HC Deb 07 December 1987 vol 124 cc119-38 10.30 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)

I beg to move, That the draft British Film Fund Agency (Dissolution) Order 1987 which was laid before this House on 27 November, be approved. The draft order provides for the dissolution of the British Film Fund Agency, once it has completed its outstanding business and, following dissolution, for the application of any surplus moneys of the agency for purposes connected with the British film industry.

The BFFA is the body responsible for distributing the proceeds of the Eady levy on cinema admissions. That levy has already been abolished and the draft order, therefore, is simply a consequential piece of legislation which ties up the resultant loose ends.

As hon. Members will recall, our intention to abolish the levy was announced in the film policy White Paper in 1984, the main aspects of which were subsequently embodied in the Films Act 1985. The purpose of the levy was to recycle money from cinema exhibition to British film production. By 1984 there was almost universal recognition within the industry that it was no longer serving the purpose for which it had been created. It had become a financial burden on what was then a struggling and declining cinema exhibition industry which was providing little money for film makers.

Mr. Bob Cryer (Bradford, South)

The Minister said that there was universal recognition in the industry that the Eady levy was a burden. Could he say to which section of the industry he was referring? The Association of Cinematographic, Television and Allied Technicians, the National Association of Television, Theatrical and Kinematographic Employees and the Electrical Electronic Telecommunication and Plumbing Union, for example, did not hold that view, nor did the Association of Independent Producers. Several individuals of eminence within the industry felt that the Eady fund was playing a useful purpose.

Mr. Butcher

The hon. Gentleman will have heard me say that the exhibition industry felt most keenly that the levy had not done its best to encourage the increase in cinema attendance. It felt that the levy was an imposition and involved bureaucracy, and that there were better ways of achieving the objective of the levy. I would not contest the hon. Gentleman's interpretation of the trade union views at that time, but I am on fairly safe ground in saying that the levy was universally disliked by the exhibitors.

In view of that, we considered that the levy should be abolished as soon as possible and it was duly terminated from 25 May 1985, almost immediately after the Films Act 1985 came into force. In normal circumstances the levy period would have continued until October 1985.

We recognised, however, that the ending of the levy represented a loss of income to recipients of the funds that it created and, accordingly, provision was made to deal with the impact of abolition on these bodies. Arrangements were made for the National Film and Television School, which received about £500,000 a year from the levy funds to receive £600,000 annually for five years from the cinemas, the BBC and the independent television companies. We also approved special additional support for the British Film Institute production board, from the final, shortened, Eady levy period.

The other film body that received money from levy funds was the National Film Finance Corporation, which received an annual sum from the levy funds of not less than £1.5 million to enable it to support the production of low and medium-budget British films. As hon. Members will recall, the intention to transfer to the private sector the highly valued work of the NFFC was another of the major strands of our film policy announced in the 1984 White Paper. The Films Act 1985 provided for the dissolution of the NFFC, which took place later that year, and for the provision of annual financial assistance of £2 million for five years to its private sector successor, British Screen Finance Limited. With private sector finance in addition to the Government's funding, British Screen has been operating successfully now for nearly two years.

The remaining recipients of Eady levy moneys were the makers of those British films that qualified to receive payment under the Films (Distribution of Levy) Regulations 1982. Each producer received a proportion of the residue of funds available for disbursement in a particular distribution period after the sums to be paid to the NFFC, the BFI and the school had been subtracted. As the order which terminated the levy reduced the final distribution and levy collection periods from the normal 52 weeks to only 32 weeks, we recognised that producers who qualified to receive payment in respect of that period would clearly suffer a loss of income as a result of the timing of abolition. We decided, therefore, that the net assets of the NFFC, after costs of dissolution had been met, should be passed to the BFFA for distribution to those producers, following which the BFFA itself would be dissolved. Accordingly, section 3(3)(a) of the Films Act enabled the Secretary of State to transfer the surplus moneys of the NFFC to the BFFA, and section 4 provides for the mechanics of disbursement by the BFFA.

The NFFC was dissolved on 30 December 1985. Winding up the affairs of the corporation raised several difficult legal and financial issues which delayed the transfer of its surplus moneys to the BFFA. However, those moneys are now with the BFFA and have been added to those already held by the agency in respect of the final distribution period. The agency has already made an interim distribution to eligible producers and is likely to have completed its final distribution by the end of January 1988.

During the Report stage and Third Reading of the Films Bill, the former Minister with responsibility for films, my right hon. Friend the Financial Secretary to the Treasury, announced that it was the Government's intention that payment would have to be taken up within two months of the final distribution being made. Accordingly, I have decided on a cut-off date of 31 March 1988. This will be widely publicised to ensure that those who are eligible to receive payment know that they will forfeit the money if they do not cash their cheques by that date. I do not expect any problems on that front as the deadline for submitting claims for payment has passed and the procedures for verifying claims have been completed.

Once the cut-off date has passed, the BFFA will pass to the Secretary of State any moneys which have not been cashed, together with any of the moneys set aside to meet the agency's administrative expenses which have not been spent. Section 3 of the 1985 Films Act provides that those moneys shall be used for any purpose connected with the British film industry. At present, we cannot say how large or small that sum may be, and I cannot say how it will be used. I am sure, however, that there will be no shortage of suitors for it.

Finally, I take this opportunity to pay tribute to the BFFA members and staff. Under their guidance and management, the agency has performed its functions smoothly and effectively. I am sure that hon. Members will join me in expressing appreciation for their work.

I invite the House to support the order.

10.39 pm
Mr. Roger Stott (Wigan)

I willingly join the Minister in congratulating the people at the BFFA on the work that they have been carrying out. I only wish that they could continue to carry out their functions. The list of Government policies that have been imposed against the advice of all sides of the film production industry is now very lengthy.

We are debating in the short time allowed to us virtually the last remaining vestige of any Government support for or intervention in the British film industry. We have already seen the abolition of the quota and the Eady levy. We have also seen the abolition of the Cinematograph Film Council and the replacement of the NFFC with the BSFC and the additional uncertainty about the role of screen entertainment and we have seen the phasing out of capital allowances. The order is virtually the final nail in the coffin.

I want to consider the way in which the Government have abandoned their role as the principal architects or partners in funding or helping to fund what in my view and the view of the Labour party is an essential part of British life—the British film industry.

Successive post-war British Governments have introduced measures to give some support to British feature film production. Those measures are replicated in one form or another in most European countries. However, the Government's 1984 White Paper on the film industry, which preceded the Films Act 1985, presented arguments for the dismantling of the existing support for the industry. We have just heard the Minister repeat that this evening. The White Paper stressed the benefits of a free market policy in the film industry and predicted benefits from aspects of that market that were then being stimulated by technical changes such as videos, cable and direct broadcasting by satellite. The assumption was that the new distributive mechanisms would be beneficial to producers as they would expand the market for films. That was a very attractive hypothesis, but one which I believe confused distribution with exhibition.

In the film industry, distribution is a source of finance for production whereas exhibition is a source of revenue following production. However, the new distributive mechanisms are not yet sources of major production finance and are unlikely to be so for the foreseeable future. They will act as consumers of library material of existing films, thereby getting some additional post-cinema revenue, but that is all. They are unlikely, except in the marginal areas, to make any crucial difference in the provision of feature film finance. Only in the United States are the markets sufficiently developed for pre-sale revenue to be available as a significant element in the production finance.

A year ago the then leading source of film finance in this country, Goldcrest, released three very expensive films — "Absolute Beginners" "Revolution" and "The Mission" two of which received extremely disappointing reviews. The combined effort led to that company virtually withdrawing from production finance for the whole of 1986, with only limited signs of resurgence in 1987. In the same year, 1986, TESE was sold to Cannon which has not been able to live up to its promised commitments to United Kingdom full production finance because it has been plagued by internal financial problems. It has sold the valuable library and there are considerable questions over the future of the studios at Elstree.

It is deeply disturbing that the control of the British film industry has largely passed into foreign hands, particularly given the limited commitment to production shown by the Rank Organisation, the only major British cinema-owning group. That major reduction of finance for film production by leading companies has been mirrored among the smaller backers such as Virgin, United Media and Rediffusion which have also scaled down investments or withdrawn completely from the industry.

The combined effect of the coincidental market shift and Government film policy, has been the virtual collapse of the United Kingdom feature production. Let us consider the years from 1975–85. The average number of feature film starts per year was 49. In 1979, the last year of the Labour Government, the figure rose to the peak of 61. In 1986 that figure had dropped to 37 and this year feature film starts are down to around 10. That is a depressing picture for the British film industry, which has done so well in the past.

The Finance Act (No. 2) 1984 phased out capital allowances. Therefore, by 1985, that Act had stopped the inflow of non-industry money that had become a significant element of the United Kingdom production finance. In 1983 the screen quota was suspended. The Films Act 1985 resulted in the privatisation of NFFC and the Eady levy was phased out. According to the Government's White Paper and the subsequent Bill, those measures were designed to free the industry, but rather than buoying the industry up they have weighed it down. It may be too early to conclude that the present downward trend will continue or will result in a permanent reduction in feature film production, but I am sorry to say that the signs are most discouraging.

I am aware that if my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher) manages to catch your eye, Madam Deputy Speaker, he will endeavour to contrast our efforts with those of the EC and other countries to support their indigenous film industries. Other major European countries have recognised the link between state intervention in the market place and the health of the national film industry. Britain has not. The recent decision not to participate in a European consortium of cinema and television production has isolated Britain from the rest of our EC partners.

The problem that any United Kingdom Government must tackle is how to encourage original United Kingdom production in the face of the unending flow of feature material from the United States. In addition, there are overwhelming cultural reasons for Britain to keep its own voice in the same way that our European partners have kept their voices in their indigenous film industries.

It is ironic that the current recession that the British film industry is suffering has occurred just when film attendance figures are on the upturn. As a result of initiatives and developments in 1985, the British film year, the number of people who went to the cinema increased between 1984 and 1985 by 11.75 million or 20 per cent. The ground was held last year with a further increase of 2.4 million. Therefore, the Government's argument in the White Paper that the decline in cinema-going was irreversible no longer has a basis in truth or logic. When halls have been refurbished, new pricing policies introduced and multi-screen theatres with car parking facilities and restaurants built, people have wanted to see films in the cinema rather than at home on television. Our production companies will not benefit from the renaissance of cinema-going if we cannot maintain the level of British film production.

A well-developed film policy, which of necessity would include an attitude to television — the two are inextricably linked — must consist of financial and cultural elements. There must be adequate provision for training, and adequate system of support for industrial activity and a constructive mechanism for the bridging of training and professional work.

At present we have various parts of that infrastructure in place. However, what is lacking is an overall policy that permits development and expansion — including job creation—without sacrificing the quality that has been associated with British film and television production.

Talent once developed needs nurturing over an extended period. The top foreign film earner in the United States last year was "A Room with a View", which was developed by the National Film Finance Corporation and financed by a consortium which included the NFFC, Goldcrest, and Channel 4. It demonstrates how an integrated infrastructure can work. The NFFC has assisted Merchant Ivory with previous productions, and has also assisted people such as David Puttnam and many other successful British producers. If the BBC and the ITV companies were allowed, as part of the process of admitting independent producers, to invest funds through the British Screen Finance Corporation, which replaces the BFFA, or a central Government-sponsored film agency, such as a British screen authority, in film production, the risk of destabilisation would be avoided and the British film industry would be underpinned to a significant extent.

The whole question of independent access highlights the problem of the policy emanating from the Minister's own Department and from other Departments. It seems to show a classic degree of non-co-operation in the way in which we support our film industry, because Departments as diverse as Trade and Industry, the Office of Arts and Libraries and even the Home Office are all technically concerned with the film industry. I say "concerned", but I do not believe, on the evidence so far, including what we have heard tonight, that they are really concerned.

I should like to draw the Minister's attention to a document produced by the Association of Cinematograph, Television and Allied Technicians. It organises within the film and television industry and its members have a great deal of experience. They work in that industry, they are extremely talented and able and they perform a very good job for Britain in the artistic sense. So they can be said to have a vested interest, and I do not doubt that for one moment. What they have been doing for a number of years is putting to Government a creative strategy for the film industry, and what we have seen from the Government is their refusal to consider any of the ACTT's suggestions.

The ACTT has put forward a whole series of suggestions, such as tax concessions, and being able to have 30 per cent. written off during the first year of release, 10 per cent. during the second year of release, 60 per cent. from the commencement of production to first release— a whole range of financial packages which would help stimulate British film production. Unfortunately, the Government have been utterly unreceptive to any of those suggestions.

Government intervention is required if we are to achieve the objectives of an integrated films policy that I have listed. It would not be pouring funds down the drain of an extinct industry to maintain a work force; it would be investing in the expansion of a highly successful one in achievement at all levels of enterprise. The industry is handicapped only by external forces. Such intervention would allow it to reach a plane of stability which it has never reached hitherto. It would enable it to play a most important role as the major proponent of British culture at a mass level, both at home and abroad, with all the export potential that that implies.

My hon. Friends and I and the ACTT are proposing a policy that will dynamically regenerate the British film industry, with enormous benefits not only to the workers in the industry, but to the viewing public as a whole, to the Government and to the country, increasing revenues both at home and abroad, and increasing Britain's status throughout the world.

The British film industry has huge potential. The men and women involved have a highly developed expertise and a worldwide reputation for technical excellence. What we do not have is a Government who are prepared to assist it, and that is a profound disappointment to me and my hon. Friends.

10.55 pm
Mr. Bob Cryer (Bradford, South)

The Joint Committee on Statutory Instruments, which I chair, has drawn the attention of the House to the instrument. I should like to refer to the instrument itself and its merits, and I should be grateful if the Minister would answer my questions when he winds up the debate.

He will appreciate that the Joint Committee does not consider the merits of an instrument, but considers only the powers that the Minister has used.

The House will be interested to know that this is the second order because rather a mess was made of the original order. In our report to the House we say that the current draft contains amendments to articles 1 and 5, to take account of points raised by the Joint Committee on the earlier draft. The date when article 1 came into force was less than clear. Article 5, covering the powers of the Secretary of State in applying the residual moneys, was couched in such a way that it might be thought that the Minister might be able to dispose of the moneys in connection with the British film industry, whereas the legislation requires him to do so. Those points were recognised and a fresh draft laid. The Joint Committee is grateful to the Minister for taking that action, but it was necessary to do so.

The Minister has close at hand a former member of the Joint Committee, the hon. Member for Dorset, North (Mr. Baker), who appreciates its work and the fact that it is not exactly the most glamorous part of the activities of the House of Commons, but that it is necessary. I hope that the Minister can give us all an assurance that civil servants in his Department will draft instruments in future with more care than in the past.

I should like to refer to the merits of the instruments, but not in the context of the Committee's report. I am sure that the Committee would not want me to give other than my own views about the merits.

It is sad that the order is being presented. It concerns the last vestige of state intervention in the British film industry, which goes back to the 1920s and 1930s. The reason why it goes back that length of time is that the idea of the market place does not work. The biggest market place is the United States. Not surprisingly, the United States film industry dominates that market and gives it a secure home base from which to export to other countries, such as the United Kingdom.

The Interim Action Committee said in 1979: What should be the object of government policy for films? To stimulate an industry for the normal economic reasons — to create employment, encourage productive investment and increase exports? Or to aid an art form? Or to encourage the making of films which reflect British life? We believe that all three objects are valid. We also believe that the barriers between industry and art in relation to film are largely artificial and subjective, and that government policy should cater for films as a whole. That committee is saying that it should be regarded as an industry for employment and as one of the major mass art forms that our civilisation has achieved.

In every case it has been recognised over the years that Government intervention, through assistance of one form or another, has been necessary to offset the enormous power of the United States industry, which can invest more in production values and in finding the elusive formula that produces feature film success, as well as to counter the power of the duopoly in the United Kingdom, which the Minister did not mention. The duopoly owns the studios and major exhibition circuits. Rank and Cannon —formerly Thorn EMI—have such commanding power in the industry that if they refuse to show a film it cannot possibly obtain even its costs of production in the United Kingdom. That is why, from the 1930s onwards, it has always been felt that the Government should have some sort of power.

It is sad that the Minister should place such weight on exhibitors only. Exhibitors need the production of films, and the Eady levy was designed to remove some of the revenue from exhibitors, to ensure that there was a continuous production of indigenous British films. The removal of the Eady levy places that in great peril.

The Government are concerned about violence in society, but the private sector will finance films of sex and violence. It will not so easily finance films that reflect the aspirations, the cultural advantages and the development of ordinary people. It sounds rather highbrow, but I am talking about the way of life of our nation. Such films are less likely to meet with favour from the private sector, which can make a fast buck out of "The Lusty Vicar" and the soft — increasingly hard — porn films that it has financed in large numbers in the past few years.

The policies that the Government have foisted on the industry have been shown in what has happened to Pinewood Studios, for instance. Until recently that was a proper studio, employing 500 people full time and able to sell its services to the rest of the world. It sold them to the United States, for example, for the production of all the Superman films but the last one, which was partly produced at Elstree. The Bond films, too, were made there. The studio provided standards of excellence and production that were unequalled anywhere in the world. Pinewood Studios is now a four-walls operation, in which a handful of people are employed. That means that the apprenticeship system, in which people learnt their craft so as to provide those standards of excellence, has been eroded at one fell swoop because of the uncertainty engendered by Government policies.

It is ironic that a visit by the Parliamentary Labour party films industry study group in 1983 received assurances from Pinewood management about providing an employed service, which film producers found of advantage because that employed staff represented the level of crafsmanship that had gained an enviable reputation throughout the world. The National Film Finance Corporation provided finance for films that might otherwise have been lost. They included "Gregory's Girl", a runaway financial success, produced for £350,000, about a local lad in a modern town in Scotland going to a local comprehensive school. What sort of private sector entrepreneur would respond if presented with that sort of script? He or she would reject it out of hand, but the film was an enormous success. It made a great deal of money and brought credit to British film producers and the British film production industry.

The National Film Finance Corporation is now defunct, as the Minister correctly said. The order winds up its residues. However, it produced controversial films such as "Britannia Hospital", "Local Hero", "Babylon" and a whole range of films, including "The Europeans", which was a cultural landmark. Although it did not receive big audiences, it was still an important production. All that has gone.

The Eady levy was successful—not completely, but to some extent—in eradicating the problems that genuine film producers who wanted to make films about our way of life faced in obtaining money so to do. The "Hot Wheels" syndrome was eradicated by the publication of the Eady levy returns when my hon. Friend the Member for Oldham, West (Mr. Meacher) was at the Department of Trade and Industry. That meant that producers could no longer add rather mediocre shorts to successful feature films and buy up the Eady returns in advance.

That was the "Hot Wheels" syndrome. I do not have time to go into the details, but "Hot Wheels" was a modest production about skateboards and it earned a lot of money because it was coupled with a good feature film. Publishing the returns and putting an upper limit on the amount of Eady money that could be earned on a film helped to eradicate some of the problems.

The Minister says that he will spend any residual amounts on purposes connected with the British film industry. Will he spell out in a little more detail what that means? He may have some money in his hand, but if, because of his policies, he were to launch a gigantic wake for the British film industry, that would be purposes connected with the film industry. I hope that he has the serious intention of helping British film producers and that he will provide seed money for scripts. Perhaps he could help the National Film School or do something like that. I am sure that he will say something about what the money should be used for.

This is a sad debate, but I am sure that the British film industry has a residual will to survive. It is an important mass art form, both in its theatrical form and in satisfying the voracious appetite of television. After the next general election the Labour Government will have a policy to ensure that British films about our people will continue to be made.

11.7 pm

Mr. Menzies Campbell (Fife, North-East)

I shall not detain the House because many of the observations that I would have made have been forcefully made by other Opposition Members. It cannot be contentious that the British Film Fund Agency falls to be dissolved by this order, because that is a necessary consequence of the abolition in 1985 of the Eady levy. In the last few minutes that levy has enjoyed some support, but prior to its abolition it is fair to say that, at least in some quarters, it had become discredited. Criticisms had been advanced against it that frequently most money went to films that already had substantial earnings and that frequently money went to foreign companies that qualified by using British casts, crews and facilities.

It is contentious that nothing effective has been put in place of the Eady levy which in 1983–84 raised about £4ô6 million. On the figures of the Department of Trade and Industry, investment in the United Kingdom's film industry fell by about 20 per cent. between 1985 and 1986. It is no understatement to say that now the United Kingdom film industry is in a critical condition. It is an important industry that employs over 20,000 people, and it contributes substantially to export earnings. Perhaps more than that, it plays a central role in our cultural life, both popular and, perhaps, exclusive. It is an important measure of how we and our society are seen abroad. In recent years the successes of British films and British film makers, of whom Mr. Bill Forsyth is but one, are eloquent testimony to that.

The support that the Government presently offer to the British film industry is poor in comparison, for example, with France where the annual amount is £30 million, Italy where it is £26 million, and Canada where it is £16 million. There is an urgent need for the Government to take action to preserve the United Kingdom industry. Any funds that may be realised as a result of the effects of article 5 of the order will hardly be sufficient for that purpose.

A number of measures might be considered. First, there should certainly be stronger and effective action against piracy. Secondly, further consideration sho:uld be given to a levy on blank video tapes, the proceeds of which could be used to assist our film industry. Perhaps more substantial and more radical, it is time for a thorough rethink on the nature of Government support for the United Kingdom's film industry. If those or similar measures are not swiftly taken, irreparable damage may be done. The Government have an obligation to act now, before it is too late.

11.9 pm

Mr. Chris Smith (Islington, South and Finsbury)

When the Films Bill was being debated in 1985, some hon. Members warned the Government of the likely consequences of the abolition of the Eady levy and the abandonment of any realistic support for the production of British films. Sadly, those warnings are now being proved correct. The Minister, in his opening of the brief debate, emphasised that the exhibitors were in favour of the abolition of the Eady levy. They would have been, as it was a levy on their takings. During the passage of the Films Bill, the entire production section of the industry — not just the trade unions, but producers and managers—banded together and, in a unique statement, condemned the Government for their proposals to withdraw all support for the production of film. It is sad that the predictions made at the time are now beginning to come true.

The year 1986 was one of the worst ever for British film production. According to Screen International, only 37 theatrical features were made in 1986, compared with 55 in 1985 and an average of 48 over the past decade. There is only a slight improvement in 1987. The seed money generated by the activities of the various organisations charged with distributing the Eady levy, which acted as a catalyst for private enterprise to seize the initiative and take off on production, is now no longer there.

It behoves the Government, now that we are in the closing stages of their support for British films, to start thinking about what will be put in its place. If nothing is put in its place and the Government rely entirely on the private sector, which seems to be their intention, I do not see any future renaissance for the production of British films, no matter how much talent, enthusiasm and desire for production may exist.

The old nitrate film stock, which exists at the moment, may not exist for very much longer. Before 1952 much film was made on nitrate stock, which deteriorates. If the film is not copied on to safety stock, it will be gone for ever. Much of our history and heritage is contained on film taken before 1952, which has not yet been copied on to safety stock from nitrate. During the passage of the Films Bill I asked the Government to take this problem seriously and to establish a scheme of support to save the film on nitrate, but they refused to take up that issue.

The Nitrate Project 2000 has now been established, on a cross-industry basis, which is making the Government and the private sector aware that only 13 years are left in which to save the existing deteriorating and highly unstable nitrate stock. The cost of saving it will be about £13 million —£1 million a year — and in terms of Government expenditure that is not such a great deal. That expenditure would save much of our heritage, history and tradition. It would save much of the wealth of the early years of British film making.

I hope that the Government will take this initiative on board. I hope also that they will respond positively to the proposals that are being made by those who are involved in the Nitrate Project 2000. If the Government cannot see a way of using any of the residue of the Eady levy for such a purpose, they might consider other possibilities. For example, they could use a greater proportion of the national heritage memorial fund than hitherto to support the saving of nitrate stock. The Minister might persuade his right hon. Friend the Chancellor of the Exchequer to bring forward proposals in the Budget for tax deductibility for support for the saving of nitrate film stock. There are mechanisms available to the Government, which I hope that they will use, to save that which is part of our heritage.

If, by introducing this measure, the Government cannot support the future of the British film industry, and it would seem that they do not want to do so, perhaps they can play some part in saving its past.

11.16 pm
Mr. Roger Gale (Thanet, North)

I had not intended to intervene in the debate this evening. However, having been a member of the Committee that considered the Films Bill 1985, and having heard certain comments made this evening, I wish to make a contribution slightly longer than you would tolerate in the form of an intervention, Madam Deputy Speaker.

When we discussed these matters in Committee in 1985, it was clear that exhibitors wanted the Eady levy abolished. As my hon. Friend the Minister has said, from the other side of the Chamber we hear the cry, "They would, wouldn't they?" It was the small, independent exhibitors, not those who have been referred to as the big two this evening, who wanted the levy to be abolished. That was their wish because it was placing a tremendous burden upon their margins.

Had any Opposition Members been present late at night a couple of weeks ago—they with their burning interest in the industry — they would have heard a discourse between my hon. Friend the Minister and myself on film exhibition. They would have heard my hon. Friend commit himself and his Department to a review of the barring contract. They would have heard him say also that by the end of January the matter would be resolved, with the result that many more small, independent cinemas would be able to show many more films. It is the outlet for such films—small films that used to be supported by a subsidy—that is so important. It is that which has been denied to them.

Mr. Mark Fisher (Stoke-on-Trent, Central)

Will the hon. Gentleman give way?

Mr. Gale

I trust that the hon. Gentleman will make his own speech. I shall not give way. I have only a little more to say.

Hon. Members

Give way.

Mr. Gale

No, I shall not give way. I am sure that the hon. Member for Stoke-on-Trent, Central (Mr. Fisher) will wish to make his own speech.

I wish to develop my argument slightly further —[Interruption.] I am sorry that the hon. Member for Stoke-on-Trent, Central finds it unpalatable. I thought that he might.

Mr. Fisher

Will the hon. Gentleman give way?

Mr. Gale

No, Madam Deputy Speaker, I am not giving way. I hope that I have made that clear.

Madam Deputy Speaker (Miss Betty Boothroyd)

The hon. Member for Thanet, North (Mr. Gale) has made it clear that he is not giving way to the hon. Member for Stoke-on-Trent, Central (Mr. Fisher).

Mr. Gale

When we discussed these matters in considering the Films Bill 1985, some of us, including my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) and I, suggested that one possibility might be a levy imposed on the films shown on television. We felt strongly that although the Eady levy was placing an intolerable burden upon the independent exhibitor, it was raising only little money. The hon. Member for Rugby (Mr. Stott) has referred to the Association of Cinematograph, Television and Allied Technicians. I am glad that he did so. I believe that I am the only paid-up member of the ACTT in the Chamber this evening. I do not recall the ACTT making any proposals to abolish the restrictive union practices that destroyed the British film industry. Not only that, but I do not recall the ACTT lending its weight to our suggestion that there should be a levy on films shown on television, the money from which would go to independent production. The reason is that the ACTT has a vested interest in in-house productions made by the major television companies.

Some common sense had been spoken on both sides of the House this evening. However, I suggest that any pretence that the Eady levy was making any realistic contribution to film production in this country when we decided to abolish it, or that it was doing the film distribution industry, in terms of the independents, any good, is sheer humbug.

11.20 pm
Mr. Tom Clarke (Monklands, West)

The House would have been spared humbug in tonight's debate, had it not been for the speech that we have just heard. I, too, was a member of the Standing Committee in 1985, and I do not recall— [Interruption.]

Madam Deputy Speaker

Order. The hon. Member for Monklands, West (Mr. Clarke) has the Floor.

Mr. Clarke

You are absolutely right, Madam Deputy Speaker. If this were a cinema, people would be stamping their feet because of the problems with the sound quality.

I, too, was a member of that Standing Committee, and I do not recall vicious attacks on the trade union movement — even from his hon. Friends — of the sort that the hon. Member for Thanet, North (Mr. Gale) has just made. Nor, when we think of the real crisis in the British film industry, and when we hear of criticisms from producers such as David Puttnam, can we put our hands on our hearts and say—for instance—that when he fled to America he blamed the trade unions. He did not: he blamed the Government. He said that they were not providing the financial incentives, and he was right. The order that we are debating tonight underlines that view.

Perhaps I should have declared an interest at the start of my comments. I am an unpaid governor of the British Film Institute, and for many years I was an assistant director of the Scottish Film Council — although, in truth, I was not paid all that much more there! Tonight, I should like to say a word or two about some of the points made by my hon. Friends.

My hon. Friend the Member for Wigan (Mr. Stott) made an excellent speech, as did my hon. Friends the Members for Bradford, South (Mr. Cryer) and for Islington, South and Finsbury (Mr. Smith). My hon. Friend the Member for Islington, South and Finsbury also served on the Standing Committee.

I should like to take up two points. One is the issue of training, which I think is crucial. Secondly, the Government have no strategy for the British film industry. Because of that we are facing many problems, not least in Scotland. Some of those were mentioned by the hon. and learned Member for Fife, North-East (Mr. Campbell).

This debate is important, and it is particularly important at the present time, when the Scottish Office is apparently considering seriously the amalgamation of the Scottish Arts Council and the Scottish Film Council. I know—and I am sure that my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher) will agree—that very few people in Scotland consider that there is any merit in that proposal. I am glad that the Minister of State, Scottish Office is present, and I hope that he will convey my views to his ministerial colleague the Parliamentary Under-Secretary of State, the hon. Member for Stirling (Mr. Forsyth). The Scottish Film Council would be smothered, and would not be free, for example, to fight for proper training within Scotland.

As this instrument refers to the right of the Secretary of State for Trade and Industry to deal with surplus funds, we should remind the Government that some of those surplus funds could reasonably be spent on training, and might be invested in the National Film and Television School. In spending the money in that way, the Secretary of State might remember—let me put it gently but firmly—the discrimination against Scottish students that is taking place at present. That is not because the National Film and Television Council wishes it, but because honours graduates in the United Kingdom outside Scotland are able to complete their studies after three years. However, the Scottish course lasts for four years. Scottish students are thereby penalised during the first year of their studies at the National Film and Television School. For all students, their last two years at the school are considered to be part of the postgraduate course. Why should Scottish students be discriminated against?

The hon. and learned Member for Fife, North-East (Mr. Campbell) referred to Bill Forsyth. Ministers and Conservative Members pay tribute, quite rightly, from time to time to "Gregory's Girl", "Comfort and Joy" and "That Sinking Feeling" among other films from Scotland. I pay tribute to Mike Alexander and Charles Gormley who produced "Heavenly Pursuits", despite the fact that there is discrimination against Scottish students. We ought to fight so that the potential of every young man and young woman throughout the United Kingdom can be realised. There might be a young man or a young girl in Benbecula, Glasgow, Edinburgh or Coatbridge who has the same potential as those successful film-makers. We have no right to stand in their way. Unhappily, this Government's policy is reflected in the decisions of the Scottish Education Department. It has the discretion to contribute to the first year of study but it has refused to use its powers to do so.

I initiated an Adjournment debate on the film industry on 25 May 1984. The present Secretary of State for Education and Science used words that are now part of the mythology that is connected with the film industry. He said: It is not too much of an exaggeration to describe it as a renaissance."—[Official Report, 25 May 1984; Vol. 60, c. 1409.] We have heard of the so-called renaissance of the British film industry, but what is the truth of the matter? The truth is that after the passing of the 1985 Act the Government's policy has been absolutely disastrous. My hon. Friends have reminded the House of what happened to Goldcrest and Pinewood Studios after the abolition of the Eady levy.

Mr. Jeremy Hanley (Richmond and Barnes)

How many cinemas were there then? How many are there now?

Madam Deputy Speaker

Order. If the hon. Member has something to say he should rise and seek to intervene.

Mr. Clarke

Yes, Madam Deputy Speaker, especially as the hon. Member appeared to be making a valid point. He is not always so modest. He referred quite rightly to the decline in cinema audiences. There has recently been a small increase, but since the war there has been a dramatic reduction in cinema audiences.

In Committee we argued that the principle of the Eady levy was right, but many hon. Members would have no objection to change. The levy was introduced to encourage those who enjoy films to make a contribution to the producers that they could make even better films. If that principle were to be applied to today's use of films, television would make a sizeable contribution. We should also consider the impact of video films. Very few newspapers now have a film column, but all of them have a video column. Those who are using video films should be asked to make a contribution to future investment and future productivity.

The hon. Member for Thanet, North (Mr. Gale) forgot to remind the House that his hon. Friend the Member for Hendon, North (Mr. Gorst) persuaded the Committee to accept the introduction of such a levy.

Mr. Hanley

indicated assent—

Mr. Clarke

I am glad that the hon. Gentleman agrees.

The Committee agreed, but when it came before the House on Report the Government used their majority to vote down the logic of that argument.

The truth is that, far from the expanding film industry that the right hon. Member for Mole Valley (Mr. Baker) had promised the House, we are witnessing an unnecessary decline. That decline is tragic and worrying because the fall in investment, and in the commitment to free enterprise in the film industry — even when it is not succeeding—betrays the tremendous talent and ability that we have in Great Britain among producers, those who work the cameras and actors and actresses.

That is a tragedy and the British people will not let the great variety of talent in our film industry be squandered. In the meantime however, that talent is being betrayed by a Government whose idealism and commitment to the free market does not reflect that talent. That is a betrayal of the British film industry.

11.30 pm
Mr. Mark Fisher (Stoke-on-Trent, Central)

As my hon. Friends have eloquently said, this is a black Monday for the British film industry. In winding up the British Film Fund Agency, we are leaving our film production industry without any form of Government support. The House will understand that the Minister has not held his responsibilities for very long, but the House will have been amazed and depressed by the complacency with which he introduced the order and the lack of historical perspective in which he put it. He did not seem to understand the significance of what we are deciding. He did not seem to understand that my hon. Friend the Member for Wigan (Mr. Stott) made clear in his trenchant speech—I hope that the Minister listened to him—that this was the last of the stripping away of all Government support. The quota has gone, the Eady levy has gone, the capital allowances have gone and all tax incentives have gone. They have all finished and our British film industry is left with absolutely no support.

Our quarrel is not with the removal of all those specific forms of assistance. I have some sympathy with the comments of the hon. Member for Thanet, North (Mr. Gale)—and my hon. Friend the Member for Bradford, South (Mr. Cryer) who said that there were imperfections with the Eady levy. I suspect—no, I am certain—that I am the only hon. Member to have been a beneficiary of the Eady levy. I know very well that the films with which I was able to benefit were possibly not as distinguished artistically, or in any other way, as some of the films that have benefited from the levy. The "Hot Wheels" system, to which my hon. Friend the Member for Bradford, South referred, saved some small producers, such as myself, and allowed us to go on to make other films. It was by no means a perfect system. We recognise that, and my hon. Friend with his great experience and knowledge of the industry, put that into a clear perspective.

If we are withdrawing all forms of support, it is important that there is some other way in which the country recognises the importance of the industry and gives it some financial assistance. However, the Government are neglecting it because of an ideological commitment and determination to the concept of the free market. In this industry, in which our small production base must compete with the United States' north American production base, there is no free and equal market.

The Minister told the House that the only support that the Government now give the industry is £1.5 million to British Screen and support through his right hon. Friend the Minister for the Arts for the excellent National Film School. It is not surprising that, with that level of support, and contrary to what my hon. Friend the Member for Bradford, South suggested, investment is declining catastrophically. Whereas production was held at about £300 million in 1985 and 1986, it looks likely to be down to only £115 million this year.

The decline is accelerated by the Government's fiscal policies. Indeed, they have perhaps been the crucial element in the devastation of our industry. If the Minister can understand only one thing as a result of this debate, it should be the significance of the Chancellor's fiscal policies and their destructive effect on the British film industry through withdrawal of capital allowances, his exchange rate policy and through withholding tax.

The Finance Act 1984 ended 100 per cent. capital allowances. We went to a cost recovery system, which made it possible to recover only 75 per cent. of the cost of a film over five years. The Minister may maintain that that does not make any difference because the receipts from films usually come in slowly. He should understand that "A Room with a View" grossed £70 million in the first six months. He may say that that proves that it is possible to recover the money quickly, but if he takes the trouble to ask British Screen, he will understand that it was an equity investor in "A Room with a View" and was not paid for two years.

The abandonment of capital allowances has made an enormous difference to investors and producers. The Chancellor has thus done a disservice to the industry, but the effects of that are not perhaps as great as those resulting from the imposition, from 1 May 1987, of witholding tax. There was no consultation with the industry and there is confusion about how it will work. In the first six months of operation, it is clear that film companies are not coming here because of uncertainty about our Inland Revenue. It is clear that it is not worth their while coming here. It is not worth important cameramen, producers, directors and actors risking battling with and perhaps falling foul of the Inland Revenue. That process is hardly helped by the Chancellor's new foreign entertainers unit of the Inland Revenue not understanding what it is doing or, if it does understand, applying the rules extremely harshly. There is no fiscal uniformity with other territories. We have a far harsher regime than any other territory.

Madam Deputy Speaker

Order. Now that he is talking about other territories, the hon. Gentleman is going very wide of the order. Perhaps he will bring his remarks back to the subject of the debate.

Mr. Fisher

I apologise. I was trying to impress on the Minister the importance of his understanding that some form of assistance is needed. If we persuade him of that, he may reconsider the order.

As my hon. Friend the Member for Wigan said, other territories provide support such as the Minister is withdrawing by winding up the BFFA. It is possible to amortise a film by 70 per cent. in one year in France; by 90 per cent. in the first year and to write off from the second year on in West Germany and by 100 per cent. in the first year in southern Ireland. We could continue through Europe. Every other country has fiscal incentives to write off losses. We simply do not have the facility.

The alternative to fiscal assistance is direct investment, but the United Kingdom is withdrawing that form of support, too, and replacing it with nothing, thus leaving us disadvantaged. We put £1.5 million into British Screen. Australia invests more than £18 million, Canada more than £17 million and West Germany £15.7 million a year. Spain, in an interesting combination of fiscal and direct investment at both regional and national levels, invests well over £20 million a year to the benefit of its industry. France, again in a curious combination of incentives, guarantees and deductions, invests more than £70 million a year. I ask the House to contrast that with our £1.5 million a year, at a time when audiences are increasing and the industry has the skills and the production expertise.

The hon. Member for Thanet, North sought credit and referred to his recent Adjournment debate. I pay tribute to him for his skill in raising the debate on barring. But he should understand that the Minister is not yet following up the recommendations of the report; I wish he were. The letter makes it clear that submissions are requested between now and the end of January and I hope that at that stage the hon. Gentleman will give full backing to the ending of the barring system because the whole industry would benefit. I am sure that the hon. Gentleman understands that that is not what the Minister is saying; the Minister is being indecisive. I hope that, together, the hon. Gentleman and I can encourage the Minister to press on with that.

We are not meeting to bury the BFFA; we are here to bury the British film industry, which is a far more serious matter. The collapse from £300 million a year production to £115 million in the first year of the new regime is a disaster. Add to that the exchange rate between the dollar and the pound, and withholding tax and we are seeing the fast decline, indeed death, of our film industry.

The Minister is new. He will learn. I urge him to read the BFTPA's report on fiscal incentives, to talk to independent producers, not just in the exhibition industry, but throughout the industry, and to listen to what they say about the realities of tax incentives, withholding tax and the lack of Government support. If he listens and learns, he may join us in trying to persuade the Chancellor of the Exchequer that his obsession with fiscal neutrality and uniformity will be the death of the industry. If he does not persuade the Chancellor, the industry will die.

11.43 pm
Mr. Frank Haynes (Ashfield)

The Minister is a little anxious, but I assure him that I shall not take long. I apologise for having spoken in the Chamber twice today, but I feel that I must speak on this subject. I know that I am getting on in years—[HON. MEMBERS: "Hear, hear."]— but I have been interested in the silver screen since I was a lad and that interest has continued year on year.

This evening's story has been about what is happening to the British film industry. It is tragic, bearing in mind our genuine interest in the industry, and I speak, not merely more for myself, but for other hon. Members. The hon. Member for Richmond and Barnes (Mr. Hanley) has appeared on the silver screen. His father made a marvellous contribution to the British film industry, as did my hon. Friend the Member for Warley, East (Mr. Faulds), who usually sits at the back of the Chamber making a bit of noise sometimes.

Mr. Hanley

The hon. Gentleman should not forget my mother.

Mr. Haynes

I must not forget the hon. Gentleman's mother. In this speech I shall not mention the Under-Secretary of State for Health and Social Security, the hon. Member for Derbyshire, South (Mrs. Currie). I often talk to my hon. Friend the Member for Warley, East, because many of his films appear on Channel 4. That was the real British film industry, but over the years it has deteriorated. It is tragic. I wish that I had some power to do something about it, because I am very worried about what is happening.

My hon. Friend the Member for Jarrow (Mr. Dixon), who is also interested in the British film industry, and I joined my hon. Friend the Member for Bradford, South (Mr. Cryer) in the parliamentary film group. We visited many studios and met many actors, and we have seen the studios fall by the wayside because the industry has been run down. A few years ago we visited Pinewood and met Albert Broccoli, who produces the "007" films. He said, "I will play my part in saving the British film industry", and he has kept his word. Had it not been for him, Pinewood would have closed by now.

I cannot understand why the Government have not grasped the nettle. They know that the industry is being run down and that it will soon be producing only B films. Following that will be the complete closure of the British film industry if we are not careful.

Britain produces the finest actors in the world—

Mr. Don Dixon (Jarrow)

In here.

Mr. Haynes

My hon. Friend is right, but we are losing those actors to America. Training in the industry is also falling by the wayside. The rundown in the film industry means that training too must go. They go together. With the little training that will be available, all that we will be doing is producing actors and technicians for the Yanks. In the coal industry, where I worked for many years, we trained electricians and fitters who flitted over to private industry after public industry had paid for all their training. The same will happen in films.

In a previous debate on films I named the actors who had left our shores for America and filled their pockets with gold over there, at the expense of British films. However, many British actors stood by the British film industry and made some marvellous films. I want to see the day when the British film industry does that again.

The industry is running down and cinemas have closed right, left and centre across the whole country, but slowly and surely they are re-opening. We must give them support. They must come back. We need the film industry to grow back to what it was. It must grow so that it can provide more of the kind of entertainment that I have enjoyed for many years, especially when I was a young lad.

11.50 pm
Mr. Butcher

With the leave of the House I will reply to this debate.

There is no lack of unanimity in the Chamber tonight that we all want to see a healthy British film industry and a healthy British production side to that industry. I very much enjoyed the tour d'horizon of the hon. Member for Stoke-on-Trent, Central (Mr. Fisher). However, he went a little too far when he implied that the ending of a defunct levy through the BFFA would mark, to paraphrase the hon. Gentleman's comments, the death knell of the British film industry. That is surely not the conclusion to which the hon. Gentleman wanted to lead us when he began his speech. Perhaps we should understand that the hon. Gentleman's rhetoric got the better of him and that the excellent analysis in the earlier parts of his comments did not lead to an appropriate conclusion when he went over the top in the way that he did.

The abolition of the Eady levy can be used to prove anything. If one were to take an exclusive set of phenomena and apply a particular conclusion to them one could state that while the Eady levy was applied, attendances went down, and since it has been abolished attendances have been moving upwards. I do not claim that the trend occurred simply because the levy was or was not there. However, Opposition Members have overplayed the levy's role. I want to show, in the few moments available to me, that not only have they over-played the levy's role, but that there were a number of major errors in fact when they implied that there was no help for the industry in training—and that is a very important issue— or by way of production support, whether one is talking about the so-called artistic section of the industry or that part of the industry referred to with a capital "I". The dichotomy was debated by Michael Winner recently as the debate between the "gentlemen and the players".

For the record I should state that my Department gives support for the screen film industry through British Screen Finance Limited by providing, as was accurately reported by Opposition Members, an annual grant of £1.5 million for five years for the production of medium and low budget films, and a further sum of £500,000 each year for project development work and the production of short films. With that financial support, British Screen has been able to invest in 18 feature films, 13 short films and support 19 applications for project development assistance in less than two years. I have a selection of the films so supported and I am bound to say that they reflect a variety and quality that anyone interested in the cinema would find wholly commendable.

The Government also provide assistance to support the artistic and cultural aspects of films. My right hon. Friend the Minister for the Arts who has been in his place throughout the debate has recently announced a three-year programme of arts funding which will result in increases of about 50 per cent. for the National Film and Television School over three years — the sums being £1.;13 million rising to £1.7 million, an increase of nearly 20 per cent. for the BFI over the same period, rising from £10.03 million to £12 million.

I cannot accept that the commercial film industry needs wholesale subsidy in spite of a fall in exports for British films from £260 million in 1985 to £209 million in 1986. Our overall export performance in films has remained strong in recent years. That is primarily due to the widely acknowledged—it is recognised on both sides of the House — excellence of our film-making talent coupled with the industry's continued ability to make films that sell overseas. The English language confers a major advantage to British film-makers in the important North American market.

I have had discussions with most parts of the film industry—the distributors, exhibitors, producers, studios or whatever—and I have thoroughly enjoyed meeting those various representatives. It is to the credit of all of them that they have focused on the production question. A number of common themes emerged when representations were made to me. Let me say straightaway that even without the hon. Gentleman's seminar—

Mr. Stott

Which one?

Mr. Butcher

I am referring to the seminar given by the hon. Member for Stoke-on-Trent, Central. I shall come to the seminar of the hon. Member for Wigan (Mr. Stott), which was equally enjoyable, in a moment.

I accept that the question of the withholding tax does cause a difficulty. Without prejudging the issue, that will be one of the items of discussion that my right hon. Friend the Minister for the Arts and will have with our right hon. Friend the Financial Secretary to the Treasury.

I understand that the difficulty is that agents on the east and west coasts of the United States may be tempted to say to some of their leading artists that they should not go to the United Kingdom because they may be liable to a taxation rate of up to 60 per cent. The hon. Member for Stoke-on-Trent, Central and I know that the withholding tax is levied at the rate of about 27 per cent. When difficulties arise or clarification is required, a unit, set up within the Inland Revenue, does its best to deal with anomalies or any lack of certitude that may cause visiting American artists reason to feel uncomfortable or nervous.

I wish to satisfy myself that the current system is working correctly. In my discussions at the Treasury I will also seek ways to re-introduce some incentives for the British production industry. The hon. Member for Stoke-on-Trent, Central will understand that, tonight, I cannot debate with him what my comments may be in any subsequent conversations. We are agreed that the fall in production is significant. We are agreed to try to find ways to encourage the reversal of that trend. However, I believe that the hon. Gentleman and start from different philosophical and practical premises. I am not prepared to go to see my right hon. Friend at the Treasury and say that we want to introduce industry-specific schemes. That has not been the thrust of my right hon. Friend's policies in the past few years. I have no intention to try to persuade my right hon. Friend to reverse that policy trend. In the past, industry-specific schemes, no matter what the industry, have tended to feed on themselves and produce more and more anomalies.

Mr. Fisher

Will the Minister confirm that all the people he has spoken to on the production side of the industry have told him that every other country in Europe has industry-specific tax incentive schemes and that the Government are leaving our industry at a fiscal disadvantage compared with other territories?

Mr. Butcher

In answer to the exact terms of the hon. Gentleman's question I cannot confirm that they said that every other European country operates positive discrimination, that is industry-specific. I can confirm that there is a great deal of concern about the level of production. However, the analysis of cause and effect is something that we could debate for a long time.

For example, the hon. Gentleman mentioned the movement of currency. If, for example, I am a big American production company and I am looking at the blandishments which are now coming in from places like Mexico, Spain, Canada and every state in the United States, all shopping for film production work, offering incentives and so on, could the hon. Gentleman tell me —and I am not inviting him to intervene—for example, the impact of the movement in the dollar against the pound, compared with, say, the removal of capital allowances, when one is looking at a location on which one wishes to produce a major film? It is excruciatingly difficult to extract from all the representations made to me those which are, firstly, within my power to do something about and which are significant and, secondly, those which are not. I suspect that anyone standing at this Dispatch Box tonight, or the previous films Ministers, will have gone through exactly those same dilemmas.

It being one and a half hours after the commencement of proceedings on the Motion, MADAM DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted Business).

Question agreed to.

Resolved, That the draft British Film Fund Agency (Dissolution) Order 1987, which was laid before this House on 27th November, be approved.