HC Deb 11 July 1984 vol 63 cc1126-38

To move the following Clause: `(1) Section 72 of the Finance Act 1982 (expenditure on production and acquisition of films etc.) shall be amended in accordance with the provisions of this section. (2) In subsection (3) (expenditure to be allocated to relevant periods in accordance with subsection (4)) for the words "subsection (4)", in both places where they occur, there shall be substituted the words "subsections (4) to (4B)" and at the beginning of subsection (4) there shall be inserted the words "Subject to subsection (4A) below". (3) After subsection (4) there shall be inserted the following subsections— (4A) In addition to any expenditure which is allocated to a relevant period in accordance with subsection (4) above, if a claim is made in that behalf not later than two years after the end of that period, there shall also be allocated to that period so much of the unallocated expenditure as is specified in the claim and does not exceed the difference between—

  1. (a) the amount allocated to that period in accordance with subsection (4) above; and
  2. (b) the value of the film, tape or disc which is realised in that period (whether by way of income or otherwise).
(4B) As respects any relevant period. "the unallocated expenditure" referred to in subsection (4A) above is that expenditure falling within subsection (3) above—
  1. (a) which does not fall to be allocated to that period in accordance with subsection (4) above; and
  2. (b) which has not been allocated to any earlier relevant period in accordance with subsection (4) or subsection (4A) above."
(4) In subsection (5) (exclusion of trading stock) for the words "and (4)" there shall be substituted the words "to (4B)". (5) In subsection (7) (which, as amended by section 32(1) of the Finance Act 1983, provides transitional relief for certain expenditure incurred on or before 31st March 1987) the words "on or before 31st March 1987" shall cease to have effect. (6) In subsection (8) (conditions for certification) after the words "this section" there shall be inserted the words "unless, by notice in writing given by the person incurring the expenditure, he is requested to do so and".'.

Brought up, and read the First time.

9.30 pm
Mr. Moore

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

Mr. Speaker

With this it will be convenient to take Government amendment No. 73, amendment No. 181, in clause 60, page 44, line 41, after `subsection', insert `(3) in line 9 and after the word "shall" shall be inserted the words "unless it is expenditure falling within subsection (9) below", and in line 10 for the words "subsection (4)" shall be substituted the words "subsections (4) and (9)", and in subsection'. and amendment No. 182, in page 45, line 2, at end, insert `and for subsection (9) there shall be substituted the following subsection— (9) Expenditure incurred (on or) after the 31st March 1985 shall be allocated in accordance with the following provision:—

  1. (a) 25 per cent. to the relevant period in which the film tape or disc is delivered;
  2. (b) 50 per cent. to the relevant period in which the film tape or disc is first exploited for the purposes of gain: and
  3. (c) 25 per cent. to the relevant period next following that in (a) above in this subsection;:—
`Delivered' shall mean that point in time when in the case of a film a final answer print has been struck and in the case of a tape or audio-visual disc when the version that is first publicly exhibited or commercially exploited came into existence and in the case of an audio disc when the final mix is completed. 'Exploited for the purposes of gain', shall mean the earlier of the first public exhibition first transmission or first diffusion or where intended for unit sales the first unit sale".'.

Mr. Moore

It has been suggested, Mr. Speaker, that it might be for the benefit of the House if, with new clause 38, we also considered amendment No. 178. I should be happy to agree to that.

Mr. Speaker

If that meets the convenience of the House.

Mr. Moore

New clause 38 gives effect to two changes in the tax treatment of films, which were foreshadowed in the Budget, and to a further change.

Films are also the subject of amendment No. 178. This is the third time during our consideration of the Bill that we have discussed the film industry. During the debate in Committee on clause 57, which was taken in the Chamber, there were a number of references to the state of the film industry and the impact of the capital allowance changes. Those who took part in the debates in Committee will recall our subsequent lengthy but considered debate on the film industry. During that debate we heard about two sides of the film industry. A number of hon. Members from both sides of the Committee paid tribute to the success of the British film industry, particularly in recent years, and felt that it needed and deserved support and encouragement. I listened with attention and sympathy to what was said. I also listened with attention and sympathy to what was said by the hon. Member for Birmingham, Perry Barr (Mr. Rooker) in that debate. During what was perhaps the more responsible part of his speech he described the way in which tax incentives for films had been abused by certain people whose interests lay not in the prosperity of the industry but in crude tax avoidance.

In responding to that debate, I made it clear that I accepted that there was substance in both arguments, even though their conclusions were not easily reconcilable. However, I reminded the Committee that there was a third argument—that the treatment of films needed to be seen in the context of the Budget reforms of business taxation changes generally, and that it was impossible to view the industry in isolation from the new capital allowance regime, which seeks to ensure more even-handed treatment between one industry, or type of asset, and another.

I shall not weary the House with a repeat of my speech, which included a detailed review of how film taxation has changed in recent years. However, I stand by the principles that I enunciated on that occasion—first, that the Government hope for a prosperous and innovative film industry, secondly, that the taxation of the industry has to run broadly with the grain of Government tax policy, and, thirdly, that the Government firmly oppose the use of filmmaking for artificial tax avoidance purposes.

The proposals in the new clause and amendments Nos. 178 and 73 are consistent with those principles. First, it was announced on Budget day by the Chancellor of the Exchequer that films qualifying under the Eady rules—broadly speaking films with a substantial British content — will qualify for capital allowances on a permanent basis, but the capital allowances will be at the rate applicable to machinery and plant generally for every other industry. That provision is already contained in clause 60. It has been incorporated in subsection (5) of the new clause, and so we propose in amendment No. 73 to delete clause 60. I welcome the support of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) for that amendment.

Secondly, we propose to give the industry an option where Eady films are concerned, of choosing either to take the capital allowances at the going rate or to be taxed in accordance with the formula laid down in section 72 of the Finance Act 1982, which allows expenditure to be written off on revenue account broadly in proportion to, and at the same speed as, the income accruing to the film. This measure was foreshadowed by my right hon. Friend on Budget day. As in many cases section 72 treatment would be preferable to the capital allowances, that is an important and valuable concession, which I shall discuss shortly.

Mr. Tony Durant (Reading, West)

One of the grievances of film producers arose from their understanding that there was a pledge to provide 100 per cent. capital allowances until 1987. They were planning on the basis of that understanding. Will my hon. Friend comment on that?

Mr. Moore

My hon. Friend is right to raise that matter now. Although I understand my hon. Friend's point, I do not accept the suggestion that the Government have not honoured the statement that my right hon. Friend the Secretary of State for Transport made when he was Financial Secretary to the Treasury. He said that he would continue to make special arrangements for the film industry until March 1987. In that statement there was no commitment to keep 100 per cent. first-year allowances until that date, nor do I think it reasonable to assume that there would have been such a commitment. We all know that changes in tax rates and allowances are made every year. My right hon. Friend the Chancellor has made a notable exception this year by announcing firm rates of corporation tax for several years ahead, so that when the system is changed there can be no reserve rights. There will often be a case for transitional arrangements, as is the case here, but nobody has a prescriptive right to regard themselves as unaffected.

Section 72 treatment is important. In many cases the industry would find it preferable to capital allowances, so it is therefore an important and valuable concession. It is not available to any other industry and, as the hon. Member for Stoke-on-Trent, Central (Mr. Fisher) said in Committee upstairs, it recognises the somewhat unusual pattern of film expenditure and receipts. We have been pressed by the film industry and some hon. Members to go much further. Proposals have been made to make section 72 far more advantageous by permitting expenditure to be written off before receipts come in, sometimes well in advance. I have made it clear that the Government cannot accept those proposals for several reasons. One is that they would effectively reintroduce, by the back door, the incentives of the first-year capital allowances that we are phasing out. I am aware that some would welcome that.

Another reason, in which the hon. Member for Perry Barr will be interested, is that the proposals would be an open invitation to exploitation, as they would allow the creation of up-front tax losses upon which tax avoidance schemes could readily be built. I accept that they could be attractive to would-be investors in the industry but that would be an enormous and unacceptable price in terms of tax lost and of the reintroduction of distortions in investment decision making. The ultimate beneficiaries of our tax reliefs would be the major American film production and distribution companies which finance and derive profits from many of the large Eady films that are made in Britain.

My hon. Friend the Member for Beaconsfield (Mr. Smith) has apologised for his absence—he has had to go to a constituency engagement. I cannot accept his amendments — Nos. 181 and 182 — which would substantially alter the thrust of section 72 by permitting expenditure to be written off in advance of income. His proposal is similar to, though not quite as favourable as, an amendment that we discussed in Committee. On this occasion, he proposes that 25 per cent. of expenditure on a film should be written off on completion, 50 per cent. should be written off on first showing and that the remaining 25 per cent. should be written off in the accounting period following completion. The difference between these and his previous amendments is the transformation of the percentages in the first two stages. That change has little effect on the cost of his proposal and none on the objections in principle to it.

After referring to costs in Committee, the industry expressed some surprise at the figures that I quoted. The cost of any change in film taxation must take into account the fact that, for tax purposes, Eady films include television and feature films. Although by definition the feature films concerned are those which are largely made in Britain, they include many, especially larger productions, which are made by overseas studios—most of which are American. Although the finance for and profits from such films are foreign, it is a fairly straightforward matter for arrangements to be so structured that any United Kingdom tax incentives for films are collected by the production or distribution companies, so such films must also be included. In other words, they reflect the pattern of the industry. In reply to my hon. Friend's amendment in Committee, I explained that the cost of his proposal would be negligible in 1985–86, £20 million in 1986–87, about £55 million in 1987–88, £65 million in 1988–89 and £60 million in 1989–90, and that thereafter the annual costs would decline. These figures were the cost of my hon. Friend's proposed write-out formula as compared with the new capital allowance regime.

The option that we are proposing in the new clause to give the industry which will allow it to opt out of capital allowances and take section 72 treatment instead, if it wishes, will itself be of considerable value. We estimate that over the next six years the section 72 option will provide a tax benefit to the industry amounting to around £100 million. The additional cost which would have been involved by amending section 72 in the way proposed by my hon. Friend, that is, additional to the £100 million, would have added a further £130 million or so to that, £50 million in 1986–87, and £40 million in 1987–88, declining to around £10 million annually thereafter.

Following our debate, the industry said that in its view the cost of its proposal would be more like £5 million to £8 million annually. That figure is not wholly inconsistent with my own estimate of the long-term steady state cost, but it ignores the substantial costs that would be involved in the early years when the write-off formula for which the industry had been asking would have maximum impact.

As to the cost of his present proposal, I have to tell my hon. Friend that there is virtually no difference between that and the cost of the proposal that he put forward in Committee which I have just explained. This is because stage one in his formula, which is completion of the film, often occurs within the same year as stage two, that is, first showing, so transforming the percentages has almost no effect, and the cost to the Exchequer remains the same.

Mr. Tim Brinton (Gravesham)

My hon. Friend referred earlier to the 100 per cent. write-off as something that could not be permanent and that was not a specific pledge. He said that transitional arrangements could be made instead. I welcome, as I suggest many people in films will welcome, his present proposals. He then talked of six years. Can he confirm that this is more permanent than the previous non-pledge?

Mr. Moore

It is always difficult in the House to confirm anything as permanent in the world in which we live. The system as proposed in the clause is an alternative system to the proposed permanent system of capital allowances so that the film industry may take its choice between the two systems. I can give that degree of commitment to my hon. Friend.

To turn to the principle of my hon. Friend's amendment, I have to point out again that it affords just as much opportunity to create up-front tax losses and, therefore, to obtain a considerable Exchequer subsidy. As before, it runs directly contrary to the whole approach of our reform of the tax incentive system.

Therefore, I regret that it does not provide the basis for an acceptable solution. Nevertheless, as my hon. Friend the Member for Gravesham (Mr. Brinton) has said, the Government, as promised in Committee, have given further consideration to what else might be done to encourage the industry within the general tax policy framework that I have described.

Beyond what I have discussed in terms of section 72 treatment, may I go on to discuss cost recovery embodied in the new clause? As a result, I have a third proposal to bring forward which is contained in subsection (3) of new clause 38. It provides for an adjustment to the present section 72 formula known as cost recovery. Under cost recovery, the expenditure on a film may be set off pound for pound against the income instead of on a pro rata basis. In effect, it means that the expenditure can be written off more quickly, but, unlike the proposal made by my hon. Friend and other hon. Members, it will not allow the expenditure to be written off in advance of, or faster than, the income arises. It will therefore neither reintroduce the distorting effect of investment subsidies nor provide a ready tax shelter for the avoidance industry, but it will be a help to successful British films, permitting them to delay the time at which tax on their profits become payable. I hope that this additional third point will be of help to the industry.

As it is for the convenience of the House, I am happy to explain now amendment No. 178 to clause 37 in the name of my right hon. Friend the Chancellor. The amendment provides for an extension of the business expansion scheme to which I referred in the Committee debates on the film industry. I announced in Committee that we were examining how investment in film production companies could benefit from the business expansion scheme. While I made it clear that I could give no firm undertakings at that stage, I said that we were having exploratory discussions with the industry to see whether film production companies could adapt to qualify under the scheme as it stood, or, if that were not possible, whether it could be reasonable and practicable to extend the scheme so that they did qualify. I said that a move along those lines would encourage direct investment by British residents who had an interest in British films and were prepared to take a risk with their money to back that interest.

9.45 pm

Following those discussions we concluded that, whereas in certain circumstances it might already be possible for some film companies to qualify under the scheme, this was not so for most such companies. We have, therefore, decided it would be right to extend the scheme more generally to investment in British film companies. Amendment No. 178 is the result.

There is a wide range of eligible trades under the business expansion scheme, but as with its predecessor — the business start-up scheme — certain trades are excluded. Among the excluded categories are trades that consist to any substantial extent of receiving royalties or licence fees. As hon. Members know, most film companies receive the majority of their income in the form of royalties and are not normally eligible under the scheme at present.

The underlying aim of the scheme is to promote growth in activity, including jobs, in the small firms sector. The scheme is also for trades where the risks to the investor are at least to some extent commensurate with the general level of relief. Certain trades are excluded not because they are considered in any sense to be undesirable, but simply because they do not fit easily with these underlying aims.

Take leasing, for example. A company that acquires assets and leases them to someone else will itself usually have relatively little direct economic activity, compared to the company that employs those assets in its own trade. And, in the case of finance leasing, the company's operation will be almost exclusively of a financial nature and one where, by virtue of the lease itself, the risk will have been largely, if not entirely, laid off. In short, the operations of such a company will in this sense be essentially of a passive and financial nature, and as such not the kind of active and high risk operation for which the scheme is intended.

Similar considerations will often apply to trades that consist to a substantial extent of receiving royalties or licence fees. Thus, for example, the operation of a company that simply collects royalties on a copyright that it owns, or that simply licences others to make or use some product or process will again be essentially passive and financial in nature.

That said, however, there is no doubt that film production itself is an extremely risky business, and moreover it is not a passive operation in the sense I have described. But, because active and high-risk film production companies also derive their income mainly from royalties, they too are caught by the present general exclusion along with other companies whose operations are more of a passive and financial nature.

The first kind of company is clearly just the kind of active and high-risk company generally that the scheme is designed to help. Moreover, representatives of the industry are especially concerned to encourage the smaller, independent United Kingdom film production company, producing relatively small budget films and material. Again, this ties in with the aims of the scheme itself.

The obvious way forward, therefore, is to find some way to distinguish between the "active" and the "passive" film company, and to extend the scheme to the former. That is what this amendment — which reflects consultation with industry representatives—seeks to do.

A film company with royalty income will be eligible under the scheme provided two key requirements are satisfied. First, the company must be engaged in the production of films throughout the relevant period. Secondly, all of its income from royalties and licence fees must derive from films which the company has itself produced. These two requirements are designed to ensure that the scheme is available only to high-risk companies, actively engaged in producing films on a continuing basis.

In addition, all the other normal qualifying conditions will have to be satisfied. For example, the company will also have to be incorporated and resident in the United Kingdom and carry on its trade wholly or mainly in the United Kingdom. It is proposed that this change should take effect for shares issued by qualifying companies from enactment of the Finance Bill. As to the cost—a point that is always raised—there is no way of knowing in advance how many companies will be encouraged to raise new equity under the scheme.

In conclusion, we believe that these changes meet the reasonable needs of the film industry, while recognising that it cannot be treated fundamentally differently from any other industry. Many other industries and sectors have pressed my right hon. Friend for exemption from the reforms that he has introduced. All can claim to have a case. Some no doubt may have a better case than the film industry.

The essence of the reform of tax incentives for investment is that taxation should be broadly neutral. We have gone as far as we can to encourage the British film industry, while remaining firmly within the framework. On that basis, I commend the new clause and the amendments to the House.

Mr. Rooker

I am grateful for the Minister's reply to the debate in Committee. There is no complaint on our part about accepting amendment No. 178. It seemed ludicrous to separate discussion on the amendments by several hours when they were all related to the same issue.

Amendment No. 73 was tabled in the name of my right hon. Friend the Shadow Chancellor. It turns out, under the rules of the House, that if the Chancellor of the Exchequer agrees with that amendment his name goes to the top of the list. A query was raised about amendment No. 73, because we wanted to re-debate it on the Floor of the House and we supposed that that would be the best way to do it.

Without going over all the debates — the Minister rightly says that this is the third time that we have dealt with the film industry —I I should like to pose a few questions. The Minister has partly answered the financial queries raised by the industry after the debate in Committee. The Chancellor's explanation and figures given in Committee, and the industry's explanation—or allegation—in its letter to him of 15 June, show that we are not talking about dissimilar sets of figures.

How will the Minister reply to the rest of the letter, in which he was accused of misleading the Committee, especially in relation to the number of films? The figure was alleged to be less than half the figure that he actually gave. He claimed that the figures included shorts, and registered Commonwealth film. The industry said that the impression created was very misleading.

Mr. Moore

I was arguing as favourable a case for the industry as I possibly could. The industry's case was based on total expenditure, and covered all films, including shorts. I was trying to show the importance of all films, whether or not they were small ones. If I had reduced the number, that would have been less advantageous to the industry.

Mr. Rooker

I accept that. Although the British Film and Television Producers Association Limited has concentrated the thrust of its argument on films, it gives the impression that it is not interested in television films and does not care about them. Yet television producers are in the organisation. Most of its arguments, when the figures do not seem to fit, are that it is dealing with films in general. That is why it is important for the Minister to put that point on the record. He should do so if only because the industry is concerned about the number of people employed in it. That is not an unimportant point, given the nature of our debate earlier today on stud farms.

The Minister said in Committee in defence of his arguments that there had been no material change in the numbers employed in the film industry. But the industry is claiming that the numbers employed have substantially increased by about 150 per cent. in the past two years. Perhaps the industry's figures include television employees, but the point deserves some explanation.

The hon. Member for Reading, West (Mr. Durant) made a valid point, which was echoed by the hon. Member for Gravesham (Mr. Brinton). On 19 January 1983, at column 136 of Hansard, the industry was given a firm commitment, which no longer stands. The Government are prepared to say that they are breaking that commitment and replacing it with something else. It is not satisfactory for the honour of the House for the Financial Secretary to say that what the former Minister who is now in the Cabinet actually said did not count. That is not good enough in respect of other industries and organisations that take seriously the written answers in Hansard.

There should be no beating about the bush. The commitment has not been kept. The Minister should have the good grace to get up and say so. I know that he has that grace, unlike some of his colleagues in the Treasury. I exclude the Economic Secretary, but hon. Members know who I am talking about.

The Minister referred to the more responsible part of my speech and went on to talk about the tax avoidance measures. I recall from memory the irresponsible parts of my speech, but I do not intend to recite them now. The scandal of the involvement of the Rossminster company in tax avoidance schemes based on the film industry is well known, and we need not go over that again. However, in Committee the Minister made a clear statement that, the Inland Revenue was investigating a number of schemes involving artificial arrangements for the financing of films."—[Official Report, Standing Committee A, 7 June 1984; c. 852.] Has there been any progress in those investigations? Until the Minister's statement, it was news to me that the Inland Revenue was taking the matter so seriously as to mount an investigation. We do not expect chapter and verse, but we should like some more informtion if that is possible.

The new clause and amendment clearly have the Prime Minister's stamp of approval, because we understand from the financial press that, despite all the great strains and the collapse of the economic structure that she has tried to create, the Prime Minister took time off to sort out the film industry while the Bill was in Committee. Therefore, it is clear that this new arrangement has the benefit of the Prime Minister's experience.

What good will result from including the film industry in the business expansion scheme? The Minister spent some time explaining amendment No. 178, but the industry points out that it welcomes the change although it has made it clear to the Government that it does not anticipate that it will be of any great help to anything other than low-budget films and programmes for television. Although the industry knocks television, it makes the point that this will be of no substantial benefit.

I appreciate that the Minister did not say that this was the panacea for the film industry. Nevertheless, it is a fig leaf, given the regime in which the film industry was placed before the Chancellor stood up on 13 March. The industry now has greater flexibility than it had under clause 60, because there are now three options, and three are better than two. For that we must be grateful.

This industry is of crucial importance to our economy. It has been brought back from the brink of disaster on several occasions and was beginning to flower once again. Therefore, it is sad that it has faced uncertainty since the Chancellor spoke. We are, however, grateful to the Minister for the way in which he has responded to the speeches and arguments made in Committee.

10 pm

Mr. Fisher

Hon. Members on both sides of the House who care about the film industry will warmly welcome the Financial Secretary's remarks, particularly the fact that he supported a prosperous and innovative film industry. The second adjective, "innovative", is every bit as important for the industry as the word "prosperous". Indeed, in the long term the two are interdependent. As the Financial Secretary knows from our previous debates on this subject, I am totally against the use of the film industry as a fairly cynical and artificial tax avoidance scheme. That is good neither for the Treasury nor, in the long term, for the film industry.

I and, I think, other Opposition Members broadly support the changes that the Government are introducing, which are a considerable improvement on the proposals made earlier in our proceedings on the Finance Bill. I congratulate the Financial Secretary on them. I agree with my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) that the proposals in amendment No. 178 will not be of any great benefit to the industry. Indeed, it will be interesting to know whether the Financial Secretary has any figures for the scale of financial benefit involved. Moreover, the definitions in amendment No. 178 will not prove to be very suitable. As I am sure the hon. Gentleman knows, the relationship of production companies to the financing of films is variable, particularly in the feature film industry.

Unlike other industries, the production company, the owning company or the company that initiates a film, does not necessarily finance it. Therefore, production companies do not have the same continuity and stability year on year as companies in other industries. Indeed, I am glad to note the agreement of the hon. Member for Reading, West (Mr. Durant), who understands the industry well.

In view of that, the Financial Secretary might benefit from trying to find a better definition of "production company". Unintentionally, he will exclude many film production companies that might conceivably benefit under the business expansion scheme. I hope that he will agree that innovation will be found in the low budget area. If there is any potential for the business expansion scheme, it must be in that area. However, I fear that, because of the definition, there is, unintentionally, a danger that film companies will be excluded.

I very much hope that the Financial Secretary's remarks will be conveyed to the Minister of State, Department of Trade and Industry. We understand tht he is likely to make his long awaited statement on the industry in the very near future, if not next week. Other hon. Members no doubt felt, like me, that the Minister of State was white-faced and quite shocked by the proposals that the Chancellor set out in his Budget statement. I trust that on this occasion the Minister has been better informed and consulted about the changes, and that he will read the Financial Secretary's remarks about a prosperous and innovative industry. Hon. Members hope to hear some very constructive suggestions from the Minister of State next week.

The industry can survive the change in tax incentives and some diminution — as we fear will happen next week—in Government support, but it cannot survive both a change in tax incentives and a reduction in Government support. I very much hope that the Financial Secretary will bear in mind when having discussions with the Minister of State.

Mr. Durant

I do not wish to detain the House for more than a few moments. I should declare that I am a consultant to the British Film and Television Producers Association Ltd. In view of the comments of the hon. Member for Birmingham, Perry Barr (Mr. Rooker), I should make it clear that I am not a financial but more of a political adviser.

The film industry's main anxiety is to obtain investment. We have an excellent film industry in the creative sense. We have the right actors and creative people, but we need to secure investment. The industry has expressed anxiety to my right hon. Friend the Chancellor of the Exchequer as to whether investors will be deterred. We shall have to see what will happen. I have already intervened about the earlier pledge on allowances and I do not wish to go over that ground again. As has been said, most production companies are set up for one film in order to bring together a team of people to produce it. Therefore, there is no on-going basis for investment. That is one of the difficulties that the industry faces. Thus, the real question is whether investment will be deterred or whether the Financial Secretary is convinced that investment will continue.

Mr. Tom Clarke (Monklands, West)

Like the hon. Member for Reading, West (Mr. Durant) and my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher), I welcome the Government's change of mind. However, by no means all the problems will be solved for the British film industry.

I apologise to the Financial Secretary because I did not hear the whole of his speech, but I am sure that he will be aware that shortly before Whitsun I initiated an Adjournment debate on the future of the film industry. I should like to think that it made a modest impression upon the Treasury's thinking.

As my hon. Friend the Member for Stoke-on-Trent, Central said, we are to be presented with a review of the film industry next week. However, we should not give the impression that, after all the discussions, representations, meetings and exchanges in the House, the film industry has been rescued.

Ministers must face the problem of the future of the Eady levy. I regret that we are dealing with the problems piecemeal. Until we know the Government's proposals for the Eady levy, we cannot be satisfied about their proposals for entitlement.

The Eady levy was introduced at a time when many more people went to the cinema. A small proportion of their ticket price went towards the production of the next film in which the producer was involved. That was an investment in the future. That is not how today's films are financed. Films are more likely to be produced for use by television, video or cable television than for the cinema. The film industry will welcome this modest proposal, but it is rightly worried about its future.

As the hon. Member for Reading, West said, the British film industry has a great deal to offer. It can tell the rest of the world that in the last two or three years it has experienced success, as the last Cannes film festival shows. Some of the finest technicians, producers and actors operate in the United Kingdom.

I hope that the Minister and the House will bear in mind that the new clause does not deal with all the film industry's problems. I hope that the Government's proposals, to be announced next week, will reflect the need to encourage a British film industry that wants to thrive and can compare with any other film industry in the world. Such an optimistic and forward-looking approach is what we all want.

Mr. Moore

I shall try to respond briefly to the debate, because, as the hon. Member for Birmingham, Perry Barr (Mr. Rooker) said, we discussed the matter at length in Committee. I thank hon. Members from both sides who have welcomed the changes, although I recognise that some hon. Members believe that we have not gone far enough.

I read the Adjournment speech by the hon. Member for Monklands, West (Mr. Clarke) with care. I shall draw the contents of his speech tonight to the attention of my right hon. Friend the Secretary of State for Trade and Industry, as I shall the speech of the hon. Member for Stoke-on-Trent, Central (Mr. Fisher). I listened carefully to the hon. Gentleman's remarks about the definition of the nature of a film production company. The problem is to ensure that the opportunities of the business expansion scheme are provided without the problems of abuse and evasion. The limiting of the line of control is critical. I shall consider the hon. Gentleman's point. I know that he is interested in the success of innovative British film production companies.

My hon. Friend the Member for Reading, West (Mr. Durant) argued strongly and rightly about the interests of the film industry and its success. I assure him that we want that success and to see good investment from Britain and overseas in the British film industry. The hon. Member for Perry Barr asked about the numbers employed. I took great care in Committee to use figures that were, if anything, advantageous. I was conscious of doing that because I wanted to ensure that the case was considered with great care. I had difficulty because the figures I quoted—25,000 — were official ones from the Department of Employment. They did not show a measurable increase. I considered that because it was raised in all our debates. However, they were the official data.

The hon. Member for Perry Barr also asked about progress on investigations. There has been one major hearing and appeal relating to a film company before the Special Commissioners. Unfortunately, despite a long hearing which lasted about a fortnight, it was not completed and the case has had to be adjourned probably for about six months. I shall note the hon. Gentleman's interest in that and make sure I come back to him on it.

Mr. Rooker

I know that the Minister cannot answer my question, but I must ask it. Do the films to which he is referring relate to those that I mentioned in Committee and are they funded by Rossminster?

Mr. Moore

As the hon. Gentleman rightly said, I cannot answer a question relating to commercial confidentiality. If I can record that information, I shall write to him.

The hon. Gentleman also asked me to go further than I went in my statement. I went as far as I could go. He asked me the same point in Committee. I answered: The statement was made by a Treasury Minister—my predecessor— my right hon. Friend the present Secretary of State for Transport, so I can answer categorically that the Treasury was involved and participated in the decision. The statement related to the existing structure of capital allowances. There were 100 per cent. capital allowances at the time, to the extension of the transitional … to 1987 subsumed within it the initial 100 per cent. allowances. The statement related to an extension beyond the time." — [Official Report, Standing Committee A, 7 June 1984; c. 822–3.] Then I talked about pressure being applied by politicians. I cannot go beyond that statement.

The hon. Gentleman also asked me about the comments he had had from the industry and whether the business expansion scheme had value. Although the industry has been arguing a great deal in other areas, it may not have concentrated on the prospects and potential in the BES. As I said earlier, the industry's representatives were anxious to extend the BES to films to help smaller independent film companies.

My hon. Friends the Members for Croydon, South (Sir W. Clark), for Beaconsfield (Mr. Smith) and for Slough (Mr. Watts) asked in Committee about the BES. All hon. Members will recognise the potential for small independent British companies and see it as a more positive opportunity. I hope that it will be regarded by the film industry in that light. I hope that answers the points raised.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

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