§ 2.40 p.m.
§ LORD MANCROFT rose to move, That the Draft Cinematograph Films (Collection of Levy) Regulations, 1957, reported from the Special Orders Committee on the 10th of July, be approved. The noble Lord said: My Lords, your Lordships will recall that the Cinematograph Films Act which was passed earlier this year instituted a statutory levy on cinema seats, the proceeds of which were to go to the help of British film producers. This levy will take the place of a scheme, familiarly known as the "Eady Levy", which the film trade have operated successfully for six years but which will terminate in October this year. The regulations now before your Lordships' House for approval are made under that Act and provide for the collection and distribution of the levy respectively.
§ Let me turn first to the question of collecting. In preparing the regulations for the collection of the levy (which will be undertaken by Her Majesty's Commissioners of Customs and Excise) the Government have carried out their obligations to consult the Cinematograph Films Council which, as your Lordships will 86 remember, is representative of all film industry interests, including producers, distributors and exhibitors. They have also implemented their pledge to consult the industry on these regulations, and have encountered a surprising measure of agreement on what the regulations should contain. Though the regulations are couched in very different terms from the rules of the old trade-operated scheme, to which I have just referred, I think closer inspection will reveal that in fact they owe a great deal to that scheme. Statutory Instruments tend to wear a somewhat austere look, but beneath the statutory prose of these regulations will be found such cheerful news for the industry as a lightening of the burden of the levy for cinemas with cheaper seats; more generous exemption arrangements; and an attempt to give exhibitors greater freedom to increase their scat prices.
§ A lot has been said—a lot was said during our debates on the Bill—about the plight of the small exhibitor, and the changes I have referred to will, I think, be welcome in that quarter. The popular 1s. and 1s. 10d. seats can, under the scale chosen, move up to 1s. 3d. and 2s. respectively without any increase in levy. By changing the exemption limit from £150 gross weekly takings to £150 net weekly takings (that is, £150 exclusive of entertainments duty) we are raising the exemption limit by something of the order of £40; that is, to £190 gross—the actual figure depends on the range of seat prices in each particular cinema. We should have liked to arrange a sliding scale for the exemption scheme which would have benefited some of the larger cinemas which, despite weekly takings exceeding £150 net, are not doing too well; but apart from the difficulties in working out a scale which really limited this help to cases in which it was needed, it would, I think, have borne very heavily on the rest of the exhibitors who would have had to carry the burden of their weaker brethren. We have had to bear in mind our statutory duty to raise £3¾ million. This, of course, limits the ability to give relief.
§ As for the estimate of £3¾ million, there are a number of variable factors which may throw out our calculations: the present downward trend of admissions into cinemas may alter; we may be wrong in the allowances we have made 87 for changes in seat prices, and our assessment of the loss of levy due to the new exemption scheme may be wide of the mark. Statistical exercises have been carried out and we have sought advice from all relevant sources except the Meteorological Office. I think that perhaps we ought to have consulted the Meteorological Office. because, of course, an exceptional summer, either very wet or very dry, makes a great deal of difference to cinema admissions and to the return from the levy.
§ Turning now to the regulations for the distribution of the Levy Fund among British film producers, your Lordships will find that most of the old well-tried arrangements for the trade-operated scheme remain: distribution of levy in proportion to earnings; short films get special support; Government films and television films still remain outside the benefits of the scheme provisional payments are made to producers. The principal changes in appearance from the trade-operated scheme arise from the fact that claimants have definite legal rights to payment and can, if necessary, sue the British Film Fund Agency, which, as your Lordships will remember, is the body set up under the Act to distribute the proceeds of the levy for the benefit of the producers. There are other differences but they are quite minor ones.
§ One change in the trade-operated scheme which had been hoped for. I know, in some quarters, but which the Government did not feel able to make. was the provision of special help for second-feature films on lines similar to those obtaining for short films which, as your Lordships will note from regulation 6, have their earnings multiplied by two and a half in calculating their share of the levy. Considerable support for this proposal had to be weighed against the view that if cinema patrons want to see second-feature films, and will not come unless they do, it must be in the interests of both exhibitors and first-feature producers to see that such films receive an economic rent.
§ The showman in the film industry may try to make us believe that economic laws do not apply to the film industry, and that other means must be found for financing long supporting films which the public insist on seeing, even though the box office 88 takings are not sufficient to provide an economic rental for such films. But the Government have concluded that the solution of this problem must be left to normal market forces. Affairs in the film industry, already complex enough, in all conscience, will become even more tangled if the Government give their sanction to a device which ignores the usual laws of supply and demand. Admittedly, short films receive special support and to that extent the normal economic processes are distorted. It is frequently observed that the rent of short films is further depressed because their share of the levy is known to be multiplied by two and a half. We cannot undo this damage and, therefore, for the time being, have made provision in the regulations for the arrangement to continue; but this is no reason for extending a bad principle to second-feature films.
§ Considerable disquiet was expressed—I think your Lordships' voiced it more than once in the course of our debates—about the risk of unscrupulous people abusing the Fund. Our consultations have disclosed support from all quarters for the view that, in order to provide a flexible means of dealing with this threat, the British Film Fund Agency must be left with a good deal of discretion. In regulation 6, bounds have been put to this discretion.
The British Film Fund Agency, whose task it will be to operate these regulations, was set up on July 1 and, subject to the approval of the regulations by both Houses of Parliament, the stage is now set for the operation of this statutory levy which marks a fresh chapter in the Government's efforts to see that the production of British films is maintained at a reasonable level. The report of the National Film Finance Corporation, recently published, provides us with figures which indicate that, with the increased levy, British film production is likely to show an aggregate profit. The Report says in paragraph 32
… recent reports indicate that British films are doing exceptionally well in the U.K.
and adds that
it is satisfactory to note that the industry's efforts are being directed towards increasing returns from overseas markets which can provide a substantial source of income for successful British films ".
It is the Government's hope that the industry, secure in the knowledge that
support for the Fund will be available for ten years, will settle down to make films which match up to the highest international standards and will win, not simply fresh laurels, but a firm and enlarged place in the world market—in other words, profits. I beg to move.
§ Moved, That the Draft Cinematograph Films (Collection of Levy) Regulations. 1957, reported from the Special Orders Committee on July 10, be approved.—(Lord Mancroft.)
§ 2.50 p.m.
§ LORD LUCAS OF CHILWORTH
My Lords, the noble Lord has presented these regulations to your Lordships' House with his usual clarity and more than his usual naïveté of manner. I do not contest any of them, except the one that is missing. The noble Lord and I had a passage of arms not a week ago on what constituted an undertaking from Her Majesty's Government. May I remind him of the undertaking he gave to your Lordships' House, which in these regulations remains unfulfilled? I agree with the noble Lord that one or two things the Government have done in these regulations will ease the burden on the smaller cinemas. Reckoning the levy at £150 net instead of £150 gross, which works out in the region of £190 gross, is a distinct advantage, but the noble Lord knows well—he has tried to gloss it over—that he has left out the section of the exhibiting trade which deserves far more sympathy than the Government have given it.
I want to draw the noble Lord's attention to the undertaking he gave during the Committee stage of the Bill. On January 29, I moved an Amendment to the Bill to institute a system of imposing this levy on cinemas which would largely do away with borderline cases. The noble Lord turned it down on the ground that it was difficult. Of course, justice is always difficult. It is so easy to be dictatorial, to issue regulations that are cast-iron, and it is so difficult to have the milk of human kindness, which I have never associated with either the Inland Revenue or the Customs and Excise but which operated when this levy was a voluntary one carried out by the trade itself. On January 29 I said [OFFICIAL REPORT, Vol. 201, col. 212]:I think the noble Lord will agree with me that it would be fair that the exhibitor should al least see that his standing charges are covered before he has to pay a levy to 90 make another section of the industry more profitable—in other words, he should not be asked to pay a levy to the producers if he himself is losing money.I think that your Lordships will agree that that principle is fundamental.
The noble Lord made a charming reply. He said [col. 214]:… my ears are … flapping receptively towards the ingenious plan of the noble Lord, Lord Lucas of Chilworth.… I have only to remind your Lordships of my own remarks on the Second Reading of this Bill [OFFICIAL, REPORT, Vol. 200 (No. 21), cal. 13371:I should like also to reassure your Lordships that, under the regulations to be made in accordance with Clause 2 of the Bill, there will be provision to exempt exhibitors, in suitable cases, from the burden of the levy.The noble Lord went on to say:That remains our intention. We are certainly going to exempt those who would be unfairly hit or ruined by the burden of the levy.That is precisely what Her Majesty's Government have not done. There are cinemas whose gross takings are just over £200, and when they have to pay the levy—and do not let us forget That although the Government reduced entertainments duty by £3½ million in the last Finance Bill, the levy has been increased and 50 per cent. of that reduction has now been absorbed in the increase in the levy—they have to pay it out of their losses. When the levy was voluntary, there was an arrangement with the renters—that is the wholesalers—that when on an accounting statement an exhibitor could prove that by paying the levy he would lose money, the renter reduced his rent for films, and if that did not meet the case collection would not be enforced. I would ask the noble Lord this question quite plainly: does he think that by sacrificing the medium-sized cinema, which will undoubtedly lose money and get into the red by the imposition of an increased levy, he is carrying out his undertaking? I repeat it:That remains our intention. We are certainly going to exempt those who would be unfairly hit …I do not say that they will be ruined.
The noble Lord put forward as a recommendation for these regulations—I wrote his words clown because I thought they were worth writing down—that the regulations:give greater freedom to increase the seat prices.91 May I, as an ordinary commercial practitioner, tell the noble Lord that you need only to increase the price of cinema seats to-day, not merely to get into the red but to get into the bankruptcy court? Those who have tried to recoup themselves for the extra levy by increasing prices have found that their patrons either go down the seat scale and sit in the cheaper seats or stay at home and look at their television sets. The fact that it is difficult to administer the scheme fairly is no excuse for bringing in hardship.
I want to put this suggestion to the noble Lord, because there is still time for something to be done under Section 2 (2) of the Act, under which these regulations are made. The noble Lord will remember that we had a long discussion on the part the Films Council should play in the administration of this levy and of all the difficulties that might arise from it. I am going to suggest to him that a regulation be framed to provide that if any cinema in this country finds that by the payment of this levy—which, again I remind your Lordships, is a levy so that the production side of the industry can operate at a profit—it is involved in a loss, a statement of the case, properly authenticated by accounting material, to the Films Council, shall be grounds for exemption. As the Act is drafted and as these regulations are drafted, the statutory duties placed on the Customs and Excise are cast-iron. There is no bending in them at all. I ask the noble Lord seriously to consider that.
The rest of the regulations faithfully interpret all the undertakings given by the Government. I am not so much concerned with the second regulation, dealing with the dispensation of the levy; I think it is right, and I do not see any difficulty there. But it is useless to deny that cinemas are closing every day. Do the Government want cinemas to close? It is no good riding this off. You have given £3½ million relief in taxation, and you have increased the levy by 50 per cent. A lot of cinemas cannot withstand the competition, and they are closing down. The noble Lord, Lord Mancroft, has admitted that there are some who will find themselves in difficulty over this levy, and the only solution that I heard him put forward was that they now have greater freedom to increase the prices for 92 seats. You might as well say that they have greater freedom to jump off Westminster Bridge. Perhaps the noble Lord can say something further on that matter. Apart from that, I welcome these regulations.
§ 3.2 p.m.
§ LORD STRABOLGI
My Lords, I should like to support what my noble friend Lord Lucas of Chilworth has said. The noble Lord, Lord Mancroft, in introducing this regulation, referred to the concessions which the Government have made to the cinema industry and said he thought that this was "cheerful news". Well, my Lords, I do not think it can be cheerful news for the larger type of cinema referred to by my noble friend. Concessions have been made in regard to cinemas taking under £150 a week, and certain concessions for the marginal cases. But the concession which the cinema trade understood, from remarks made in general terms during the debates, that the Government were going to make, has been left out of this particular statutory instrument. I refer to the larger type of cinema which is taking over £150 a week and is still making a loss.
Under the voluntary scheme, the Eady scheme, arrangements were made for these cinemas to get a certain reduction in film hire; and if this did not suffice to keep them out of the red they were then excused the levy. There is no provision for this in the Government's regulations. Furthermore, under the voluntary scheme there was considerable co-operation from the renters to allow the levy to be deducted before the percentage for film hire was calculated. I understand that so far, since this arrangement has become statutory rather than voluntary, the renters have not committed themselves to saying that this will continue under the statutory scheme. However, it is to be hoped that it will, and I understand that the matter is at present being discussed. This is really a matter between the various sections of the trade, but I have raised it because it is an important factor and it is one of the things that the exhibitors have to take into account—that is, their treatment from renters quite apart from their treatment by the Government.
I understand that the Government consider that the larger type of cinema is not entitled to these concessions because of 93 the great reductions they have made in entertainments tax. All figures are comparative, of course, and I suppose £6½ million is a large sum; but it is considerably less than the amount that we hoped the Government would give in the last Budget. Offset against it must be the £1¼ million from the additional levy; then there is the sum of £3¾ million which is the film hire on the balance; and, in addition, there are the wage increases which have effect from July 1 last, amounting to over £1 million. If one subtracts these from the £6½ million entertainments duty concession one finds that the exhibitors will really have in hand only £2¼ million. I should have thought that the argument that the Government have given this great concession in entertainments tax is really not so strong as they may perhaps think.
The Government also consider, I think, that the larger type of cinema should increase its seat prices; but I am informed that many of these cinemas are second run exhibitors (as it is called in the trade) and it is difficult for this type of exhibitor to put up his prices without losing revenue. Therefore, I should like to support warmly the suggestion that my noble friend Lord Lucas of Chilworth has made: that at an early date the President of the board of Trade should issue another statutory regulation to cover this particular kind of cinema. I should have thought that this would be of advantage to the producers and the renters as well as to the exhibitors. Surely it is not in the interests of any section of the trade that cinemas should close down. It seems to me much better that a cinema should remain open and be a source of film hire, even if it is not paying a levy, rather than that it should close down altogether. I say that purely from the point of view of supply and demand, an argument which the noble Lord, Lord Mancroft, put forward, and I do not intend at this stage to go into the other advantages of the cinema from the cultural and entertainment point of view.
I understand that the Government are waiting to see how these regulations work out in practice. Well, while one is seeing how something works out in practice, cinemas are closing down; the livelihood of many people is coming to an end and the entertainment of the patrons whom 94 they serve is in many ways coming to an end also. I hope that although the Government have left out the larger type of cinema from these particular regulations, they will at an early date bring in some other instrument to give them the relief which they need and deserve.
§ 3.8 p.m.
§ LORD ARCHIBALD
My Lords, I am going to say only one or two words upon this Motion. I associate myself with the general arguments which have been put forward by my noble friends Lord Lucas of Chilworth and Lord Strabolgi on the missing regulation, as it might be called, but as I think they have put the whole of the arguments, I need not go into them further. I have been more concerned with the second set of regulations, dealing with the distribution of the levy, and rise mainly to say that I think a tribute is due lo be paid to the Board of Trade for the way in which they have carried out the undertaking of their consultations with the industry. So far as my experience goes—and it does not cover the whole of the production side of the industry—the consultations have been extremely well carried out.
That does not mean that I am 100 per cent. in agreement with the regulations as framed; but I am not stupid enough to say that the Board of Trade are wrong in the way they have drawn them and that the way in which I should have drawn them would be right. Taking it by and large, I think they have done an exceptionally good job in the drawing up of the second set of regulations, and I think it is only fair that that should be said. I would add only that on the one possible controversial item in the second set of regulations, like the noble Lord, Lord Mancroft, I will shed no tears over the fact that there is no additional payment out of the fund for second feature films. I think that the decision on that matter has been a wise one. If consideration could be given to the point which has been made by my noble friends, I think that, by and large, one could say that an excellent job had been done.
§ 3.10 p.m.
§ LORD MANCROFT
My Lords, with the exception of this rather difficult point of the medium-sized cinema which may be finding itself in difficulties, your Lordships seem tolerably fond of these regulations. I emphasise that, just to make 95 certain that your Lordships' appreciation, which was uttered in smaller voices than your Lordships' dislike, should not go unheard. I admit at once that it is a controversial question and we have had a lot of trouble with it. But in view of the reduction in entertainment duty and the more generous exemption limit, as well as the reduction of levy on the cheaper seats, I venture to express the hope that the number of cinemas which find it difficult to operate profitably will be greatly reduced. If there are some left in this category—as there may well be; I do not deny that—I hope the new levy and duty scales will enable them to retain a larger proportion of any increases in seat prices which they may feel obliged to make than was formerly the case. The noble Lord, Lord Lucas of Chilworth, was harsh about the increase of seat prices, but he will bear in mind that this point has been widely discussed in the trade Press. It is a matter of opinion. I readily agree.
Then we turn to the suggestion that the Cinematograph Films Council might advise the Board of Trade on the desirability of granting exemption in individual cases of hardship. That, I must admit, is not one which commends itself to the Government. I am afraid it would lay upon the Council the rather invidious task of advising on matters which would directly concern the pockets of other members of the film industry. Another point is that any such scheme would have to rest on audited accounts which, in turn, would have to be examined and submitted to the Council with the aid of professional advice, and there, again, is more expense. Reviews of each case would have to be made at frequent intervals, as I am sure the noble Lord, Lord Strabolgi, appreciates, and the inability to pay, and the reasons for it, might vary widely. It would be necessary to consider, not simply whether a loss was being made, but why. For example, in some cases—this is obviously so—it might be due to sheer inefficiency.
I hope I am not sounding unsympathetic. I think there is general sympathy for the exhibitor who, through no fault of his own, is in difficulties and yet is 96 required to make a contribution to the welfare of British film producers. But to deal with this sort of case under a statutory scheme is much more difficult than under a flexible, trade-operated scheme. This lack of flexibility is one of the disadvantages which had always been foreseen when the institution of a statutory scheme was under discussion. I hope I am not sounding unsympathetic, but I rather think that in the circumstances we shall have to see how the regulations work out.
§ LORD LUCAS OF CHILWORTH
My Lords, before the noble Lord loses his sympathetic tone and hardens his heart, would be consent to do this? If, through the appropriate channels of the trade, representations are made at some distant date, when experience has been gained, that there is a degree of hardship on the cinemas, will the noble Lord give an undertaking that it will be sympathetically considered by the Board of Trade?
§ LORD MANCROFT
My Lords, the noble Lord has taken some, but not all, of the words out of my mouth. What I was going to say in conclusion was this. If the dire results which the noble Lord. Lord Lucas of Chilworth, and his colleagues behind him fear do occur, then I say that the point will have to be looked at again. It will have to be looked at in the light of developments. I hope it will not, and I hope noble Lords will all be proved wrong and myself, for once, be right. That would be very comforting.
§ On Question, Motion agreed to.