§ 2.46 p.m.
§ Order of the Day for the Second Reading read.
§ LORD LUCAS OF CHILWORTH
My Lords, in asking your Lordships to give a second Reading to this Bill, I do not intend to embark upon a historical survey of the British film industry. Were I to do so, it might be regarded by some of your Lordships as impertinent, so in this epic which is before your Lordships this afternoon, I would prefer to cast myself for the rôle of a Benjamin to the Jacob of the noble Viscount, Lord Swinton, who surely must be regarded at least as the political godfather of British films. Indeed, it was the noble Viscount who introduced the first legislation connected with the film industry when he occupied the position of President of the Board of Trade in 1927, the story of which he has told so delightfully in a recent book of autobiography, on the publication of which I may perhaps be allowed respectfully to offer him my most sincere congratulations.
§ LORD LUCAS OF CHILWORTH
Ever since that start which the noble Viscount made in 1927, it has been the policy of successive Governments to foster by every possible and practicable means the expansion of the British film industry. My right honourable friend the President of the Board of Trade has made that assertion recently on behalf of the present Government; and for two very good reasons—first, to make the British industry, and the British cinema-going public, less reliant upon American films, and; secondly, to encourage the British film industry to play its part in the expansion of our export trade. I know that in the film industry adjectives are common language, but when one tries to describe the vast British film industry, I think it would be a modest statement to say that it is substantial. There are over 30,000,000 people who go to the 5,000 British cinemas every week and who contribute, through the box offices of those cinemas, no less a sum than £108,000,000 per annum, of which, incidentally, £38,000,000 finds its way to the Exchequer via entertainment duty. Your Lordships will agree that it is a sad commentary that an industry attracting that patronage cannot attain a level financial basis.
It is the object of His Majesty's Government to increase progressively the quota of British films. Your Lordships were engaged on legislation to this effect in the spring of last year, when you considered the Cinematograph Films Act, 1948. But the sad story is that to-day the British film industry cannot even satisfy that quota, still less exceed it in any progressive measure. The fact is that British film production is carried on to-day at a loss, and profits are possible only if the production organisation is vertically linked with exhibition. It has been said by a cynic that fools make films for wise men to exhibit. I do not know whether that is true, but, in so far as it is true, the net result is that outside the big organisations, such as Rank and the A.B.C., it is almost impossible to obtain finance for the production of the necessary British films.
I do not think it is necessary to go into the financial structure of this industry. If I did, I should feel bound 423 to transport your Lordships into a world of phantasy, peopled by characters which have their rightful place in Alice in Wonderland. But there is no doubt that the financing of ill-conceived projects with almost phenomenal imprudence, and the wildly extravagant production costs of past years, have resulted in frightening away the normal channels of finance. Yet, in spite of that unhappy circumstance, this is an industry which can and must satisfy public demand for entertainment, both in the short-term and the long-term—in the short-term because it is impossible to exceed the amount of dollars made available for the importation of American films and in the long-term because, surely, British films should be able more adequately to satisfy British demands.
There is no doubt that the future existence of the British film industry demands a drastic rationalisation of its production costs and a searching inquiry into distribution and exhibition. A Working Party is at the present time examining costs, and a Committee, presided over by the noble Viscount, Lord Portal, has started its examination of distribution and exhibition. In the meantime, His Majesty's Government feel that the provision of financial facilities, supplementary where normal facilities are inadequate, is an urgent necessity. It is not the intention of this Bill to provide finance for the large producing companies, but for the independent or freelance producer who is not directly linked with exhibiting circuits. The position of this class of producer was so bad in July last that my right honourable friend the President of the Board of Trade set up the National Film Finance Company Limited as an interim arrangement, and the finance was backed by an overdraft guaranteed by the Treasury to the extent of £2,500,000, under the Borrowing (Control and Guarantees) Act, 1946.
Clause I of the Bill sets up the National Film Finance Corporation, and in paragraph (a) takes over the assets and liabilities of the National Film Finance Company Limited. Paragraph (b) limits the period of the Corporation's activities to five years, and also enables the Corporation to make loans, to be employed in financing both the production and the distribution of films. As your Lordships 424 will see, there is a limiting proviso in the next clause, with which I will deal when I come to it. Clause I also provides that loans may be made only to qualified borrowers who are not able to obtain adequate finance from alternative lenders. As I have already pointed out to your Lordships, these loans will not compete with the present channels of finance; they are supplemental. It is not intended that this arrangement shall be a permanent feature of British film finance. The industry must put its own house in order and so arrange its affairs that in five years' time, when the Corporation has run its course, it can raise the money on its own credit in the normal way.
Clause 2 provides that every loan must be repayable to the Corporation in five years from the date of advance. Subsection (3) of this clause contains the proviso to which I have already referred, which limits the borrowers, except in such classes of case as the Board of Trade may approve, to film distributors who will use the money in financing film production. Some of your Lordships may ask: If the objective is to finance independent producers, why is it being done through distributors, and not to the producers direct? There are three main answers to that question. First, distributing agencies provide a distribution guarantee to the independent producer who is without an exhibiting circuit; secondly, they provide some degree of control upon costs of independent production; and, thirdly, they are able to spread the risks over a number of films. Without additional safeguards, direct financing of the production would call for too great a risk, even if the Corporation were willing to set up an organisation for supervising the details of production costs such as already exists in the distributing agencies.
There is a lot of misunderstanding—I would almost say mystery—as to how independent production of films in this country is financed. If your Lordships will bear with me, I think it will serve a useful purpose if I endeavour to explain the modus operandi. An independent producer will go to a distribution agency, armed with his project (cast, story and budget of production costs) and if the distributing agency likes the project it will offer a contract to the independent producer. This contract, as a rule, embodies a guarantee from the distributor 425 that the producer's share of the eventual proceeds will be not less than some fixed amount—often the agreed amount of the production budget. But in any discussion of ways and means between the producer and the distributing agency, they must clearly bear in mind that they have to provide finance on three bases: they have to find the "front money," the "end money" and the "guarantee of completion."
"Front money" is the trade term for money advanced at a fixed rate of interest against the security of a first charge upon the receipts guaranteed to the producer by the distributor; in other words, it is like preference capital. If the distributor is a man of substance, and subject to "guarantee of completion," this money is fairly safe. Therefore, the producer will normally have no difficulty in finding a joint stock bank or a finance house to advance up to sometimes 75 per cent. of whatever amount has been guaranteed. "End money" is the additional money which still remains to be found by the producer after the comparatively easy "front money" has been duly arranged for. This "end money" is the equity capital—the amount to be found in addition to the "front money" to balance the budget of production—and it is the element which is slightly more speculative. The producer must either provide it himself (or have it advanced to him by his own private backers), or he must have it set down in his contract that some or all of this money will be invested in the production by the distributor. The "guarantee of completion," is somebody's formal guarantee that if, for any reason, the film producer should run out of funds—if, for example, it turns out that in fact the film will "run over budget"—he (the guarantor) will provide any necessary funds for completing it. If the film had to be left unfinished, of course, the distribution guarantee would be inoperative. Failing a guarantee of completion, no prudent bank or finance house is likely to be prepared to advance the "front money "; so, if the producer and his backers are unwilling or unable to guarantee completion themselves, completion, as well as distribution, has to be guaranteed by the distributor.
Your Lordships will see from this that the film distributor may need to borrow money from the National Film Finance 426 Corporation for any or all of three purposes. He may need more cash at his bank in order to satisfy lenders of "front money" that his producers can be safely financed in reliance on his distribution guarantees. He may need money for putting more substance behind his guarantees of completion; or, above all, he may need additional funds for pictures which he is financing with "end money." That, as your Lordships may see, is the reason why His Majesty's Government are financing independent production through distributing agencies.
I have said that it is intended that direct financing of producers shall be provided in a suitable class or classes of case, and should be approved by the Board of Trade. The question of how the need of such classes should be defined is already under discussion between the Board of Trade and the interim finance company. Of course, it must always be clearly understood that discretion must rest with the Corporation as to the choice of the individual projects within those classes of case. Distribution, as such, will not be financed, but there is power to finance distribution in such classes of case as may be approved, and it is contemplated that the Finance Corporation may think it necessary and desirable to finance a centralised distribution agency for distribution of documentaries and other short films.
During the Committee stage of this Bill in another place the question was raised as to whether the Corporation should be expressly restrained from lending unless they are satisfied that the costs of production will not exceed the amount of the revenues which the producer can reasonably expect to recover. Although the precise wording has not yet been agreed upon, I think it proper to tell your Lordships that, at an appropriate stage of this Bill in your Lordships' House, I shall put down an Amendment on behalf of His Majesty's Government to cover the principle involved in that. Clause 4 limits the advance to the Corporation to a maximum of £5,000,000. I know that in the world of film finance this is, or can be regarded, as a very small figure—indeed, I have already heard it described as "chicken-feed"—but it is hoped that it will be enough to enable film producers to re-establish public confidence in film production as a commercial proposition, and to raise their money by more ortho- 427 dox methods after the Corporation has ceased its activities—which, as I have told your Lordships, will be in five years. Should £5,000,000 not be enough, however, and if in other respects the scheme is working satisfactorily, my right honourable friend the President of the Board of Trade will be prepared, as he has already stated, to consider amending legislation to increase this amount.
I do not claim that this Bill will cure all the troubles of this remarkable industry. In particular, it will not by itself provide a solution to the crucial problem of bringing down production costs, but we have very great hopes that this will be done. Indeed, only yesterday, through the kindness of the noble Lord, Lord Grantley, I was able to see this new technique of "independent frame" which, I am told, bids fair to reduce production costs by nearly two-thirds. I would offer my congratulations to the pioneers of this new technique, which I hope in the not too distant future will be available to all producers. I think your Lordships will agree that this Bill provides the industry with a breathing space and, perhaps, paves the way back on to the high road of a more prosperous future. In the hope that it may receive the approbation of noble Lords in all parts of the House, I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Lucas of Chilworth.)
§ 3.8 p.m.
§ VISCOUNT SWINTON
My Lords, this is an unusual Bill, but I think your Lordships will probably agree that it is justified by exceptional circumstances. The Minister, in his clear speech has—I think rightly—gone back a little into the past, to the Bill of which he was good enough to say I was the father or grandfather.
§ VISCOUNT SWINTON
All these paternal terms are agreeable. The noble Lord might well add the year before that, because it is worth remembering that the Bill which I introduced in 1927 had its origin in the Imperial Conference of 1926. At that time British film production was not only at a low ebb, it was nearly extinct. I felt that this was so important, not only to this country but 428 to the whole of the Empire, that it was a fit matter to raise at an Imperial Conference. Every one of the Dominions cordially agreed, and said that if we in this country would give the lead they would do their best to help. From that moment I think it has been accepted, not only here but also in the Empire, that the production of good British films (and by "British" I include Empire, because we were very careful in the original Bill, and in every subsequent measure, to define a "British film" as "a film made within the confines and by talent of the British Empire") is not only a national interest but a Commonwealth interest.
We had a certain amount of rather factious opposition to this Act of 1927, but the Labour Party were rather good about it; the opposition came from another quarter. But twice, after the Act has run out, it has, with the appropriate amendment, been renewed by Parliament with complete unanimity. I should like to add that from the time of the early negotiations, when I was drafting the Bill, and ever since, in the administration of that and subsequent Acts exhibitors of this country have always been wholly and entirely co-operative. They are anxious to show good British films—as the producers and distributors are anxious to produce and distribute good British films.
I was interested and not altogether surprised to hear the noble Lord, Lord Lucas, say this afternoon that the quota under the present Act was proving too high, and that it was doubtful whether it could be filled. When the Bill was introduced last year, I warned the Government that they had put the initial quota too high, and that it would be better to make it lower. It is very difficult to administer this quota fairly. Moreover, there is a tendency on the part of the producer to be satisfied with anything, because whatever he produces is going to be passed on. That of course is not good enough, and that was why I warned the House at the time of the debate last year that the quota was too high, and that it would be wiser to start with a lower compulsory quota; then, if everything went all right, it would be easy to step up that quota to a higher figure in the next half-year.
I have no desire, however, just to say "I told you so." What we have to do now is to see how we can improve production, and improve it not only in quantity but 429 in quality. It is not enough merely to produce British films; we have to produce good British films. For that two things are necessary. First, in production there must be a career open to talent; there must be an opening for new men and new ideas. That is where the independent producer is important. He has to remember, nevertheless, that he is not just an artist: he is a producer, and he has to produce something which the box office will take and the public will go and see—and he has to produce it at an economic price.
The second thing that is necessary is adequate finance. I deliberately use the word "adequate" rather than "ample," because I entirely agree with the Minister that in this industry (or art, or craft) extravagance must be curbed. British producers have produced fine spectacular films, and I hope they always will; but even in spectacular films it is not true that nothing succeeds like excess. When I see some films—and I am extremely fond of seeing films—I am bound to say I am reminded (and this applies not so much to British films as to some made elsewhere) of a musical comedy character of my early youth called "Mrs. Hoggenheimer of Park Lane," whose cliché was, "I'm not rude: I'm rich."
§ VISCOUNT SWINTON
The noble Lord is too young to remember.
While the good spectacular film will always make its appeal, I am quite sure that the good simpler films will provide an almost equal if not an equal attraction. Probably most film fans in your Lordships' House (and I hope there are many) will have shared my enjoyment at, for instance, a very simple but beautifully acted film called Brief Encounter. I thought this film was a lovely film. It was not only an æsthetic film but, I am delighted to say, it was also a "best seller."
So far, no doubt, we are all in agreement. The Minister has explained to us the situation in the production industry and the provisions of the Bill. As the President of the Board of Trade said in another place, the banks have always been prepared to finance production up to the limit of what was wise and prudent. There can be no complaint 430 on that score. It is in regard to the remainder, what has been called the "end" finance, where difficulty arises. Normally one would say that the finding of this extra finance for an industry was the job of the Finance Corporation, which exists in order to finance smaller industries—or even larger industries—with a modest amount of money where it is not practicable or convenient to make a public issue. But I do not think that that would be a possible course here. Film production cannot be dealt with in the void or in the large; what has to be considered in each case is the production' of the particular film. It is not a case of financing a business where you can assess the risk on the general prospects of the industry or the general capacity of its management. It is really, in each case, a matter of financing a particular venture in a highly specialised and speculative enterprise. Each case must be considered on its merits by people who understand the trade. It is for those reasons that I think the establishment of this special Corporation is justified.
I should like to ask one or two questions about how it is going to work. First, I am not clear whether the £5,000,000 which is to be its capital is one single final sum, or is in the nature of a revolving credit. I hope it is a revolving credit. A loan on a particular film, if the film goes well, might easily be paid off, or largely paid off, in eighteen months. If we are to find this £5,000,000, then the Corporation ought to be able to go on lending, provided the total outstanding liability does not at any time exceed £5,000,000. It may be that that is provided in terms in the Bill, but when the Minister replies I would like to be sure if that is the intention. If it is not the intention, I think it ought to be the intention. If it is the intention, then no doubt we shall see whether the words adequately cover it.
The second question I want to raise is how we are going to benefit the independent producer under this Bill, because it is the independent producer whom we want to help. The Minister has said that the Government contemplate that they will normally do this through a distributor; that they will give the producer his finance through the distributor. I can easily see the advantages of that. Some of them have 431 been enumerated. The independent producer himself has no direct relations with the exhibitor; it is the distributor who has to place the film with the exhibitor. He has the organisation, the contacts and the goodwill for doing that job. It is also no doubt true that the distributor can give better security than the producer can. It is true, also, that he can—and I hope he will—exercise some control over the producer's costs. But it is the producer to whom we want to give a chance.
Therefore, I think that the Government, through the Corporation, should do two things. In the first place, they ought to be satisfied that the terms which the distributor is proposing to exact from the producer are reasonable. I do not vouch for this, but I have heard of cases where maybe a "new boy" has gone to a distributor, and the distributor has proposed to exact such onerous terms that there would have been nothing left for the producer but a share in the risk. That was wrong. The Government have a two-fold duty in this matter—I am coming to their risk in a moment. Not only ought they to see that the terms are reasonable, but they should, of course, see that the terms upon which they are going into this business are also reasonable and are such that the distributor is not forced to exact unreasonable terms from his producer. The second point is this—I think that the Minister has, to some extent, answered it with his suggestion of an Amendment. If there is a genuine and fair partnership between a producer and a distributor, that is the best way to get a production done. But I hope that, where there is not a partnership of that kind, the Corporation will be ready to finance a producer direct, if they believe they are "on a good thing," or even on a really sporting chance.
The Minister has told us that he is going to propose an Amendment at a later stage which, as I understand it, will enable a producer to be financed direct in what I believe he called an appropriate class of case or appropriate classes of cases. But I do not know what "an appropriate class of case" means. Indeed, I do not know how one can decide this matter on a class of case. Such terms as "genus" and "species" do not apply here. They are not films of a particular 432 class. They are not all in one class. Surely, the real test of whether a film is worth financing or not is whether that particular film is likely to be a winner. In that regard you have to "back your fancy"—and a fancy chosen from a knowledge of form, of what is the kind of horse that wins the race. Films do not fall into a class. They are not just particular "two-year-olds" or "three-year-olds." What you have to do is to decide whether you think that a particular film is likely to be a winner—and then you should back it.
Here I come to what I consider is the crux of the matter. Even now it seems to me that the Government do not seem able to make up their minds whether the Corporation is to insist upon a safe security or whether it is to take a sporting risk. If it is going to rest upon security—"Safety first"—I think it will do very little business. If the Corporation is going to lend only where its risk is effectively underwritten by the distributors, then I do not think the distributors will take much risk, and I do not think the Bill will do the producers much good. If we are going into this business at all—and in the peculiar circumstances which are apparent from our discussion I think we ought to go into this business—then we have to take a risk. After all, as the noble Lord has frankly reminded us, the Government take a great deal of money out of this business already; £38,000,000 is going out of the industry, not to the producer but in entertainment tax. It is not unreasonable that a little of that money should be ventured back in a risk.
I would suggest to the Minister—and I want him to answer this question, because, if we are to give him this Bill, we want to know how the Corporation is to operate—that he should inform us what is the directive that is going to be given to the Corporation by the Minister. I do not think you can put this point in terms into the Bill, but the way in which the Corporation will do its work will depend on the spirit in which the Minister and Parliament animate the Corporation. I think the right way to approach the subject is that the Corporation should really share the risk, or a reasonable part of the risk, equally with the distributor or the producer. It ought not to ask for first charges. It should make up its mind whether it is a good proposition and 433 then go into the venture as a partnership. If the distributor or the producer is incurring a liability pari passe with the Corporation, then they will have a strong inducement to put up sound propositions and to cut their costs. In that way I believe that you will do real good under this Bill, and that it will be effectively used, and I hope it will encourage new talent and also economy in production. I think we ought to support this unusual Bill for the reasons I gave at the beginning: because British films have an importance in this country, in the Commonwealth and, indeed, in the whole world, far transcending the interests of the industry itself. For those reasons, I certainly will wish it well.
§ 3.30 p.m.
My Lords, I have the unusual, and indeed most agreeable, experience this afternoon of finding myself in agreement with the noble Viscount who has just spoken in almost every word he has said. He and I have been fighting each other on and off since about 1919, I am sure to our mutual benefit, and I am very glad indeed to find myself on this important occasion so heartily in agreement with what has fallen from his lips. I would also like to congratulate my noble friend Lord Lucas for the very clear way in which he explained this somewhat complicated and important Bill. For many years now I have had a small interest in this particular industry, my interest being a small producing company. Therefore, I know some of the difficulties and some of the tremendous problems that the Board of Trade have had to try to solve. The only thing I disagree with in the analysis of the noble Viscount is his reference to my age and a mythical or stage character called Mr. Hoggenheimer of Park Lane. I have just returned from the West Indies, and I may look younger to-day than usual, but I remember that play at Daly's very well indeed—better, in fact, than the noble Viscount. Mrs. Hoggenheimer was the charming lady who came at the end to accept Mr. Hoggenheimer and marry him. It was Mr. Hoggenheimer, not Mrs. Hoggenheimer, who used to say: "I'm not rude; I'm rich," and made all the other gaffes.
§ VISCOUNT SWINTON
I bow to the noble Lord's closer and more nautical connection with Daly's of that day.
I cannot remember the lady's name. She was a very beautiful actress, and I think she would have been called my "pin-up girl"—to use the modern expression.
The other point I wish to mention is that when the noble Viscount spoke of the hazards of backing a film as being comparable to trying to back a winner on the racecourse, he grossly understated the hazards. On the racecourse you can go into the paddock and see the horses: you know their previous performances. But backing a film is equivalent to backing an unborn horse; it is altogether more complicated. Even heredity is not of tremendous value here; the film industry is too young to have developed the hereditary system. The Americans have tried to overcome this difficulty by building up the star system, by popularising male and female stars whom people will come to see, whatever the film. But until a star system can be built up, and a certain amount of security obtained in this way, there must be this tremendous gamble. I am sure that is appreciated by my noble friend Lord Lucas, and those who will have to administer this fund under the Bill. They must take risks, of course. I cannot too strongly support the noble Viscount in saying that risks will have to be taken: and I think they are worth taking in this particular case.
I want here to make a protest, if I may, which I think applies to all Parties in your Lordships' House; we have all sinned in this respect to a greater or lesser degree. In my view there has been an unnecessary hostility to Hollywood, which I think is a great pity I think there ought to have been far more co-operation and a greater effort made to come to terms with Hollywood, instead of trying to force the pace as we have done. I do not think the noble Viscount did that sort of thing when he was President of the Board of Trade. Since those days, in the sort of speeches we have had on this subject, and from the letters we see in the Press and so on, there has been an unreasonable hostility to Haywood, which I think has done only harm. I hope we shall restore our previous good relations with them.
In the early days of the war, when we had very few friends, even in the United States, the Hollywood leaders were very good supporters of the Allied cause. Then the cause was sustained in actual fighting 435 only by ourselves. They have taken the lead in many great movements, such as those against Fascism, anti-Semitism, and so on; and that should not be forgotten. Furthermore, in the palmiest days of the American film industry in this country, when perhaps they had an unreasonable amount of the screen space here, and we could afford the dollars (and that dollar problem can be and has been solved since), we took £100,000,000 a year at British box offices, five-sixths or £83,000,000 of which remained permanently in Britain. That is a fact that is sometimes overlooked. The remaining one-sixth went to the United States in dollars, and that was the full amount of revenue which they received for their films, which did perhaps fill too much of our screen space.
From entertainment tax on these same films, the Exchequer alone received more than twice the amount of the revenue which the American film industry took out of the country in dollars. As a result, the exhibiting industry here was flourishing, with plenty of employment and good wages, and the British film producing industry was gradually growing up. If there is any possible criticism to make it is that His Majesty's present advisers, with the best intentions, have rather tried to force the pace of production in Britain. It has been rather a case of attempting artificially to stimulate it, with somewhat bad results, as I shall show your Lordships in a moment. If you try and force production in films, you are bound to suffer, to a certain extent, in quality. I agree with everything which the noble Viscount, and also my noble friend Lord Lucas, said about the superlative excellence of certain British films that we have produced recently in this country. We have produced the very finest quality of films in the world; of that there is no doubt—some of them most remarkable in their appeal to the public.
My noble friend knows what is happening with regard to Hamlet in the United States. The Americans thought there was not a sufficient public for Shakespeare in that country, but no one can get near the theatre which is showing that film at the present time.
Yes, I understand that is so. If you force production you also produce bad films, and a few bad films will do a great harm to the whole industry. A man takes his family to the cinema, and if they do not like the film, out they will come. And they will not go for weeks afterwards, with the result that the whole industry suffers. After all, it is the box office which eventually pays for the production, distribution and equipment and for everything else, including the payment of the sums to be advanced by the Treasury under this Bill. There is also this to be remembered: that the exhibiting side of the industry is going through a rather bad time—I believe my noble friend Lord Grantley will bear me out here. I am told that box office receipts are considerably down throughout the United States—partly owing to the growth of television and for one reason or another. And in the same way there is not so much money being spent in the cinemas of this country. A few bad films will only add to the difficulties, and will do harm to the whole industry. That, I am sure, is the last desire of my right honourable friend the President of the Board of Trade.
The other matter I wish to mention is a point made by the noble Viscount which I should like to reinforce. This is the proof of what I have been saying, that it has been a mistake artificially to force the pace. There is no prospect at the present time of filling the quota with suitable films. This point was made very clear by the noble Viscount. There is no possibility of filling a 45 per cent. quota with good films. As the noble Viscount pointed out, cinema owners are either exempted wholesale or they are forced to take inferior films, with long-term bad results.
Speaking from these Benches as a member of the Labour Party, I consider it my duty to put forward the views of the workers, the technicians in the industry. I have been at some pains to ascertain them. We have been speaking a lot this afternoon about exhibitors, distributors and producers; let us now turn to the people who make the films, not merely the stars who act in them, but those who work on the floors of the studios—the carpenters, the painters, the camera men, the lighting men, and all 437 the rest of them. They are highly skilled people and they have some very pertinent criticisms to make. One of their main criticisms has already been referred to by my noble friend. He said that the £5,000,000 capital may not be sufficient. The technicians endorse that opinion wholeheartedly. They are not people with extravagant ideas, used to throwing millions all over the place, and they firmly believe, in view of the extent and the standing of the industry, that this £5,000,000 may not be enough, especially as it takes nearly two years for the money to turn over and come back. But my noble friend Lord Lucas has dealt with that point, and has suggested that there may be amending legislation if this amount is found to be insufficient. That is a very satisfactory assurance.
Then again, it is suggested that the policy of financing films exclusively through the distributors should be abandoned. The distributors, I am sorry to say, have been one of the sources of trouble in the industry. They take far too much for what they do. Consider this point. Out of every shilling taken at the box office, fivepence goes in entertainment tax, fourpence goes to the theatre owner, one penny to the distributor, and twopence to the producer. So the distributor, in payment for his not very onerous duties—if you like, for his good judgment in backing unseen horses—takes 50 per cent. of the proportion which is received by the producer who has to pay everyone, the stars and the workers, provide a story and all the necessary material and so on. That is an utterly grotesque situation. What these people for whom I am endeavouring to make a case advocate is not a reduction in the entertainment tax. Their proposal is practically the same as the one made by the noble Viscount who spoke on behalf of the Conservative Party, and therefore I hope that the Government will pay careful attention to what I am going to say.
These skilled workers, and they are backed by the trade unions concerned, suggest that part of the revenue from tax should be used to subsidise film production by means of subsidy direct to the producers, in almost the same way as the Road Fund tax was supposed to be used for the maintenance of the roads and the building of new roads. The 438 present position of the producing industry is a very sad one Twelve out of twenty-six film studios are idle at the moment—that is to say, nearly half of the studios are not working. I have drawn attention to this before and the situation has not improved since I last spoke; in fact it has grown rather worse. The Rank Organisation, I believe, has closed down Islington, and dismissed 250 workers from Denham and Pinewood. I understand that still more dismissals may take place. These are figures which I have been given, and I do not think that my noble friend Lord Grantley will contradict me. I am sure that he regrets them as much as I do. Within the past few days, too, Sir Alexander Korda has announced that he has stopped, or will stop, making films at the National Studios.
This is a terrible state of affairs. It is indeed regrettable that with this very high quota of 45 per cent., which it was hoped would give such a splendid stimulus to the industry, there should have been a tremendous fall in British production. There must be something wrong. What is it? One thing is that the City of London has rather lost faith in the film industry, and it is now very difficult for the industry to get finances. This Bill may do something to ameliorate that part of the trouble, and it should be welcomed on that account. But two other things have happened. The 45 per cent. quota, I think it must be agreed—indeed, it has been proved to be so-is too high. That is shown by the fact that so many exemptions have been given. It is also indicated by the reissuing of old films. Hundreds of old films are being reissued and shown in place of new films, and that process will do harm in the long run. Secondly, good films are being shown for much longer periods than usual. That takes away screen time from other new films.
Then there is the exemption or partial relief which the Board of Trade have given from the 45 per cent. quota. I understand that so far it has been extended to 1,600 cinemas. I think the total of the cinemas in the whole country is 3,500.
I am obliged to the noble Lord. One thousand six 439 hundred cinemas have already had exemption or partial exemption, which I think proves the point put by the noble Viscount, Lord Swinton, to the effect that the quota was too high. If we attempt to use a kind of forced draught on the industry, the effect on what is, after all, a great art as well as good entertainment must be bad. I have put forward these suggestions and proposals which come straight from the workers, and, as members of the Labour Party, we ought surely to give some weight to what these people say. I am glad that the Opposition have welcomed this Bill. Needless to say, I also welcome it, as I would welcome anything to help the industry at the present time. I wish the Bill every success, and I am sure that the noble Lord, Lord Lucas, will not fail to do everything that he can to contribute to that success.
§ 3.48 p.m.
My Lords, I am sure that none of you would accuse me of being particularly enamoured of Government subsidies, but if we are going to have subsidies—and that is what this Bill may amount to in the end—let us have subsidies which stand some chance of adding to Britain's prestige in the world. The British film industry has literally and figuratively a new world to conquer. South America to-day is looking to Britain for its culture in the way that thirty years ago it looked to France. The modern generation—certainly so far as the middle classes are concerned—are learning English at school. In Rio de Janeiro 2,500 young men and maidens are now passing through a hard three year course at the English Cultura. A similar number are learning our language in Sao Paulo, and an equal number in the American Cultura.
All these young people are a potential public for British films with English script. They will be able to appreciate them in the original English language without even relying on Portuguese subtitles. Moreover, these young people prefer British films—they consider them to be the best of all. And that is something which is not to be wondered at, at least not by one who, as I have, has been with them, standing around a piano and singing old English songs like "John Peel" and so on. Are they getting these British films? Yes, but they are getting them only spasmodically. They get plenty 440 of American. Italian, French, and Portuguese, also I believe Spanish films and local films, but British films reach them only occasionally. When they do they are enthusiastically received. The showing of Great Expectations in Rio was a social event of the first magnitude, but it was a considerable period after the film was on view at the smallest provincial cinemas in this country.
One hears of inflated costs in this industry. I never know whether that is true and whether the stars really do get salaries which can be compared only with the salary (including entertainment allowances) of the Prime Minister. It may be propaganda to boost the star policy, which the noble Lord has mentioned as being the policy of Hollywood. Nevertheless, if public money is going into this industry, I hope that there will be a drastic review of all costs which are inflated. It has always seemed to me that payment by results is the proper way to try to do these things. It has been suggested that the higher-paid technicians and actors should rely for their ultimate remuneration on the box office success of a film. Such a system, if it were practicable and satisfactory, would cut down waste of money and time on the sets, and "temperament" would certainly become at a serious discount. Most authors, playwrights and composers are remunerated in this way and I do not see why actors and actresses should not be paid similarly. Why swell the original costs of a film with an enormous "cut" to the Chancellor of the Exchequer? It is not sensible. Pay up when the box office brings your profit.
I have always read with interest the film critiques in the daily Press—not that I expected any guidance from them as to whether I would like a film or not, because, without exception, they damned unmercifully any film they wrote about. I regarded it as the exhibition of a form of intellectual snobbery, which was quite harmless but also quite useless to their public. But the other day I read a very small leader in a prominent penny daily which said, in effect: "Tut, tut, boys, this will not do. We must not run down films like this. There is good in some of them." From that moment I have never seen more fulsome flattery than that poured out on films by critics whose work I have happened to read. What is the good of criticism of that sort, if one 441 minute the critics exercise their intellectual snobbery to run down everything and the next minute, at a crack from their master's whip, they come fawning and are equally in error on the opposite track? The purpose of criticism is to tell one whether one is likely to enjoy a film or not. So far as I can see, both in their former and their present attitude, the film critics are quite useless to people of such moderate intellect as myself. In spite of the critics, however, we enjoy our British films, and I know that other people throughout the world will do so as soon as they get a chance of seeing them. In our language we have the greatest stories in the world. We have, I think, the greatest actors in the world, and some of the greatest actresses. With those three strengths in combination, surely British films can be placed on the screens of the world.
§ 3.55 p.m.
My Lords, I should like to add my support to this Bill, which I am sure will be a great help to the industry. I was glad to hear from the noble Lord who introduced the Bill that we may see a widening of the provisions in Clause 2, so that loans can be made direct to independent producers. I feel certain that without a generous provision in this clause, the Bill would be of little value to the industry. My main reason for intervening in this debate is to emphasise the effect that the high rate of entertainment tax has on the production side of the film industry. The noble Lord, Lord Lucas of Chilworth, mentioned that £108,000,000 was taken at the box office. I would like to add that £25,000,000 only is received by the producers of films, and of that sum only approximately £8,000,000 is received by British producers. It is clear from that that the production side of the industry is bearing the bulk of this taxation. As already mentioned by the noble Viscount, Lord Swinton, entertainment tax amounts to approximately 40 per cent. of the gross box office returns. I would suggest that that is far too high a proportion for this industry to bear, especially as the bulk of tax falls on the production side. I suggest that the only way in which the film production industry at the present time can carry on successfully is by some provision whereby a proportion of the entertainment tax that British pictures pay should be ploughed back in some 442 way into the industry. Perhaps that could be done by way of subsidy, as suggested by the noble Lord, Lord Strabolgi.
What is happening in other countries? It may not be fully realised that in America the entertainment tax in the film industry is exactly half that ruling in this country. It is clear that our industry is bearing a very heavy burden. I hope that His Majesty's Government will consider giving some relief to the industry in entertainment tax. I am sure that would go a long way to help in the stepping-up of production and the provision of more British films, which we all know are vitally necessary at the present time. The industry itself is making great efforts to reduce its costs. Like the noble Lord who introduced the Bill, I had the opportunity of witnessing recently the new method of production now in operation by the Rank Organisation, and I am certain it will go far to reducing costs in the industry. This is undoubtedly a very good Bill. We welcome it and hope it will aid the industry.
§ 3.59 p.m.
My Lords, I wish to interpose only a few brief sentences, and in doing so I should like to make the customary declaration that I am a director of a large number of film production companies. I should like to congratulate the noble Lord, Lord Lucas of Chilworth, on his extremely lucid explanation of this Bill, which struck me as very complicated when I first read it. The noble Lord will permit me to correct his kind reference about me, in so far as the figures which he gave to your Lordships are concerned. He said that he thought this new system of production, about which we in the Rank Organisation are all so happy, might save as much as two-thirds of the negative cost. As things stand at present, we do not think that we shall save much more than one-half the negative cost. I wish to bring only two points to the attention of your Lordships; the debate has covered so amply every problem that has arisen. I would like to see the Board of Trade use the powers which they apparently have under Clause 3 (2) of the Bill, where it refers to special classes, as widely and as generously as possible. Distributors are not always the best judges of what films to make. In my long experience I have 443 known very successful films which have been made without the approval of the distributors—indeed, in spite of them. I hope the Board of Trade will be very elastic in their instructions to the Corporation on that subject.
The other thing to which I would refer is this. To my delight a good deal has been said this afternoon on the question of entertainment tax, and on the possibility of rebating some of that tax to producers of British films. We have had some interesting statistics on the subject. I will add one further statistic: out of the £8,000,000 (approximately) which British producers receive in this country every year in return for their capital expenditure (it is a simple mathematical deduction), only eighty films costing £100,000 each can be made. The British Film Producers' Association, who look after the interests of British film producers, have promised that they will try to make ninety films this year, in order to give a wider choice to exhibitors, and to enable them to satisfy the high and generous quota that has been allotted—namely, 45 per cent. But if eighty films were made at a cost of £100,000 each, I am afraid that they would not be very good films. On present-day costs it is more likely that only sixty films would be made with the £8,000,000 received.
The film producer has a reputation for being grossly extravagant, and in many ways perhaps he is. But he is no miracle worker. The only miracles worked in our business are by trick photography. Taking this as a mathematical problem, as we take it, and trying to make eighty films out of £8,000,000 and "break even," I do not think it is possible. It therefore appears that unless His Majesty's Government can see their way to rebate some of this entertainment tax, we shall either have too few films, or we shall have some bad films. That again will have the deleterious effect of driving away audiences from box offices.
This Bill provides sensible help for independent producers. As the noble Lord, Lord Lucas, has said, it is not intended to assist any of the large combines which make pictures in this country. But even those combines will have to have assistance if things go on as they are at present. Your Lordships have heard the figures which the noble Lord, 444 Lord Strabolgi, has given this afternoon about redundancies and studios closing. The only fair way I can see of meeting this problem is by devising a scheme. One scheme is already on paper, and I do not think I am giving away any secrets if I say that it has already been submitted to the Committee of the Board of Trade of which the noble Viscount, Lord Portal, is Chairman. This scheme suggests that the rebate should be on the basis on the amount of entertainment tax that a British film has attracted. In other words, a film which has attracted £100,000 at the box office should get a rebate of an xth part of £100,000; a film that has attracted £500,000 at the box office should get five times as much rebate. Apart from that point, I welcome this Bill, and I am grateful for the Government's continued interest in the industry.
§ 4.5 p.m.
§ LORD LUCAS OF CHILWORTH
My Lords, His Majesty's Government cannot be other than pleased at the reception which your Lordships have given to this Bill. It has had universal praise, and my task of replying to the debate is correspondingly easier. I would, however, like to try and answer categorically the questions which have been put to me, before making any other observations. The noble Viscount, Lord Swinton, whose contribution to this debate has, as usual, been most helpful, asked me a question whether the £5,000,000, which is the limit the Treasury will advance to the Corporation for the purpose of lending, is a revolving credit. If I may suggest it, I think the question is answered in Clause 4 (1), because there are used the very words which the noble Viscount used. It says:Provided the aggregate amount of the principal outstanding in respect of any advances under this subsection shall not at any time exceed five million pounds.So it is a revolving credit.
The noble Viscount then had some very fair things to say about the sometimes onerous conditions which distributors try to impose upon producers. It will be the task of the National Film Finance Corporation carefully to scrutinise the conditions of the contract between the producer and the distributor. I will put it colloquially and say: "Bad conditions—no money!" I feel that that will have a deterrent effect. The noble Viscount 445 then, if I understood him aright (I may be mistaken) rather confused the Amendment which I said I would put down on behalf of the Government on the Committee stage, with the classes of case where the producer will be financed direct. The Amendment (if I can dispose of that first) is to meet the point whether the Corporation should be expressly restrained from lending unless they are satisfied that the cost of production will not exceed the amount of the revenues which the producer can reasonably expect to recover. The noble Viscount will recall that the question hinged upon whether the revenue should be counted as the revenue from the home market, or from export as well. That is the Amendment which I will put down.
§ LORD LUCAS OF CHILWORTH
Accepting the principle that it should be both. The noble Viscount wanted to widen the prospect—if I may put it that way—of the independent producer being financed direct. As I explained when I moved the Second Reading, there will be classes of case where it will be possible for the National Film Finance Corporation to go direct with finance to the producer, and not, as at present, through the distributor. As your Lordships will readily appreciate (I am sure I can carry with me in this matter the noble Lord, Lord Grantley, who knows so much of the practical side of the industry) the risks attaching to production are enormous. The Government will have to be satisfied that the risks are fully appreciated by the Corporation before it can advance finance direct. As I said, the classes of case will be defined, and the definition is being worked out at the present time. Perhaps the best way I can try and satisfy the noble Viscount is by saying that in these classes of case minimum requirements will be laid down, and so long as those minimum or basic requirements are satisfied, the National Film Finance Corporation will be given a free hand. I would not pretend to disparage—I was almost going to use the term "insult"—the intelligence of noble Lords by pretending that there is no risk. The point on which the Finance Corporation have to use their discretion, aided and abetted by the Board of Trade, is whether the risks it is desired to take in 446 film production are justifiable in all the circumstances. I can assure the noble Viscount that a very broad interpretation will be given to those minimum requirements.
§ VISCOUNT SWINTON
As I understand it, "class of case" means that the independent producer—the distributor is not concerned in this case—has to put up a minimum proportion of the "end money" himself. What you are going to define is financial risk, and not the character of the film.
§ LORD LUCAS OF CHILWORTH
The noble Viscount has illustrated the trouble which exists in defining this class of case. Many of those things have to be taken into consideration.
§ VISCOUNT SWINTON
We are asked to pass these very odd words, "class of case." We ought to know what is going to be the "class of case" we are asked to approve before we pass it. We may have to come back to the matter again in Committee, but I think it would help the House if the noble Lord would say whether the producer has to find a certain proportion of the finance.
§ LORD LUCAS OF CHILWORTH
Undoubtedly that will be a factor, but it might not be the only factor which will appear in the definition of "class of case." Discussions are at present proceeding between the Board of Trade and the interim Finance Company upon this subject. I accept the noble Viscount's invitation, and I will see whether I can get more information upon this matter when we reach the next stage, if the noble Viscount will provide me with the opportunity.
§ LORD LUCAS OF CHILWORTH
think those are the main points the noble Viscount put to me. The noble Lord, Lord Strabolgi, who speaks upon these matters with great knowledge, emphasised the remarks of the noble Viscount about the gamble. There must be a gamble. If this Finance Corporation is not to supplant ordinary channels of finance, then it will have to deal with the speculative "end finance," and in speculation there is always risk. The noble Lord also asked, "On what is success planned?" I think the noble Lord, Lord 447 Hawke, really answered that question. It goes without any contradiction that in this country we have the finest film actors and actresses. I cannot speak upon the subject of film actresses with the same authority as the noble Viscount, Lord Swinton, or the noble Lord, Lord Strabolgi. I will confess to your Lordships that many years ago I lost my heart to a "celluloid fairy." That was at a time when I was very young, and she had already had four husbands. You can imagine my consternation when only the other day I read in the newspaper that she is now a grandmother. However, we have the finest actresses and I think we have the finest technicians. That is the basis of success. What we have to do in this industry is to cut out (I do not think it is an extravagant term) the crazy financial waste which goes on. I will deal with that in a moment.
My noble friend Lord Strabolgi answered his own question as to whether £5,000,000 is enough. If it is not, and the scheme is working satisfactorily, my right honourable friend the President of the Board of Trade has intimated that there will be additional finance. The noble Lord had some harsh words to say about distribution. I am afraid it has to be admitted that this industry has attracted more than its fair share of parasites, and we always think that they, like all middlemen, are remunerated on far too high a scale. But I think it would be preferable, before one makes any definite assertions about this matter, to await the Report of the Committee which is presided over by the noble Viscount, Lord Portal. I hope that will give us more information than we have at the present time about the set-up of distribution and exhibition and its relation to film finance as a whole.
The noble Lord, Lord Hawke, also made a point about Income Tax, with which I will deal in a moment. The noble Lord made a big point about the reason for inflated costs. I was discussing this matter with experts in the film industry the other day, and they told me something which staggered me. In a working day, from half-past eight in the morning until half-past five in the afternoon, if they complete one and a half minutes of actual showing film time on the screen it is a good day's work, and one and three-quarter minutes is phenomenal. One 448 can understand that when one sees a film being taken. The only two people who are working on a set which contains forty to fifty people are the two principal characters, and the others are waiting for something to do. That revolts my commercial instinct, as I am sure it revolted the instinct of the noble Lord, Lord Hawke. I am not going to join issue with him or say much about the position of critics, because Ministers of the Crown are lust as susceptible to the blandishments of critics as are film stars, and I think it is better for me not to say anything about them.
The noble Lord, Lord Teynham, then made the burden of his remarks the entertainment tax. I hope the noble Lord will not think that I am evading the issue or trying to ride it off, but he is, of course, quite right in saying that the entertainment tax is a Budgetary matter. It would ill become me to say anything in anticipation of the Budget statement of my right honourable friend the Chancellor of the Exchequer, except to say that everything that has been said upon that point will be carefully considered. The noble Lord, Lord Grantley, offered me a correction, for which I am grateful, upon the figure which I gave as being the anticipated saving in production cost of the new technique of independent frame production. I said that it was anticipated that it would reduce the production costs by two-thirds. The noble Lord is slightly more cautious—he says one-half. My figure was given to me from another source. But if it is only one-half, it is a prodigious saving. If British industry as a whole could reduce its production costs by one-half, what a heaven we should be living in at the present time!
I was sorry that the noble Lord, Lord Grantley, ended on such a solemn note. He said that the Rank Organisation would probably have to go to the Film Finance Corporation for funds. Does the noble Lord really mean that? They could come to the Corporation only if every other financial door was closed to them. What a state the British film industry would be in if the Rank Organisation should need that aid because of a Government clause! I cannot really believe that that would ever happen.
§ LORD LUCAS OF CHILWORTH
I am very glad indeed to be corrected. I hope I have done what noble Lords wanted me to do, which was to answer these points. I thank noble Lords once again for their acceptance of this Bill, and I hope that it will be a new help for this great and important industry.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.