§ 11.55 a.m.
§ EARL FERRERS rose to move, That the Draft Cinematograph Films (Collection of Levy) (Amendment No. 2) Regulations 1971, laid before the House on July 1, be approved. The noble Earl said: My Lords, the Acts provide for the imposition of a levy on exhibitors of cinematograph films, and for payments from that levy to makers of British films and for some other purposes. Under Section 2 of the 1957 Act, the Department of Trade and Industry is required, after consulting the Cinematograph Films Council, to make regulations prescribing the rate and the method of collection of the levy. The regulations require the prior approval of Parliament by Resolution of each House. In determining the rate of levy, the Statute requires that regard should be paid to the prevailing economic circumstances of cinema exhibitors and of makers of British films, as well as to the prevailing level of films production. It also provides for action to ensure that the yield in a year of 52 weeks does not fall below £2 million, nor exceed £5 million. The rate of levy payable at present—that is, since the last change in the rate which took place in 1968—is one-ninth of that price of a cinema seat which exceeds 7½p, with the exception to which I shall refer in a moment which is the subject of the Resolution now before your Lordships.
§ All cinemas which show films publicly must pay this levy. The yield of the levy reached about £4.6 million in both 1964–65 and 1965–66. In the following year, the yield was approaching the statutory limit of £5 million, and in July, 645 1968, having regard to the rate at which cinemas were closing and to the high level of activity in the film studios in this country, Parliament approved a change in the levy-free portion of the admission charge, raising this to the present rate of 7½p.
§ The result was that the yield in the levy period 1968–69, which was the first full period after the change took place, fell to a little over £4 million. In the latest complete period, up to October, 1970, it had increased to £4.2 million, and the yield so far in the present year suggests that unless there are any unforeseen changes by the year's end, the yield will be something under £4.5 million by October 2. I refer to the exemption which is the subject of this Resolution. The regulations provide that if a cinema's weekly takings are below a specified figure, no levy at all is payable. The figure was fixed at £150 in 1957, and it was increased in stages until it reached £400 in 1967. It still is £400.
§ Representations were made earlier this year by the Cinematograph Exhibitors' Association for a reduction in the size of the levy. They asked, first, that the levy-free portion of the price of a cinema seat should be increased from 7½p to 10p; secondly, that the rate of the levy should be reduced from one-ninth to one-tenth of that part of the seat price which exceeds 10p; thirdly, the maximum weekly takings below which the levy would not be payable should be raised from £400 to £450. The Association of Independent Cinemas wanted the maximum weekly takings for exemption purposes raised to £500. As is required by Statute, the Department of Trade and Industry consulted the Cinematograph Films Council, which recommended that, while there was no case for reducing the rate of the levy, cinemas with low takings merited some further assistance, and that the exemption limit should be raised from £400 to £500. The Department accepted that recommendation.
§ This change of itself is not expected to have any considerable effect on the yield of the levy. As I have already pointed out, the Department of Trade and Industry has a duty to keep a constant watch on the yield, and your Lordships can be assured that this will be maintained. The amount of levy collected, both in absolute terms and in 646 terms of a percentage of total box office takings, as well as the level of production in British studios and the rate at which cinemas are still closing, are all factors which would be taken into account.
§ It is expected that in the main those who will benefit from the minor change now before the House will be owners of those cinemas which are at present only just able to pay their way. It is certainly not in the interests of producers that cinemas should close and this small change may help some which would otherwise have closed to remain in business. I beg to move.
§ Moved, That the Draft Cinematograph Films (Collection of Levy) (Amendment No. 2) Regulations 1971, laid before the House on 1st July, be approved.—(Earl Ferrers.)
§ 12.2 p.m.
§ LORD STRABOLGI
My Lords, I am sure that the House is grateful to the noble Earl for explaining the provisions of the Order, and for the very clear way in which he has gone into this particularly detailed and rather complicated matter. He has told the House of the different representations made by the Cinematograph Exhibitors' Association and the Association of Independent Cinemas, which varied slightly in detail, but I am very glad that the Government have consulted the Cinematograph Films Council, and have agreed to exempt cinemas with maximum weekly takings of up to £500. This is approved, and, indeed, has been welcomed by the Cinematograph Exhibitors Association, the larger of the associations.
The effect of the Regulations will be that cinemas with up to about £26,000 annual box office receipts will be exempted. As the noble Earl said, this will help many cinemas which have been having difficulties, due not only to rising operating costs, but also to declining audiences, to remain in business. I should therefore like to say that we on this side of the House will welcome this Order.
However, I should like to ask the Government whether they will consider the long-term effects of this policy in the light of the changing industry. I think that the Eady Levy, as it is called, which was started by the Labour Government after the war, has been tremendously 647 successful in ploughing back finance into production. Indeed, it has been one of the main reasons which have encouraged American producers to come here and make films over the last 25 years on a co-production basis. As a result, we have had several hundred very notable British films.
Nevertheless, the industry is changing. Audiences are declining. But the exhibitors, both the big circuits and the independents, are doing a great deal to put their houses in order. One of the things that they are doing is to change to much smaller cinemas. Some of the larger houses are being converted into twin and sometimes triple cinemas. Indeed, I am told that there is one scheme for a chain of cinemas backed by American interests where there will be an audience of only a few hundred. This will have an effect on the levy, because it will mean that the number of cinemas with very small audiences, and in consequence rather small takings, will increase. I hope, therefore, that the Government will go into this matter.
The Labour Government after the war saved the British film industry by the introduction of this levy, which was agreed by all sections of the industry, both producers and exhibitors. They were also responsible for the National Film Finance Corporation. The present Government (I am sorry to say this, and I do not mean it in any way personally to the noble Earl), when in Opposition, showed that they had not done their homework so far as the film industry was concerned. At the beginning of this month the Government announced that they were going to phase out the National Film Finance Corporation, which had been granted £5 million by the last Government under the Films Act. Everything they have done so far, I am afraid, has not given one very much confidence. I therefore hope that they will look into the future of the British film industry, which is a 648 very important industry not only for British prestige, but also for exports, and come back to Parliament in due course with some concrete proposals for the future.
§ 12.5 p.m.
My Lords, I am grateful to the noble Lord for the welcome he has given to this Order. I am bound to say that I wondered whether he would manage to pop into his speech at some juncture a little comment about the National Film Finance Corporation: it did not surprise me that he took the opportunity to do so. I assure him that the Government are concerned that the British film industry should prosper. As he rightly said, we are in changing times, and the industry has to change. Indeed, the Government intend to keep an eye on how it is changing. The point about smaller cinemas, to which he referred, is one that is very germane to this particular Order. Incidentally, in these days, when everything seems to have to get bigger and bigger in order to succeed, it is interesting that apparently there is one industry which in some ways finds that it has to get a little smaller to succeed.
With regard to that particular point in the context of the levy, I would reassure him that it is the duty of the Department of Trade and Industry so to set the levy that it brings in between £2 million and £5 million per year. That is what has been happening up to date. If the effect of the increase in the number of small cinemas is to bring a larger number into the category which do not pay a levy, then of course it may be necessary at some future juncture to alter the rate at which the levy will be set. I can assure the noble Lord that we shall keep an eye on that.
§ On Question, Motion agreed to.
§ House adjourned at eight minutes after twelve noon.