§ 3.10 p.m.
§ Order of the Day for the Second Reading read.
§ LORD MANCROFT
My Lords, on June 11, 1953, a debate on the general condition of the British film industry was initiated in your Lordships' House by the noble Lord, Lord Archibald, who speaks with unrivalled authority in film matters. In the course of his speech, he asked me whether Her Majesty's Government had formed any opinion concerning the future of the National Film Finance Corporation. In the course of my reply, I was able to tell him that my right honourable friend the President of the Board of Trade had decided to recommend to Parliament that the National Film Finance Corporation's powers of lending money should be extended for a further three years and that legislation would shortly be put before Parliament to achieve that end. This Bill, which I have the honour to ask your Lordships to accord a Second Reading to-day, is the fulfilment of that promise. It is proposed, should your Lordships so see fit, that it should become law by March 8 of this year, that day being the limit set by the current legislation to the lending powers of the National Film Finance Corporation.
The Bill, I am happy to tell your Lordships, is neither long nor particularly complex. I very much hope that I shall be able to explain the principal provisions of it to your Lordships in slightly less than the three hours or so which an honourable Member in another place took some while ago in opposing provisions of this measure. The chief purpose of the Bill, contained in Clause 1, is to amend present legislation in order to allow the National Film Finance Corporation to go on making fresh loans to film producers for a further three years from March 9, this year. There is a subsidiary purpose in the Bill, and it is to be found in Clause 2. It is to provide powers explicitly for the Corporation to deal with loans which either cannot be recovered or cannot be recovered in full. The amount of the money at the Corporation's disposal, I should like to emphasise, is not increased beyond present limits, which are not more than £6 million from the Board of Trade, and not more than £2 million from "any other persons."
383 May I elaborate that second point? In regard to these proposals to allow the National Film Finance Corporation to compound with a debtor, the present Bill provides for the Corporation to make any financial arrangements designed to deal with such cases, provided that such arrangements are calculated both to avoid harm to the general run of British film production and to safeguard the ultimate recovery of the loan. It provides, in particular, that the National Film Finance Corporation may waive the payment of interest due to them or accept shares or debentures in any company, in or towards repayment of the amount of the loan. Whatever arrangements they may wish to make under the terms of this clause must he subject to the approval of the Board of Trade. Provision is also made for the Board of Trade, in their turn, to remit or postpone payment by the Corporation to the Board of Trade of interest or principal. It is not envisaged that the Board of Trade will make such adjustments in all circumstances in which the Corporation have to make some composition with a defaulting debtor; but in any case in which such adjustment is to be made, the Board of Trade have not only to secure the approval of the Treasury but also to lay before each House of Parliament a statement of such adjustments and of the arrangements made by the Corporation which have given rise to them.
When asking people to subscribe money to any concern or, as in this case, to continue to subscribe to a concern, I think it is only fair to put before the potential subscribers the reasons why the concern is worthy of further financial support. Therefore, with your Lordships' permission, I should like to devote a few minutes to a review of the current position of the National Film Finance Corporation and, perhaps, of the film industry in general. I apologise to the noble Lords, Lord Archibald, Lord Lucas, and Lord Reith, who are experts in this matter, for trespassing on ground which is much more familiar to them than it is even to me. But for the benefit of your Lordships, I think I might mention one or two facts which caused the National Film Finance Corporation to come into being and the reason why we are asking for financial provision for its continuance.
The Corporation was established in July, 1948, when there appeared to be a 384 real danger of the total collapse of British film production. It was not possible in those days to talk about the film industry without introducing the word "crisis" in every other sentence. The immediate task, at the request of the then Government, was to make a loan of £3 million to the British Lion Film Corporation. At that time, the British Lion Film Corporation was the only important channel for the financing and distribution of British films outside the large vertical organisations—namely, the Rank Organisation and the Associated British Picture Corporation. In the five years-odd up to the end of March, 1953, the National Film Finance Corporation provided financial assistance for about 250 films. I will not weary your Lordships with the names, but many of the films have achieved world-wide fame. Many of them have brought great prestige, not only to the British film industry but also to our country as a whole.
If I single out only one, it is for this reason: that during the last debate I laid particular emphasis on the financial assistance which would be given to films which fall under Group 3—namely, films which encourage young men of talent and promise, both on the technical and artistic side of the industry. I said that much hope was held out for the filmConquest of Everest, which was then planned and about to be launched. If the saddest words in the English language are "What might have been," there are no more comforting words in the English language than "I told you so," and I am happy to remind the House of the enormous success of the film Conquest of Everest, made with the Corporation's money and support, and made under this particular Group. I think it is right that, among the tributes we pay to men of the calibre of Sir John Hunt, Sir Edmund Hillary and Sherpa Tensing, we should pay our tribute to Mr. Torn Stobart, who was the photographer of that film and who carried his camera very nearly to the top of Everest, taking his artistic skill with him. Perhaps I may quote from the report of the New York film critics' selection of the best films of 1953 in the New York Times, a paper not normally over-friendly to British films. That report refers to the:…brilliant pictorial realisation of the Everest documentary film. This latter motion 385 picture record struck us as one of the most tremendous films that has ever been brought out of the camera and out of the labyrinth of the cutting and scoring rooms.That is no mean compliment from other country, and I think we can look forward with pleasure to the results of Tom Stobart's next expedition, which is to photograph, if he possibly can, that almost ex-officio member of The Times staff, the "Abominable Snowman."
Up to March, 1953, the total of loans approved by the Corporation was about £9 million, of which nearly £8 million has actually been taken up. About £5½ million is on loan at the moment, of which £3 million remains with British Lion. So far, only £300,000 has been regarded as incapable of recovery. After heavy deficiencies on the first two years' work—a reflection, of course, of the financial difficulties of the whole film industry in 1948—the Corporation is now running on a fairly even keel. Administrative costs of the Corporation are commendably small—about £30,000 a year. As on previous occasions, I should like to draw the attention of the House to the extremely efficient, frank and economic way in which the Corporation presents the annual report of its affairs to the country. I can assure your Lordships that the National Film Finance Corporation is very conscious of the need to secure the greatest benefit to the industry from the money which it lends, and there is no question whatever of public money being frittered away. I might add also that up to date no loss has been incurred by the Board of Trade.
I think that this is the right juncture to offer a tribute of thanks to Mr. James Lawrie, who has just retired from the position of Managing Director of the Corporation and is about to seek his fortunes elsewhere. He has done a magnificent job of work, and he has succeeded in earning the thanks of everybody who has any connection with the film industry. He carries with him into his future fortunes the best possible wishes of those whose gratitude he has rightly earned. As noble Lords will have seen in the newspapers yesterday, his place as Managing Director of the Corporation is to be taken by Mr. David Kingsley. Mr. David Kingsley comes to this job with considerable qualifications. He is a professional accountant, with 386 considerable experience of the film world, of the City and of investments. He was at one time Secretary to the National Film Finance Corporation, and has had a wide experience which I am certain will fit him very well indeed for this difficult and responsible task. In my eyes, he has the additional advantage of having served for a long time with the Royal Regiment of Artillery. I should also like to pay tribute to Sir Michael Balcon, who has been the technical adviser at the highest level for a considerable time—an extremely difficult job, in view of the fact that he had always to face the possible criticism, being himself a film producer of the highest possible calibre, of running with the hare and hunting with the hounds. Sir Michael Balcon has been to elaborate lengths to make certain that no such criticism is for a moment justifiable. He has rendered powerful service to the industry, and the Government are grateful to him.
Now I should like to say a few words about the present state of the film industry. When the Corporation was established in 1949, the then President of the Board of Trade, Mr. Harold Wilson, stated in public that he hoped that the film industry would so manage its affairs thatin five years time it can raise money on its own credit in the normal way.I think it is only fair to ask what has been done by the industry in the last five years. The most important thing that has been done—and this there cal be no denying—is that it has saved itself, and has been saved, from complete extinction. The next thing that can be said in its favour is that it has made each year many films of the highest class. It has also earned appreciable amounts of foreign currency. I think it is fair to say that present conditions in the film industry are much more healthy and more stable than they have been for many years, and this is due in large degree to the operations of the National Film Finance Corporation and of the British Film Production Fund—more popularly known as the Eady Fund—which the industry has happily agreed to continue on a voluntary basis. But even so, unfortunately, it is not yet possible to suppose that any considerable amount of private finance would be available for the working capital of film production if the Corporation's activities 387 were brought to an end in 1954—that is to say, the date when the existing legislation runs out. We are asking for an extension of three years, and I think I am in duty bound to try and justify that period of three years.
It may well be asked whether the Government are satisfied that another three years will see the end of the necessity for the activities of the National Film Finance Corporation. Or, if they are not so satisfied, whether they regard the National Film Finance Corporation as a permanent institution. I can certainly say this. It is the policy of the present Government, as I believe it was of their predecessors, that the British film industry should stand on its own feet as soon as possible. I am old-fashioned enough to believe that the Government should have as little as possible to do with this sort of thing. I believe that it is the function of the industrialists to run industry, of film men to make films, and of Governments to govern. But the fact remains that the point at which it may be possible for the Government in this case to draw out of the film industry is very difficult to predict.
There are at the moment, for instance, as your Lordships are well aware, great developments of new entertainment techniques. There are new professional techniques in the film industry, technical phenomena which I myself do not pretend to understand for one moment, which have to a certain degree been successful, but which also have been expensive—I refer to 3-D, cinemascope, cinerama, and so on. Moreover, of course, there are the not-to-be-forgotten but more natural phenomena—as, for instance, Marilyn Monroe—which are much easier for most of us to understand. Most of all, there is the influence and spread of television. I wonder whether there has not been created an unnecessary panic and alarm about the influence of television on the fortunes of the British film industry, panic and alarm which has been created by contemplation of events on the other side of the Atlantic, events which, as is so often the case when we try and compare like with unlike, really bear no grounds for comparison at all. I myself, on the evidence available to me, do not think the effect of television upon the American cinema will be reflected in anything like the same degree upon the British cinema.
388 There has, of course, been a marked fall—one must admit this—in the wartime boom in cinema attendances which had been brought on by lack of other entertainment, by the blackout, by the;desire for any entertainment, however trivial. That, of course, is now going through an obvious recession. But, suffice it to say, the figures show that every man, woman and child, including infants in arms, still apparently attends the cinema in this country twenty-eight times a year. I am interested to find from my own diary that last year I attended the cinema twenty-seven times, so that in this respect, as perhaps in some others, I appear to be subnormal. I might also mention that only about 3 per cent. of the total of some 4,800 cinemas in these islands have closed in the last three years, representing about 140 cinemas. That is a decline; but nobody denies for a moment that the cinema is going through a decline. But I do not think those figures are evidence of the catastrophic decline which some people would have us believe the cinema is going through. Filmmaking is a lengthy process, and producers must plan ahead. A shorter period than three years would probably mean preparing at once for fresh legislation to become effective in a year's time. I would submit to your Lordships therefore, that the period of three years appears to be a reasonable time to allow for.
I should now like to say a word or two on this vexed question of the British Lion loan. The most important case which will need to be considered in the light of the terms of Clause 2, to which I have referred, is, of course, this £3 million loan to the British Lion Film Corporation. This loan, which represents half of the amount which the National Film Finance Corporation have received in advances from the Government out of which to make loans, was made in 1948 at the request of the Board of Trade and the Treasury to save the complete collapse of British Lion. It was the subject of a number of conditions designed to ensure that effective control of British Lion expenditure was maintained, and approval has to be given by the National Film Finance Corporation to the budgets made for films before shooting begins. Over the years, British Lion have paid something like £500,000 in interest; but the National Film Finance Corporation have 389 already had to realise that perhaps £1 million of the loan is unlikely to be recovered, and that they could not enforce immediate repayment of the whole loan without severe damage to British film production. That, I think, is the answer. To enforce the repayment of any money now could not be carried out without bringing complete catastrophe and ruin over a wide area to British film production. When, as we hope, this Bill becomes law, the National Film Finance Corporation will have to consider what arrangements would best deal with this situation in the light of the provision of this clause of the Bill; and if the remission of public money is involved, the Board of Trade will have to make a statement of the circumstances to both Houses of Parliament.
Now a word as to the future. It remains the hope of the Government that in the foreseeable future the British film industry will be able to stand on its own feet, and that continued intervention by the Government in the affairs of the film industry will not be a permanent part of Government policy. The extension of the loan-making powers of the National Film Finance Corporation is part of the policy which, together with the voluntary extension of the British Film Production Fund—the Eady Fund—is designed to give British film production more breathing space in which to become a going concern.
The competition for the public interest which television will provide may well act as a stimulus to further efforts on the part of the industry to put its house in order, and it is hoped that the film industry will continue to make the admittedly slow but certainly steady progress that they have made in the last few years and to continue that progress in the years to come. The industry, I am certain your Lordships will be only too willing to admit, has made a valuable contribution to the country's foreign exchange resources, and it is, in its present hands and under present methods of conduct, a most important influence on the lives, welfare and well-being of the British people. I hope, therefore, that the House will be prepared to give this Bill a Second Reading. I beg to move.
§ Moved, That the Bill be now read 2ª.—(Lord Mancroft.)390
§ 3.31 p.m.
§ LORD LUCAS OF CHILWORTH
My Lords, it is indeed pleasurable to be back once again in your Lordships' House to listen to the eloquence of the noble Lord, Lord Mancroft, and the conciseness and clarity with which he has asked your Lordships to give a Second Reading to this Bill. I do not intend to follow him into a review of the film industry. I can quite understand its attractions for the noble Lord; it is a far greater attraction, I should think, to talk about the film industry than as to how this Bill is going to do what it purports to do or what the noble Lord wishes it to do.
Before I reach that particular subject, I would join with him in congratulating the National Film Finance Corporation upon the success of their activities, particularly, if I may say so, because I was responsible for piloting through your Lordships' House the Bill which brought that Corporation into being. I said then that I considered the National Film Finance Corporation would play, in some shape or another, a permanent part in the film industry of this country. In spite of all the wishful thinking displayed by the noble Lord this afternoon, I see no reason whatsoever for changing my opinion. It is obvious to anybody who is at all knowledgeable of current affairs that the film industry of this country at the present time, and as far ahead as I think it is reasonable to foresee, will be unable to attract finance from what are known as the orthodox sources. The film industry cannot, at the present time, give any attraction to the ordinary investor.
The noble Lord, Lord Mancroft, said that it is the business of industry to run industry and of the Government to run government. With that we all agree: But when there is an industry like the film industry, which is necessary for propaganding the life and the culture of this country, and which is a natural industry for a Government to subsidise in some way when it cannot attract finance from orthodox sources; and when the Government of the day see fit—as the late Government did and the present Government do—to provide working capital, then we have a right to expect that while the Government will go on doing that and safeguarding the industry, the taxpayer is safeguarded at the same time.
391 I want also to join with the noble Lord in paying a tribute to Mr. Lawrie, who so admirably managed affairs from the seat of the managing director of the National Film Finance Corporation. Our thanks and the thanks of the film industry are due to him. We wish his successor, hard though his task may be, a successful period of office. We in your Lordships' House are fortunate also in being able to have an expression of view from the noble Lord, Lord Reith, who was the first chairman of the National Film Finance Corporation and launched that body on its successful career. I believe we would all say that Lord Reith, in some way and in no small way, was responsible for its present success.
The noble Lord, Lord Mancroft, in asking your Lordships to give a Second Reading to this Bill, said it was necessary to safeguard the ultimate recovery of debts. I agree with him, but I cannot see how this Bill is going to do it. Let me set not only the noble Lord's mind but all your Lordships' minds at rest: although I am going to be critical of one clause of this Bill, I do not intend to-day to detain your Lordships for three hours in so doing. Clause 1, which continues the life of the National Film Finance Corporation for another three years, receives our whole-hearted support. In spite of what the noble Lord has said, I am quite prepared to see us debating in three years' time a further extension of the life of the Corporation. The Bill we may debate then may not be in the shape of the one to-day, because we all live and learn. The Bill which is before your Lordships now would have led to the raising of many eyebrows if its provisions had been contained in the original Bill setting up the National Film Finance Corporation. When I say "we live and learn," I hope I can include the noble Lord in that, because when, in the debate to which he has referred and which was opened by my noble friend Lord Archibald. I made similar proposals to those now contained in this Bill, he poured cold water on them. I thought that his whole approach to the problem of finance of the film industry was rather—if he will forgive my saying so—of the Primrose League type, rather than perhaps the hard-headed approach of the City.
Now Clause 2 of this Bill says that if at any time the Corporation are satis- 392 fied that a loan cannot be repaid without harmful consequences to the production of films, they may make such financial arrangements with the borrower as will lead to the recovery of the debt so long as the means and the method do not incur those harmful consequences. I frankly do not understand what that clause means. It appears that we go full circle and then arrive at where we started. The Bill goes on to say that the object of this clause can be accomplished in three ways: first of all, the Corporation may take up debentures; secondly, the Corporation may take shares; and, thirdly, the Corporation may waive the interest upon the loan. All these three things are put forward as ways in which—to use the noble Lord's expression—the ultimate recovery of the debt can be assured. Let me take the first method—that of taking up debentures. The only advantage, or the great advantage, of a debenture, in my experience, is that it gives one priority over the ordinary creditor. That is the value of the security: the right to foreclosure of a debenture is the security for the money advanced. Now what does the Bill say? The Bill says that if the National Film Finance Corporation is satisfied that the debt cannot be recovered in any other way it can take a debenture. But this clause goes on to say that it cannot exercise the right of an ordinary debenture holder if, in the exercise of that right, the consequences are harmful to the production of films. I am sorry—I am open to be persuaded—but to me that just does not add up to common sense, especially when the National Film Finance Corporation will in the future, as it has done in the past, have to subscribe most of the working capital of the film industry. Perhaps the noble Lord, when he comes to reply, will try to persuade your Lordships that I am entirely wrong; but frankly I cannot see it, because this is down in the Bill in black and white. So that is no safeguard at all.
The second method is the taking of shares. Now, what is the good of shares as a security for a debt when a company cannot repay its loan capital? Therefore, though I am all in favour in certain circumstances of having shares as a security for a loan, I frankly cannot see the use of it in cases where a concern cannot repay its loan capital. The next thing the Corporation may do is to waive 393 the interest. Now, one or two of the final words of the noble Lord disturbed me and gave me an unpleasant feeling that my worst fears are justified. I put this question bluntly and plainly to the noble Lord, and I require an answer, if he will be kind enough to give it to mc. Is the real purpose of this Bill to authorise the National Film Finance Corporation to waive the interest—in other words to give the taxpayers' money away? If it is, that is directly opposite to the contention of the noble Lord that the object of the Bill was to safeguard the taxpayer's money. I cannot see how the second clause of this Bill really adds up to common sense. If my interpretation is correct—and again I make the proviso that I may be entirely wrong—this clause puts the National Film Finance Corporation in a worse position than it is to-day, because I can only assume that it takes the ordinary prudent course of an investor of loan capital and takes a security, a security which it can realise on at any time it thinks fit.
But the noble Lord now comes along with this Bill and says, "Oh, but you cannot realise on this security if the consequences are going to be harmful to the production of films." Anybody cart argue that if out of even a £2 million loan which provides the whole of the working capital of a concern, the Film Finance Corporation want repayment of £1 million, they cannot have it because it would be "harmful to the production of films." I hope sincerely that the noble Lord will think again. I am not leading up to a request that this Bill should be withdrawn—as the noble Lord had to withdraw a Bill on one memorable occasion in your Lordships' House not long ago—because this Bill is valuable in its first clause. But I say that it is worse than useless in its second clause.
There is another peculiar thing about this most peculiarly drafted clause. If the National Film Finance Corporation wants either to waive the interest or to forgo any of the loan, it can do so after consultation with the Board of Trade, but it does not have to get Treasury consent. Yet this is the taxpayers' money. But if the Board of Trade, in consequence of the forgoing of either interest or capital by the National Film Finance Corporation, want to forgo repaying the Treasury the money, they can do so only by getting Treasury consent. If I may use a vulgarism, that appears to me to be 394 "cock-eyed." I should have thought that if the taxpayers' money should not be given away by remission of interest or capital, in the first instance the proposal should at least receive the approbation of the Treasury; the second would come automatically. Will the noble Lord tell your Lordships this: if it is necessary to get Treasury consent for the Board of Trade not to pay the Treasury, why is it not necessary to get the consent of the Treasury for a debtor to be excused repaying his debt to the National Film Finance Corporation? Perhaps the noble Lord will tell us that.
As the noble Lord has said, the main purpose of Clause 2 of this Bill is to clean up or attempt to clean up the position or attempt to safeguard the taxpayers' money in British Lion. I should like to quote some words used by the President of the Board of Trade in another place. I hope the noble Lord will not be affronted if say that I think this puts the matter rather more concisely. This is what the President of the Board of Trade said (OFFICIAL REPORT, Commons, Vol. 520 (No. 14), col. 2032):The object of Clause 2 is to enable the Corporation to make some prudent arrangements with British Lion which would make it possible, either by reorganisation of the capital or something of that kind, to deal with the matter in a realistic way and to see what measures could best be taken to safeguard that public money in the future.I rather like the President of the Board of Trade's expression…either by reorganisation of the capital or something of that kind.…That is a nice omnibus phrase and I shall return to it in a moment. With that we agree: but how, under this Bill, can it be done? The loan from the National Film Finance Corporation to British Lion is 100 per cent. of British Lion's working capital. There is already a debenture held by the National Film Finance Corporation as security for the existing loan. I do not think it is a straight first mortgage debenture: I believe the banks come in front of it—the banks who provide the front money.
Now it is obvious that the National Film Finance Corporation, being prudent business men, have reserved £1 million of that £3 million, as the £1 million, they estimate, is lost. In other words, they value the assets of British Lion at £2 million. With that picture in mind, I 395 might ask the noble Lord: how can Clause 2 of this Bill help the Film Finance Corporation in the slightest degree, except by remitting the interest? If you examine the accounts of British Lion, you will see that British Lion live on a knife edge, and always will do while they have this £150,000 a year of interest to find: it just eats their profits. How can this Bill help them? As the noble Lord knows from his experiences when he practised law before he came on the Front Bench, if you have a debenture for a loan that has already been issued, the debenture is not valid for twelve months. Let us take it that the Corporation have a debenture. I suppose that, without this Bill, the National Film Finance Corporation could foreclose on their debenture if they thought that that was ultimately the best thing for the taxpayer; but this Bill would prevent their doing it if foreclosing on that debenture was "harmful to the production of films."
Again, may I ask the noble Lord, and repeat my question: Is it really the ultimate object of this Bill to waive the interest from British Lion? That would be very good for the shareholders, especially if British Lion could find some way of producing three Sound Barriers and were not inveigled into producing a Gilbert and Sullivan, because three films of theSound Barriercalibre would show handsome profits; and, if British Lion did not have to pay the interest of £150,000 to the National Film Finance Corporation, the shares of British Lion, which to-day are worth nothing, might be worth something. That would be very nice for the shareholder, but it would not be so good for the taxpayer, the debenture holder. Again, I would ask the noble Lord, what is he attempting to do? There is no equity in the ordinary shares of British Lion. There cannot be any equity in British Lion while the loan capital cannot be paid back. So how does this Bill help this problem one iota?
Let me return to these words of the President of the Board of Trade when he spoke ofthe reorganisation of the capital, or something of that kind.I do not think it would require this Bill, or anything in Clause 2 of this Bill, to enable the National Film Finance 396 Corporation, with the approval of the Board of Trade, to come to some arrangement with British Lion for the reorganisation of the whole of the finances of British Lion That could be done at any time. Indeed, this Bill handicaps such an arrangement because the National Film Finance Corporation will have hanging over their heads the condition that no arrangement they can make with British Lion must be "harmful to the production of films." I say that the taxpayer should be the first consideration.
I would suggest—I make the noble Lord a present of this suggestion; I think perhaps he might seriously consider with his advisers whether this is not the only practical solution—that a new financial arrangement be entered into whereby the National Film Finance Corporation hold the majority of the ordinary shares in British Lion, as well as the debentures, and forgo the interest on the loan. That would make sense; because then I feel sure the noble Lord, having been dragged to the trough so far, would take one gulp, have a deep drink and agree to the representation of the shareholders—who would then be the British taxpayers—on the Board. In my view, that is the ultimate way that British Lion should be operated. I do not say that the Corporation should own the whole of the ordinary shares, but they should have sufficient control of British Lion in ordinary shares to relieve them of the necessity of paying interest, if so desired, from year to year. Then we might find British Lion able to get out of the rut it is in and break free; but it will never do it under Clause 2 of this Bill.
I do not know whether it would be a bad thing for the State to control British Lion. It might be able to produce films that would brighten the lives of the British Broadcasting Corporation, with its television. The British Broadcasting Corporation will want some help with its programme material in the not distant future. At the present time, the British Broadcasting Corporation cannot put a film on its television service because (I hope I shall not be misunderstood) the whole of the film industry "gang up" against it. If the State or the taxpayers, who are the capital subscribers to the British Broadcasting Corporation, also owned a film producing and distributing unit, it might be very helpful. I 397 make the suggestion to the noble Lord that that may be the way out of his dilemma. I am certain that the way out of his dilemma is not as Clause 2 is written at the present time.
I have not taken three hours to voice my opposition. We will give the noble Lord his Second Reading, but we shall be careful to listen to what the noble Lord says in reply to what I have had to say, to determine our action at future stages of this Bill. If the noble Lord says to me, "It is hard to ask me to reply upon the spur of the moment to such sweeping criticism of Clause 2," and that he would like time to think about it again, I would ask him not to withdraw the Bill—that would be too unkind—but to consuls with us as to the best way of making the Bill workable. For I contend that Clause 2, as it stands, is absolutely unworkable. It does nothing to carry into effect what the noble Lori wishes to carry into effect and, in my view, will have to be either removed from the Bill or drastically altered.
§ 4.0 p.m.
§ LORD ARCHIBALD
My Lords, in recent years I have inflicted so many lengthy speeches on the House on film matters that I feel I ought to preface this one with an apology for speaking again on this subject. But since the noble Lord, Lord Mancroft, in introducing this Bill, made reference to an earlier debate and mentioned my name in connection with it, I feel that I must say something about it this afternoon. Despite the strong words of my noble friend Lord Lucas about it, the Bill that we are considering this afternoon is a very small Bill—in fact, my main criticism of it is that it is such a little Bill. In my opinion, it does not represent any serious attempt to deal with any of the fundamental problems in the industry. It is a perfect example of that sort of hand-to-mouth, short-term, interim method of dealing with things, without any long-term, well-thought-out programme—a method with which, I am bound to say, we are becoming entirely familiar from this Government, not only with regard to films but also with regard to farming, roads and practically everything else. This is not a very controversial Bill, and I may be introducing a controversial note when I say that this rather short-term, interim approach to problems may well 398 reflect the opinion of the Government that their term of office is likely to be of a rather short-term and interim character, and that their legislation should correspond with that. That may well be so. But that is no consolation for the industries and the interests that have to try to keep going at this time.
In saying that this is a little Bill, I refer particularly to the fact that it extends the life of the National Film Finance Corporation for only three years. Does anyone seriously suggest that the need for the Corporation will have passed in three years' time? Of course it will not. Therefore, it would be much more sensible if this Bill extended its life for ten years, so that in this respect, at least, producers would know for a considerable time ahead the conditions under which they would operate. I am not suggesting that with a ten years' extension there should necessarily be an increase is the funds of the Corporation; the same funds would, in effect, continue over that period. Naturally, if conditions in the industry were to get worse and the losses of the Corporation increased, the funds might run out within the ten year period; but I see no reason to believe that. The operation of what is popularly called the Eady Fund is minimising the losses, not only for the industry but for the National Film Finance Corporation, and I believe that for the next ten years the present funds of the Corporation would be adequate. I suggest, however, that the Board of Trade should also be considering how to put the Eady Fund on to a ten-year basis so that these things might link up together. To have the National Film Finance Corporation going on for three years and the Eady Fund going on for one year or two years is a quite inadequate way of approaching the matter; a long-term view is definitely required.
I come particularly to Clause 2, which, apart from the extension which we welcome, even for three years, is the really important part of the Bill. Despite the criticisms of my noble friend Lord Lucas, I suppose I must accept some responsibility for the provisions of Clause 2, because I believe that the suggestion of, in certain circumstances, taking debentures or shares was first made by me in your Lordships' House on the occasion of our debate in June last year. But I feel that my responsibility in this respect must be 399 strictly limited, because the Government have accepted only part, and not the whole, of the suggestion which I then made. What I suggested was that where loans could not be repaid without unduly harmful consequences, the National Film Finance Corporation should have the power to take shares and or debentures, and should also have representation on the board of directors of the companies concerned. As has already been stated, Clause 2 deals predominantly (though it does not say so) with the affairs of the British Lion Corporation. But before we can see how it will work, or how it is intended to work, I think we should try to understand how the loan to British Lion differs from the other loans made by the National Film Finance Corporation. It differs in certain respects, but not in all.
Let us take the case of producer X, who wants to make a film costing, say, £200,000. He comes to the National Film Finance Corporation to help him finance it. He may get a loan from the Corporation of £50,000, but the Corporation will require to be satisfied that he has got the rest of the finance, which may be mainly on a discountable guarantee from a distributor; that he has got a guarantee of completion, and that he has got a distribution contract on proper terms from a reputable distributor. They will want to approve his story, his script, his director, his cast of artistes, his budget, and all the rest of it. If they are satisfied on all those things, he will get a loan of, say, £50,000. If, when that film is made, the Corporation is not seriously dissatisfied with the producer, he may in the same way get a further loan of £50,000 for his next film. It may even be that he will get a third loan of £50,000 for his third film, before the revenues have come in sufficiently on the first one to repay the first loan. In other words, that individual producer has been provided by the National Film Finance Corporation with a working capital of perhaps £150,000, which is just as much a permanent loan as the £3 million loan to the British Lion Corporation.
But what is the difference? The difference is that if at any date the National Film Finance Corporation becomes dissatisfied with producer X, because it is considered that he has put up a poor 400 script, a bad director or unsatisfactory artistes, or because he has overspent on his budget on the last film, it can say, "Sorry, Mr. Producer X; no further loan for you"—and it is only one film at a time that is involved. The Finance Corporation can say that the cessation of his production does not involve, in the words of Clause 2, "harmful consequences to the production of films." I am not as clear as I should like to be about the wording of subsection (1), but dealing with it in common-sense terms it seems to me that the cessation of producer X's activities would not infringe that particular provision. The refusal of loans would have to apply to twenty such producers before the provision about "harmful consequences to the production of films" would arise. But, having told him, "No more loans for you," what happens? The National Film Finance Corporation sit back and wait for the revenue to come in from the films which he has already made; and as this revenue comes in the loans already made to him are repaid, in whole or in part, according to the success of the films.
At this particular point, the British Lion loan is quite different. I have heard for the first time this afternoon one piece of information which I believe was not common knowledge—that is, that the National Film Finance Corporation has a debenture as security for that loan. All we have known in the past is that the loan was made before the National Film Finance Corporation was formed, before even the National Film Finance Company, which preceded the Corporation, was formed. It was made in a great hurry, and we have never really known anything worth while about the security for it, the proposed terms of repayment or anything else. We know that there has not been given to the National Film Finance Corporation that right of approval of story, script, director, artistes, budget and so on, which the Corporation has with regard to all the individual producers to whom it normally makes loans.
It is easy to be wise after the event, and I may be accused of that; but I have always had doubts about the original wisdom of rushing this particular loan. We have been told—I think it has been repeated to-day—that if the loan had not been made with that extreme haste there would have been a 401 catastrophic collapse in British film production. I think we accepted that a little easily. A little delay while terms and conditions and rights of approval were worked out might have meant a temporary slowing down, or even a temporary cessation, of production from that particular group. That, obviously, would have been an undesirable consequence, but it would not have meant a catastrophe. It would have meant that the approvals could have been worked out without trespassing on the proper freedom of the creative people. I think the obvious temporary disadvantages would have been outweighed by the long-term advantages from having all these approvals as part of the loan conditions. Control over the use of the loan, I think, would have been very desirable.
May I make one point with regard to this matter? I think that the proper terms and approvals, perhaps even the delay itself, might have been very conducive to economy in production. We have heard it said on many occasions, by and for the National Film Finance Corporation, what a great contribution it has made to producing economy in the British film industry. The fact that the introduction of economies followed the setting up of the National Film Finance Corporation does not necessarily mean that economies were caused by the Corporation. In my view, this is a case—I do not want to upset any of the Latinists in your Lordships' House—of post hoc, not propter hoc. Economies were caused by the condition of the film industry But the greatest opportunity for economy was lost by reason of the precipitate manner in which the loan was made to British Lion, for the fact that British Lion was outside the sphere of control rendered economies in that particular group quite outside the National Film Finance Corporation's purview. That is perhaps crying over spilt milk, but it has its relevance to future dealings with that £3 million loan and this particular Corporation.
A £3 million loan has been matte to a company which, I believe, has an issued capital of something like £340,000 in ordinary and preference shares. I do not know what its other borrowings are, but Lord Lucas cannot be far wrong when he says that the £3 million loan constitutes not all but the major part of its working capital. I instanced, in the case of individual producers, how the 402 National Film Finance Corporation can stop loans without doing harm to film production as a whole. But if the Corporation demanded repayment of the £3 million British Lion loan, clearly that would mean that when films now in production had been completed, British Lion would have to stop producing films altogether. That, I think we must all accept, would be quite wrong; it would be definitely harmful to the whole of British film production. If you stopped British Lion's production when films now "on the floor" or in the cutting room were completed you could sit back and take the revenue from all its older films, current films and new films, and get back probably a very substantial part of the £3 million—possibly more than the £2 million which the National Film Finance Corporation now estimates the group's assets to he worth. We do not know how much would be recovered but we know that to create that situation would be to bring about harmful consequences to British film production. Therefore, by general agreement we rule it out. We say that the £3 million must remain as a more or less permanent loan, and we must consider, therefore, under what conditions that money should remain as a more or less permanent loan.
May I just interpolate a point which I mentioned before the debate to the noble Lord, Lord Mancroft? I am a little concerned about the wording—not being myself a lawyer—in Clause 2 to the effect that the Corporation may take shares or debentures. Does that mean that if it takes shares it may not take debentures, or that if it takes debentures it may not take shares? I imagine that one may read these words in the common sense way—that is to say, as meaning "shares and/or debentures."
§ LORD ARCHIBALD
In that case, I suggest that Lord Lucas of Chilworth is putting forward a reasonable suggestion. He proposes that the National Film Finance Corporation should take such a proportion of shares as will give control over the company; that Clause 2 should be amended to provide that the taking of snares may also carry with it representation on the board, corresponding to the shareholding, whether it be majority or minority; 403 and that the Finance Corporation should take a debenture for the rest—in effect that we should make the new situation correspond with the present actual situation. Where the Government are a major shareholder they should have the control of the board.
That is all I want to say on the British Lion matter. May I for a moment ask the National Film Finance Corporation, in its extended period of life, to give further consideration to a point which I argued on a previous occasion—I will not argue it in detail again? It is a point with regard to the percentages of revenue going to the distributor and to the producer. I have argued before that the distributor gets too high a percentage of the films' revenues. That high percentage was justified in the past by the fact that the distributor guaranteed, as a rule, 70 per cent. of the cost of the film and on many occasions, did not recover the 70 per cent. which he had guaranteed: and that distribution percentage on all films had to provide a pool out of which he met his costs. Now that the Eady Fund is operating, while not all films will get back 100 per cent. of costs, it will be only on very rare occasions that they will not get back 70 cent. That being so, the distributor's guarantee now involves little or no risk, and I suggest that his distribution percentage should be reduced accordingly. That would mean a higher percentage of revenue for producers, and would give British Lion and all other producers a better chance of getting back their investment in production costs.
This would not require a clause in the Bill; it would not need any legislation. It is something that could be done administratively by the National Film Finance Corporation. They will not give a loan to a producer until they have evidence that he has a distribution contract with a reputable distributor. If they will simply make it clear that they are not going to give loans unless the distribution contracts provide for a more reasonable distribution fee, it will not be long, I think, before the terms of the contracts are rewritten in that respect. I commend to the board and to the new managing director of the National Film Finance Corporation, whom I am sure we all wish well, that they give that matter their attention in the near future.
404 As your Lordships will agree, I have not attempted to cover any of the major problems of the industry, because as by custom these fall to be discussed on the Report of the Corporation, we shall have an opportunity later on in the year for that. Despite my criticism of the Bill, particularly of the limited term of three years, I wish it well.
§ 4.23 p.m.
§ LORD REITH
My Lords, I am sure that the present directors of the National Film Finance Corporation will have regard to the suggestion that the noble Lord, Lord Archibald, has just made about the conditions of their ordinary loans. He is entirely right—the British Lion loan commitment was made before even the embryonic Company was established, let alone the National Film Finance Corporation; and it was unfortunate. The Corporation were pretty quickly aware that when that commitment was made, conditions might have been attached to it which in normal circumstances would have been attached. The National Film Finance Corporation were dependent to a large extent on the amenability or good nature of British Lion in looking after the money which the Corporation were committed to lend. That was not very good.
On the chief point made by the noble Lord, Lord Lucas of Chilworth, and referred to by the noble Lord, Lord Archibald, I agree that Clause 2 is not an easy one to understand. It is irritating when one has to read a clause two or three times and then, in the end, is still not certain about what exactly is intended. I read the clause, however, in this way—and I hope the noble Lord, Lord Mancroft, will be able to confirm my reading. There is nothing that Lord Lucas of Chilworth wishes the Corporation to be able to do that in fact they are not either already able to do or are empowered to do by this clause. My understanding is that this clause is put in in order to remove the doubt, which existed in the minds of some people (and there is an eminent lawyer on the board of the Corporation), as to whether the Corporation could do what they might want to do in respect of this loan.
The loan is covered by a debenture of unspecified amount on the whole of the assets of British Lion. The loan is 405 £3 millions—the noble Lord, Lord Lucas of Chilworth, is quite right in his reckoning. One-third of that may not be realisable, so they have made a provision of £1 million. As to the rest, they have a first charge on all assets, subject only, as Lord Lucas of Chilworth indicated, to the charge given to British Electric Traction on two particular films and then to a first charge for any bank advances for particular films. The Corporation's estimate of what can be realised if they take drastic action is £2 million. Of course, this loan is on call, as Lord Lucas of Chilworth knows, but it would be most unfortunate if a call were exercised, as both Lord Lucas of Chilworth and Lord Archibald agree. The noble Lord, Lord Mancroft, will be able to say whether I am right or wrong.
I am sure the present directorate of the Corporation will be greatly encouraged by the views which have been expressed by all three speakers to-day. I should like to add my tribute to Mr. Lawrie, for his devotion and efficiency were beyond praise. Personally, I am glad that Mr. Kingsley is returning to the Corporation, where he did such good work and where he will be immensely advantaged by knowing already so much of the country. As the noble Lord, Lord Mancroft, said, the Corporation started at a time of crisis. I should like to pay tribute to Mr. Harold Wilson, who put the thing through and took great personal interest in it, and to what the Corporation have accomplished—the production of over 250 films which probably would not have been produced but for the assistance and work of the National Film Finance Corporation. The Corporation took note of the precarious position in which the independent producers found themselves and took care of them to good purposes. Most of them are still with us to-day. It is more than doubtful whether many of them would have survived the crisis.
I do not think that the Corporation tried to give themselves credit for having put more financial discipline into the organisation of which, until recently, the noble Lord. Lord Archibald, was an ornament, but I think they put financial discipline over most of the people with whom they dealt—the independent producers and so forth—and perhaps even assisted the big organisations, J.A.R.O., A.B.P.C. and British Lion, in the measures they 406 had already taken to impose economies and eliminate extravagances. I think they are entitled to a little more credit for what they did in this matter than Lord Archibald was inclined to give. The complimentary observations of the noble Lord, Lord Mancroft, whose exposition of the case was excellent, and of the noble Lords, Lord Lucas of Chilworth and Lord Archibald, should be a considerable encouragement to those who compose the Corporation now and to the new managing director.
§ 4.30 p.m.
§ LORD MANCROFT
My Lords, the three noble Lords who have been good enough to take part in the debate have welcomed this Bill with varying degrees of warmth and enthusiasm. The noble Lord, Lord Lucas, was to a certain degree cool; the noble Lord, Lord Archibald, who sits behind him, was a little warmer; and the noble, Lord, Lord Reith, was a good deal warmer than that. I should like to thank the noble Lords with corresponding and equivalent amounts of enthusiasm. They have the great advantage over me of being experts. I am the veriest amateur, my knowledge confined almost entirely to the back row of the "three-and-sixpennies."
My task is made somewhat easier by the kindness of the noble Lord. Lord Reith (and who can speak better than he?) in that he has answered almost all the major points made by the noble Lord, Lord Lucas, and the noble Lord, Lord Archibald. He could not answer one general point made by the noble Lord, Lord Lucas, and I will do that straight away. The noble Lord suggested, kindly enough, that I might not be able to follow completely the complexities and details of the financial proposals he was making, and he suggested that I might care to take advice. I will, of course, take his advice, and that of other people as well. I will look carefully into what he has suggested. But I will tell him at once that two or three of his proposals completely defeated me. If I can help him in any way, or offer him such advice as is available to me, he is welcome to it.
I feel that the noble Lord made very heavy weather of Clause 2 of the Bill. I would ask him when he looks at it again to read into it two proverbs which cannot 407 be written into an Act of Parliament. The first one is:Cast thy bread upon the waters: for thou shalt find it after many days.That applies notably to the film industry in its difficult state at the moment. The other proverb is:Don't kill the goose that lays the golden egg,even if the eggs are small, and few and far between. That is, after all, the spirit of this clause. The noble Lord made great fun of it, but in point of fact what he did was to take out one or two passages from the clause and try to apply them to particular circumstances which we all have in mind. He greatly played down the overriding intention of the clause, which is that…the Corporation may with the approval of the Board of Trade enter into any financial arrangements with respect to that loan which, in the judgment of the Corporation, are calculated to lead to the eventual recovery without such harmful consequences as aforesaid.…I agree that one or two of the extracts which the noble Lord took out of the latter part of the clause, and out of context, may sound odd in the way he put them, if you neglect the overriding meaning and purpose of the clause. I must confess that I became lost in one or two of his ingenious proposals. I will have them examined carefully, and if they seem to contain the merit which the noble Lord clearly thinks they contain, I will do my best to help him.
To the noble Lord, Lord Archibald, I would only say this about his reference to the short period of three years which is envisaged by the Bill. The noble Lord now proposes ten years, with the possibility of ten years for the Eady Fund as well. Any guess and any period can be defended. I tried to explain to your Lordships why the Government have 408 "settled for" the period of three years, without attaching any particular magic to that period. Coming from the noble Lord, Lord Archibald, the proposal for ten years seems to me to suggest the outside fringe of nationalisation—the noble Lord shakes his head, and I must take his word for it; but that was the first impression his suggestion made upon me.
§ LORD ARCHIBALD
If I may be excused for interrupting, my intention was entirely to give those outstanding exponents of private enterprise, the individualists of the film industry, what I regard as a reasonable period in which to look ahead, to make their plans and to operate.
§ LORD MANCROFT
I am comforted to hear that remark from the noble Lord. The Bill is merely an attempt to achieve the same object which the noble Lord wants to achieve, but I think that three years is about as far as we want to go at the moment. The noble Lord, Lord Reith, answered the point made by the noble Lord, Lord Archibald, concerning the original British Lion loan. The noble Lord, Lord Archibald, thought that the word "crisis" was a little lightly bandied about at the time when that loan was made. He may well be right. But as the Government of which I have the honour to be a junior member was not the Government at that time, I must ask not to be charged with any responsibility for that. I am grateful to the House for having accorded this Bill such a gentle passage. I assure noble Lords who have put forward technical suggestions that I will do my best to see that they are all treated with the sincerity with which they are offered.
§ On Question, Bill read 2ª, and committed to a Committee of the Whole House.