HC Deb 16 March 1981 vol 1 cc173-80

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Goodlad.]

12.51 am
Mr. Les Huckfield (Nuneaton)

I congratulate you, Mr. Deputy Speaker, on assuming your office.

I am grateful for the opportunity of raising on the Adjournment the need for investigation by the Department of Trade of the activities and operation of the Performing Right Society. In so far as I have an interest to declare, it is that I am the political secretary of the National Union of Labour and Socialist Clubs, an organisation of some 130 Labour clubs which makes to me continuing complaints about the activities and operation of the PRS.

Many Labour club secretaries would prefer not to pay a PRS levy or tariff at all. However, I do not wish tonight to raise the issue of principle. I wish to concentrate on the method of operation of the PRS, which is the chief complaint that the PRS attracts from Labour clubs and their committees and secretaries.

I have no objection to secrets where vital national defence or commercial confidentiality is involved, but the PRS is different. Secrecy seems to operate there mainly for the benefit of senior management. The Department of Trade has powers of investigation. London and County Securities, Pinnock Finance, the recent example of Norton Warburg Ltd. and the case of Lloyd's and Sasse, where financial journalists have complained of a lack of secrecy, are rather similar examples of where the Department has the powers and, many feel, ought to use them.

We are dealing with a monopoly, formed in 1914, which Parliament has allowed to become a de facto, almost statutory, monopoly. If one is in the music business and wishes to receive royalty payments, it must be done through the PRS. If one uses music, one must make a payment to the PRS. Although the PRS is a de facto monopoly which Parliament has allowed to be created, the difficulty is that neither those who have to pay nor those who receive the money can find out what happens to it in between.

We are talking not about a small business but about an organisation with a membership of 12,000, with an annual turnover of £40 million and involving £9 million of overseas royalties. It is a multinational business, transferring millions of pounds around the globe, without its members knowing what takes place. It has a massive headquarters in Berners Street, employing some 500 staff, and an overhead administration cost of some £5 million.

Worse than that, it employs a small army of snoopers who prey on Labour and other clubs. They suddenly appear at the door demanding large sums of money in almost Dick Turpin fashion. It is high handed and it is arbitrary. When challenged, it very often cannot produce sufficient evidence. Labour clubs which I represent and other organisations would like to know what goes on and I venture to suggest that many of the members of the PRS would like to know what goes on as well. Many club secretaries find themselves being asked to do ridiculous amounts of secretarial work on behalf of the society and the burden is greatly resented.

It is just as bad for the members of the Performing Right Society. They find it very difficult to carry out a detailed check on the sources of their payments. When they ask for additional information, they are sometimes told that supplying it could cost up to 80 per cent. of the sum to which they might ultimately be entitled. A member might be entitled, for example, to receive royalties of £10,000, but by the time the cost of investigation and administration had been borne this might mean that that person would receive only about £1,250. That is just one example. It has now reached the stage where many members are afraid even to ask for information in case their revenue from the PRS suffers the following year.

Until five years ago, only 12 per cent. of the membership had a vote at all. Worse than that, only the governing council of the Performing Right Society had the lists of those entitled to vote. Little wonder was it, then, that every one who stood for election to the governing council of the PRS in the past 60 years was elected. It is a self-perpetuating oligarchy. Indeed, I venture to suggest that compared with the Performing Right Society a papal conclave looks like a Longbridge mass meeting.

When a PRS member complained that this was undemocratic and suggested that the disfranchisement of 88 per cent. of the membership might be illegal, Michael Freegard, the general manager, who I believe now titles himself the chief executive, said in a suit that he was being accused of acting improperly, dishonestly and secretively in the discharge of his responsibilities". Those are his words and they reflect a very serious accusation not just against him but against the conduct of the society as well. Quite remarkably, however, although that is a very serious accusation and those are his words, he withdrew the suit without apology and was even ordered to pay the detractor's costs. For his pains in doing that, he was awarded a 50 per cent. increase in his salary which is now some £30,000 per year.

Little wonder was it that someone quipped to me over the telephone this afternoon that if anyone was wondering what had happened to "The Godfather Part III", perhaps this is it. Those are not my words. They are the sentiments of someone who deplores the activities of the Performing Right Society, as do many others. Indeed, as a result of that, some 25 hon. Members signed a letter to The Guardiandeploring the secrecy in the organisation. But, I repeat, this is an organisation to which the Labour clubs and others that I represent have to pay royalties. It is a monopoly that Parliament has allowed to develop.

Following a further initative and a further resort to legal action, the appellate court found that the principal excuse that that governing council was using—that it did not have the authority to publish the names and the voting lists—was both false and untrue. The appellate court in fact said that at all times the governing council had an absolute right to make the voting lists available. Little wonder was it that at the 1978 annual general meeting there was a 77 per cent. majority for the publication of the lists. The difficulty was that, having taken the legal action which ultimately brought that about, a portion of the costs was assessed against the PRS member who brought the suit.

In 1977, the voting lists were extended to include 54 per cent. of the membership—hardly a great advance in democracy, although I suppose one must consider that to be the case with the PRS. The difficulty is that the members now have either one, 10 or 20 votes. Therefore, about 12,000 members have 21,000 votes. But the problem is that 400 members have 20 votes each, giving them 8,000 votes—enough to exert control over the society. There are proxy votes as well, which means that publishers have an undue influence, and still only the council members themselves know who has 20 votes.

That means that, despite the legal actions which have taken place, despite the minuscule extensions in democracy which have been brought about, the control still rests in hands of very few people—very big music publishers but very few people—and we are talking about certain key companies in the music business.

I also refer to the unknown size and the unknown contents of the alleged "black box", for within the Performing Right Society there exists a sum of money known as a black box. No one knows the sums, no one knows where it comes from, and no one knows where it might be destined to go. It is administered, it seems to be collected and it seems to accrue on entirely internal and unaccountable rules.

Why is there the need to preserve all this security and secrecy in an organisation which Parliament has allowed to become a monopoly, to which the clubs that I represent have to pay royalties if they want to perform music, and to which members of the music profession have to apply if they wish to receive royalty payments?

Why, for example, has the Performing Right Society expended as much as £100,000 and over £200,000 of members' money in fighting off these reforms? Why are there these great endeavours to preserve all this secrecy? Could it be, for example, that someone inquiring into the activities of the PRS might get round to finding out about some of the interest-free loans which members of the staff have received? I accept that these have now been made interest-bearing loans. But when only 19 per cent. of the loans have been made to about 500 employees—these are figures gleaned from the annual reports—and when 81 per cent. of the loans have been made to seven members of the executive staff, with 50 per cent. of the loans to the ultimate benefit of the general manager and the legal adviser, including, I understand, a £56,000 loan for a house mortgage, is this perhaps the reason for the great endeavour on the part of the PRS to preserve security and secrecy?

It cannot be that the society wants to preserve secrecy against its competitors; it is not that kind of organisation. It cannot be that the society wants to preserve secrecy because it fears that it will lose the market. It does not have any other market competitor; it has the market to itself. One has to pay the tariff to it and one can only receive one's royalties through it. A great many people who either have to pay to or receive money from the PRS wonder about these questions daily, weekly and annually—even to the extent of taking their concern to court. So why is there this great urgency and need to preserve secrecy?

The Minister may say that the amendments being proposed to the Companies (No. 2) Bill in another place will be sufficient, but the amendment to section 110 of the Companies Act—indeed, it has come to be called "the PRS amendment"—certainly will not be sufficient for the organisation that I represent, for, although it will enable the publication of voting lists and names and further details, that will only enable us to see who has the vote at present. It certainly will not enable us to inquire into matters which may have transpired in the past. So I am afraid that I shall find it difficult to accept it if the Minister simply says that the Government intend to amend the Companies (No. 2) Bill.

I do not seek a full-blown inquiry under sections 164 and 165 of the 1948 Act. The Minister has all the powers that he needs in section 109 of the Companies Act 1967. He will know that that is often variously referred to in the trade as the "suspicion clause" or the "suspicion section". When the Secretary of State has certain information relayed to him, he can ask for documents to be produced.

I should like to quote from the tribunal report in the 1971 case of Vehicle and General Insurance. It held that the Minister concerned was negligent on the ground that it was his responsibility at all times after the 1967 Act came into force to ensure that suspicions which attached to the Company were resolved one way or another. His position in the Department … and his authority to use the extensive powers in the 1967 Act, gave him the necessary weapons to fulfil his responsibility". I suggest that those sentiments apply in this case.

Even at this late hour, I submit that the Secretary of State has the necessary powers. I hope that he will initiate an inquiry according to the powers at his disposal in the 1967 Act. I do not want to minimise the concern. This issue involves not only Labour clubs but all sorts of organisations that use music in one way or another. There is a great deal of concern on their part and an equal amount of concern on the part of members of the Performing Right Society. This issue will not go away. I hope that the Government will show their concern in the appropriate manner tonight.

1.11 am
The Under-Secretary of State for Trade (Mr. Reginald Eyre)

In the time available, I shall reply by explaining how the system works. I expect in part to answer the criticisms of the hon. Member for Nuneaton (Mr. Huckfield) and to show how the working of the system has been and will be improved by the enactment of the Companies Bill.

The right to authorise the public performance and broadcasting of his works is one of the most valuable given by copyright law to a composer of music. No one can reasonably deny that composers are entitled to fair payment when their musical works are enjoyed by the public. But public performances take place at all times and in diverse locations and it is impossible for a composer as an individual to police his right. Equally impossible is the public's task of obtaining the necessary permission from the author of each piece of music they want to perform. The Performing Right Society Ltd. provides the solution to both these problems.

Since the Performing Right Society was established more than 60 years ago—bringing together British composers and music publishers and collectively exercising their right to authorise public performance—it has enjoyed world-wide recognition for efficiency and has earned a sound reputation. Not only does it enable composers to obtain an important part of their earnings but it gives music users convenient access to virtually the whole musical repertoire by means of a single simple licence.

A licence scheme has been drawn up for each different class of establishment where music is performed in public, ranging from the BBC—which is a very large music user—to village halls where music may be played only occasionally. Generally, the terms of the licence will be negotiated with the body representing the particular class of music user. In the event of a dispute over terms, reference can be made to the independent Performing Right Tribunal, which has power to revise tariffs which it considers unreasonable.

The Performing Right Society, exercising as it does a very large number of composers' rights, is in a quasi-monopoly position. Having regard to the purposes that I have described, it could not be otherwise. In order to avoid abuse of this power, the Performing Right Tribunal was set up by Parliament by virtue of part IV of the Copyright Act 1956. Anyone who is refused a licence by the Performing Right Society or who is not satisfied with the appropriate tariff may make reference to the tribunal. Its fee is kept deliberately low in order not to deter the little man who thinks that his case should be independently reviewed. In considering cases referred to it, the tribunal has to fix the terms at the level it considers reasonable in all the circumstances. The chairman of the tribunal is appointed by the Lord Chancellor.

The hon. Gentleman referred to clubs. Most working mens' clubs, by which I mean the usual kind of social or members' clubs, are found in large numbers in urban and rural parts of the country. Their membership includes people from all occupations and walks of life. Therefore, I shall subsequently refer to them as social clubs. Most of these clubs will provide music for the enjoyment of their members. They may provide live musical entertainment, background music or performances by means of radio or television sets. The Performing Right Society's licensing scheme provides for all these possibilities and takes into account the number of persons present and the value of the music to the activity.

For example, music for dancing commands a higher fee than background music or music incidental to the use of a television set. Most club management committees recognise that music is a commodity to be paid for like any other. The annual licence fees charged by the society represent a relatively modest sum when related to an hour's entertainment per member present.

The hon. Gentleman referred particularly to Labour clubs, although he went on to explain the background of his complaint. The Performing Right Society has a tariff for the performance of music in clubs, details of which are published each year and full details of which can be seen in the 1980 yearbook. The publication of those details contradicts one of the hon. Gentleman's allegations of secrecy.

The tariff offers concessionary rates to various club associations, and that has been taken up by the Club and Institute Union, the Association of Conservative Clubs, the National Union of Liberal Clubs, the Royal British Legion, and others. But the National Union of Labour and Socialist Clubs has declined. I am not sure whether that has been recent under the hon. Gentleman's influence or whether it occurred in earlier years, although I would have thought that in earlier years it would fit in with this pattern. Disputes over tariffs can be referred to the Performing Right Tribunal, but there has been no reference in this instance.

The exercise of copyright is a private matter between the copyright owners—in this case the Performing Right Society—and those who want to put on public performances of music. There is no provision for Government intervention. If it is dissatisfied, the National Union of Labour and Socialist Clubs may bring the matter before the Performing Right Tribunal, which is empowered to fix tariffs at a reasonable level. There is no question of political bias of any kind with regard to any of these arrangements.

The PRS licence schemes include provision for calculating the charge. In the case of clubs, performances are broken down into live performances, recorded music, and background music. It is up to the music user to make sure that his use of music is correctly assessed by the PRS in accordance with the published tariff.

I want to refer to the hon. Gentleman's allegations of secrecy, because there appears to me to be no secrecy about the public operation of the society. It publishes full information, including a statement of accounts, in its yearbook, which is readily available. That can be seen. It is spelt out in the accounts. It shows the revenue and how it is made up, as well as United Kingdom revenue and that which comes from overseas. It deals with the administrative costs, the total for distribution and the manner in which it is distributed.

Having rejected another of the hon. Gentleman's allegations about unjustified secrecy, I turn to the subject of the companies limited by guarantee and to the disclosure of voting rights of members. I acknowledge that the provisions of clause 54 of the Companies (No. 2) Bill, as introduced in another place, would not for technical reasons require companies limited by guarantee, such as the Performing Right Society, to disclose the voting rights of their members. The hon. Gentleman is right in that respect. However, a good deal of work has been done on this subject in recent months, and this deficiency is to be corrected. The Government plan to have amendments tabled to achieve this correction by the time the Bill comes to this House.

Therefore, I suggest that the hon. Gentleman should study carefully these amended provisions as I believe that they will meet the substance of his points with regard to disclosure of voting rights. In that respect, I think that the hon. Gentleman had grounds for complaining. The provisions to be introduced will require disclosure of voting rights. I believe that that will deal substantially with the main point that the hon. Gentleman raised in this respect.

The hon. Gentleman also referred to loans or quasi-loans to officers. I emphasise that the Companies Act 1980 dealt with this matter. There is now an obligation to disclose any such transactions of this kind.

I should like to refer quickly to the Whitford committee, which reported in 1977 having considered the collective exercise of a composer's performing right and acknowledged that the society had monopolistic control. The committee considered, however, that it was clearly an advantage to promoters of musical entertainments to be able to obtain from one source a licence to perform all the music they needed. The committee reported that there was little criticism, on the evidence that it received, of either the powers or the operation of the tribunal.

Many views and comments have been received since the committee reported, and they are under consideration. A Green Paper setting out the Government's views is expected to be published within the next few months, and that will relate to the whole of copyright.

Mr. Les Huckfield

The Minister is trying to be very helpful. However, is he saying that, in view of the evidence which I have submitted this evening, and in view of other evidence which I could send to him, he does not think that there are any grounds for any kind of investigation under section 109 of the Companies Act 1967? I grant that he is putting before the House powers which the Government are preparing to take, but that still does not cover the great majority of the points that I have made tonight.

Mr. Eyre

I thought that the hon. Gentleman gave an over-critical account of the general public function of the society. I have tried to explain the general background and the benefit, not only to music producers but also to the general public, which comes out of that system. I have also gone further, though, with regard to the internal affairs of the society. I have tried to explain, first, the ways in which the hon. Gentleman's allegations of secrecy about the accounts and so on are not justified and how the information is available, but, secondly, I have tried to explain the way in which, with the changes under company law—the Bill which is now before Parliament—there will be a change and an improvement in the publication of voting rights. I believe that that is an important matter within guarantee societies of this category. The changes will relate to all the guarantee societies.

Mr. Huckfield

If I send the Minister information, will he at least examine it to see whether an investigation under section 109 of the 1967 Act is warranted?

Mr. Eyre

For the reasons that I have explained. at this stage I do not think that the hon. Gentleman has fully justified his request for an investigation. Considerable expense is involved in such investigations. However, if the hon. Gentleman would like to send me extra information, I shall consider it, but I ask him to pause and to review the matters that I have put before the House tonight, because I believe that he will find that the substance of his main criticisms will be met.

Question put and agreed to.

Adjourned accordingly at nineteen minutes past One o' clock.