tion. We wish the industry well. Indeed, we wish it so well that we hope we shall not have to debate it again too often in future.

8.25 p.m.

The Parliamentary Secretary to the Board of Trade (Mrs. Gwyneth Dunwoody)

I ask leave to speak again.

I have listened with great attention to the debate. Although I was fascinated by the metaphors used by the right hon. Member for Leeds, North-East (Sir K. Joseph), who seemed about to get himself into a dangerous situation with mice and elephants at one point, I think that the debate owed more on the Opposition benches to the Red Queen than to mice and elephants, because hon. Gentlemen appeared to be saying "Off with his head, off with his head", secure in the knowledge that everybody would fall down flat and within five minutes get up again untouched. This just is not on. We are talking about an extension of existing forms of legislation. It is clear, and it has been clear from the progress of the debate, that the important part of the Bill in many ways is the refunding of the National Film Finance Corporation.

We ought to get one or two things clear about the industry. I was very much taken by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) saying that he knew nothing about the industry and going on so conclusively to prove it. Let us not drag in this business of film stars and their enormous wages and the difficulties that they cause in production costs.

I said in opening that we were concerned that the industry should look at its efficiency rating. We want it to use the new equipment, the new and effective means that it now has, for making films more efficiently and cheaper. We want it to look at its overall production costs. But we should not run away with the idea that people in the industry are grossly overpaid in relation to people outside. The industry consists of many actors, writers and technicians who do not receive inflated wages. These are the people whose interests we must preserve. It is, after all, a large industry, not in terms of numbers, but in terms of what it does in overseas markets, in the return that we get on the investment, and the effect that it has on this country's overall advantages.

Various points were made by hon. Members, to most of which I shall be able to reply. I begin by taking up the point about Patté News raised by my hon. Friend the Member for Wandsworth, Central (Dr. David Kerr). Patté News has become almost an institution in this country. It has been a model of what short film making ought to be. The men who have turned it out year in, year out, have done a great job, not just in cinema terms but in the service that they have offered to the community. I remember that during the war the facilities that they gave to people to realise what was going on in world terms were about the only means of getting over to the general public many of the situations that were being faced in wartime. I should like to pay a sad but heart-felt tribute to the men of Pathé News. I am sorry that we have reached the stage where they are no longer able to continue. The Government felt that possibly they should have been able to carry on, but we have to say that they have reached the point where they cannot do so. I pay them a worthy tribute, because what they have done has been important, and they have done it well and with imagination.

Having said that, I come back to the Bill. There has been a considerable amount of discussion about the film school. One hon. Member said that the difficulty he faced was that we were talking in the Bill about any film school, not about the National Film School. That is simply answered, because the National Film School has as yet no legal personality. This is a drafting question, although there will be people who will want to express their views, one way or the other, when the setting-up of the National Film School is considered.

Whatever we have in this country as a National Film School, it will produce people to work in the commercial industry. It will train men who will be used to produce more films, and it seems to me that we are talking about a very small alteration, because there has been no discussion as yet about what proportions we shall offer, or how this levy will be altered. It will naturally go to the Cinematograph Films Council before any decisions are taken. One feature of the pattern consistently operated by the Board of Trade has been the constant and, I hope, sincere relationship which has existed between the C.F.C. and the Board of Trade in the way that we have been able to discuss, to examine, and in many cases to agree, about the right sort of plan for the industry as a whole.

That brings me to another matter. I do not find it altogether surprising that hon. Gentlemen opposite do not listen to what I say, but it is a trifle unflattering when they make it so obvious. The hon. Member for Walthamstow, West (Mr. Silvester) staggered around and came up with the figure that £150,000 was, on average, the amount of money that had been lost. I gave that figure in my opening speech. He went through the various reasons why he felt that the N.F.F.C. should be continued, but he did not express himself too strongly about the C.F.C.

I hope that the hon. Gentleman will agree with me that the one thing which the industry has in abundance is a firm belief in holding forth at great length about its own interests. The one thing that I do not lack in dealing with the film industry is advice. I receive advice from all sections of the industry, much of it directly conflicting. I am a very reasonable woman, but, while I am prepared to listen, I must on occasions try to make up my mind about what is an efficient way of coming to a happy conclusion. This does not mean that we are always able to please all of the people all of the time. Sometimes, in relation to this industry, one suspects that one never pleases any of the people any of the time.

The constitution of the C.F.C. is a case in point. All the sections of the C.F.C. would like to have more representations. The hon. Member for Henley (Mr. Hay) made the point very strongly that in the film producers' section of the C.F.C. we are dealing with two major companies who themselves put up people who could be held to be representing other sections of the industry whilst they sit as film producers' representatives. The unions feel that possibly they would be justified in asking for further representation, because, although there are many unions in the industry, some of them do not have direct representation on the C.F.C.

The one thing that all sections of the industry are agreed upon is that they should all have more people on the C.F.C. It seems to me, therefore, that we should say now quite clearly that we have looked at this system. We have examined who is represented, and how they are represented, and on balance, knowing that this will not be popular with everybody, we have come to the conclusion that we must leave the constitution as it is because it has been seen to be working efficiently, and because, in the long run, this is by far the best for all sections.

One matter that was raised was the question of money from the television levy going to the N.F.F.C. I do not know where this story came from, although I know where it was printed. I say quite plainly that I am not aware of these talks in which, according to the Press story, I am involved.

Hon. Members on both sides of the House are concerned about the fact that the Bill has not implemented the report of the Monopolies Commission. There is a review in progress at the moment by the Department of Employment and Productivity which has responsibility in this field, and all sections of the industry are being consulted. Every effort will be made to follow the recommendations in the Commission's Report, but this is not for me to discuss now. The Bill is not concerned with that. I am trying to give hon. Members some indication of how action will come about on the Monopolies Commission's Report.

Mr. Hay

Which recommendation is the hon. Lady talking about? There are a number of recommendations, covering two pages. If the Department of Employment and Productivity is looking at some of these, can the hon. Lady say which they are?

Mrs. Dunwoody

No. It is a comprehensive review by the Department of Employment and Productivity, and will cover all aspects of the Report. The Department will have consultations with all sections of the industry who will be given an opportunity to express their views before any decisions are taken. Competitive bidding is one of the things that is being reviewed by the D.E.P., and it is not possible for me to make a statement while these talks are in their very early stages.

My hon. Friend the Member for Wandsworth, Central said that he was worried about the effect of S.E.T. on the industry. S.E.T. was removed last year from the film production side of the industry, which I think was a considerable step in the right direction from the industry's point of view, and assisted it quite considerably. It meant that all the work done on the floor of the studio was acceptable as being part of a manufacturing process.

The hon. Member for Scarborough and Whitby (Mr. Michael Shaw) said that one has to accept occasionally that money should be written off, and that this is done in any sensible business. I must correct the hon. Gentleman. The moneys are not being written off. It is the interest which is being written off, and should the N.F.F.C. find itself in the happy situation of having a vast surplus at any time, no doubt the Government will take a considerable interest in what happens to that surplus.

My hon. Friend the Member for Bassetlaw (Mr. Ashton) painted a fascinating picture of the frozen north, and seemed to suggest that there were difficulties, particularly in relation to exhibitions. My hon. Friend made some very interesting points, but I am not sure that the Bill is the right way of dealing with them, and he might like to consider the whole problem of how the customer can be better catered for. I sometimes think that the industry has not got round to putting as much as it could into new cinemas, although there is a welcome move in this direction in the setting-up of the new twin and treble cinemas. The sin twin cinema is a wonderful title, only too accurate on some occasions.

I come, now, to the remarks of the hon. Member for Cirencester and Tewkesbury. He made considerable play with the fact that the N.F.F.C. would be required to be a commercial unit. It has always been required to be a financial and commercial unit. Nobody consciously puts money into a film which he thinks will lose.

Hon. Gentlemen opposite criticised, in various degrees of roughness, the administration of the N.F.F.C. It has been working under considerable difficulties, and I should like to pay tribute to it. We demanded of it that it should be commercial. We have in the past made it difficult, because of its terms of reference, for it to be anything but the bank of last resort about which the hon. Gentleman was talking, and it is precisely because we want to alter its constitution that the Bill is drafted in the way that it is.

We are now going to say to the N.F.F.C., "If you are going to be commercial,"—perhaps I should say "even more than in the past"—"if you are going to be effective in the way that you intervene in the industry, you should have the right to get the best financial deal that you can from the people who deal with you."

After the publication of the Bill—but before it came to Parliament—the Corporation received tentative approaches from merchant banks and other city groups interested in the possibility of film financing. This had not happened before. In other words, once they knew that the corporation was to be refunded they were interested in putting up something. So we have the catalyst argument. At present the few merchant banks who have done some film financing are merely discounting part of the guarantee given by the major distributor and are therefore taking hardly any risk at all. In other words, private finance, about which hon. Members opposite have been waxing very eloquent this evening, has not been forthcoming to support British films—even those films which have made considerable sums of money elsewhere over the globe.

Mr. Ridley

The hon. Lady is wrong about that. She knows that six or seven films have been financed by Morgan Grenfell and have covered the whole cost of the film by a complicated system of discounted guarantees round the world. They have provided the whole finance for the films, and nobody else has.

Mrs. Dunwoody

My point is that we have been saying all along that once the corporation has more funds it will attract finance from other sources. That is what is happening. There is hardly any point in hon. Members opposite saying, on the one hand, that the Corporation must be there and that they hope that it will be so commercial that it will phase itself out of existence and, on the other, going through a list of films and saying that it has financed only so many, and what is the point of its being there? If we are to use the insurance argument we must accept that if American investment ceased tomorrow the Corporation could not possibly provide enough finance to replace the 90 per cent. of American investment that we estimate came into this country last year. We have not pretended that that was so. It provides an opportunity for films to be made in this country and for employment to be offered to people in the industry. The industry would not exist at all otherwise.

Hon. Members opposite would take a great deal of interest in any other industry in respect of which 90 per cent. of the finance was provided by America, so that it could be pulled out at short notice. The difficulties of this industry are such that in the past the entire corporation set-up has been bedevilled by the difficulty of having to pick almost instinctively what is going to be a paying propoposition. Given the difficulties of the industry the corporation has succeeded astonishingly well. It has done a very good job. In the past three years, if it had not had these heavy interest payments to make it would have made a small profit.

What we are talking about when we say that we are going to alter the terms under which the corporation works is about giving it greater freedom to be a commercial unit. Hon. Members opposite demanded a review. Ever since I have been in the Board of Trade it seems to me that we have done nothing but review the film industry. The industry is not incapable of a good deal of ballyhoo. It is capable of expressing itself loudly, firmly and frequently. Hon. Members opposite may talk about a unit being so successful that it can phase itself out, but if we did not feel that the industry required this sort of insurance we would not be bringing the Bill before the House today. If we did not think that by giving the corporation these extra powers it would be commercial we would not be bringing the Bill before the House.

There are still many points to be discussed in greater detail in Committee. I hope that hon. Members will not be quite so grudging there. This is a difficult industry. It has contributed strongly to the balance of payments. It is sometimes its own worst enemy. When we talk about the British film industry we are not talking about a chauvinistic run of "Carry On" films—although there is nothing wrong with "Carry On" films; we are talking about providing employment for people of creative talent in this country—actors, writers, musicians and directors—some of them the best in the world. They could find employment elsewhere if we drove them out of this country. By maintaining the industry in this way I believe that we are acting not only in its best interests but in our best interests and I hope to see the rapid passing of this Bill on to the Statute Book.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

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1. FILMS [MONEY] 155 words