HL Deb 12 April 1973 vol 341 cc883-7

BARONESS YOUNG rose to move, That the Draft Cinematograph Films (Collection of Levy) (Amendment No. 3) Regulations 1973, laid before the House on March 27, be approved. The noble Baroness said: My Lords, I beg to move that the Cinematograph Films (Collection of Levy) (Amendment No. 3) Regulations 1973, be approved. Under the Cinematograph Films Act 1957, exhibitors of cinematograph films pay a levy, based on the price of admission to the cinema, into the British Film Fund. The proceeds of that levy are distributed, with minor exceptions, entirely to makers of British films. Both the collection and the distribution of the levy are governed by Regulations, which the Department of Trade and Industry are required by the Act to make after consulting the Cinematograph Films Council. The Regulations require, the prior approval of Parliament by Resolutions of each House.

The amending Regulations now before your Lordships are entirely consequential on the application of V.A.T. to the price of admission to cinemas. The existing Regulations which determine the amount of levy are geared to the full price of admission, and if the price of admission is raised because of V.A.T., the amount of levy payable will increase proportionately. The levy payable therefore needs to be adjusted. The Government and all sides of the industry are in agreement about this, as is the Cinematograph Films Council, which has made a recommendation on the lines of the Amendment now before your Lordships.

The amount payable by the exhibitor as levy is one-ninth of that portion of the admission price which exceeds 7½,p. Thus, on typical admission price, before V.A.T., of 40p, levy payable was 3.61p, leaving the exhibitor with 36.39p. If the exhibitor raises his price by the full 10 per cent., making the seat price 44p, he can retain his net price of 36.39p only if levy remains assessed on the price exclusive of V.A.T. In fact the exhibitor would have to raise his admission price by between 11 and 11½ per cent. in order to retain his original net price, if V.A.T. were to be included in the computation of the levy payment. I am glad to be able to report that exhibitors have not raised prices in this way, doubtless because they have every confidence that these Amendments will be approved. They will ensure that the amount payable by the exhibitor as levy will not be altered because of V.A.T.

Cinemas with partcularly low weekly takings—not more than £500, subject to some marginal adjustments for cinemas with seasonal takings which vary—are already exempt from payment of the levy.

The takings of these cinemas may be expected to rise because of the addition of V.A.T., unless it should happen that the number of admissions drops for the same reason. Any such increase in takings will, of course, be of no benefit to the exhibitor; all of it will be payable as V.A.T. But it could have the effect of bringing some cinemas, at present in the exempt category, just above the figure quoted for maximum weekly takings. The Regulations therefore provide for V.A.T. to be excluded for purposes of calculating the amount of these weekly takings.

The Regulations will come into effect the day after they are made and will apply in the first place to the current levy period which ends next Saturday, April 14. Levy periods last for four weeks, so the revised arrangements will cover the period already passed since V.A.T. was introduced on April 1, and the complicated computations which otherwise would have been necessary will be avoided. For these reasons these measures have been brought before your Lordships at rather short notice. I recommend that your Lordships approve the Regulations.

Moved, That the Draft Cinematograph Films (Collection of Levy) (Amendment No. 3) Regulations 1973, laid before the House on March 27, be approved. —(Baroness Young.)

8.21 p.m.


My Lords, I am sure that we are all grateful to the noble Baroness for explaining the purpose of these Regulations. I welcome this Amendment to the previous Regulations to enable V.A.T. to be excluded from the Eady Levy payments. In other words, this is an Order designed to allow value added tax to be calculated on the admission price minus the Eady Levy. As the noble Baroness has said, this concession is supported by all parts of the industry. Certainly it has our support from this side of the House. But we are not so happy about the effect of V.A.T. on cinema admissions generally as this tax will tend to raise prices. Although most exhibitors increased their overall admission prices by 10 per cent. recently it is unlikely that they will be able to absorb the tax out of their own profit margins, and no doubt it will have to be passed on to the consumer. Increased admission prices also will result in further falls in admissions. Many cinemas, particularly the smaller houses, are already operating on very slender profit margins, and some of these may have to go out of business if admissions decline further.

My Lords, during 1972 there was a decline of over 20 million admissions. Even with increased seat prices the gross takings were well below the 1971 total. I am glad to say that a great deal has been done by the industry to modernise cinemas and convert many of the larger ones to smaller "twins" or even to "triplets", as they are called, and to improve facilities generally. But the industry is facing difficulties, and any further curtailment of profit margins will jeopardise this modernisation programme. Indeed, many cinemas have to rely heavily on sales of confectionery, and the industry would have been placed in a most invidious position if these sales, which are not part of catering, had not been zero-rated. This last minute concession is sensible and logical, and we welcome it. But the fact that such a concession is so vital is a grim and salutary reminder of present trends in the industry.

I hope that the Government will consider very carefully whether all cinema admission prices should not be zero-rated in the same way as books and newspapers. I believe that opinion in Europe has been tending towards this rather more civilised view following the UNESCO agreement in Florence which links films with books as deserving preferential treatment. It is surely not logical to differentiate between one kind of communication and another. Moreover, at present no other E.E.C. country except Holland has a V.A.T. rate as high as 10 per cent. on the film distribution side. I hope that the noble Baroness and her colleagues will take note of that. The British Film Production Fund, or Eady Levy, as it is known, was originally a voluntary levy which the industry agreed to on the understanding that the very onerous entertainment duty would be reduced and eventually abolished, which it was. The Levy was made compulsory in 1957, with the agreement of the industry, but now the entertainment duty has been clamped oil again in the form of V.A.T. So while welcoming this Order to exempt the levy from V.A.T., I must beg the Government to look more widely across the whole exhibition field and to consider the eventual zero-rating of cinema admission prices as well.

8.25 p.m.


My Lords, I should like to thank the noble Lord, Lord Strabolgi, for the welcome which he gave to this Order. I think it has been widely supported by the industry. I am very glad also for the welcome that he gave to the zero-rating on the sale of confectionery in cinemas. These are two major matters of interest to the cinema industry and we feel that this concession will be of great help to them in both respects. I feel that to have a general discussion on the whole subject of value added tax is to go somewhat wide of the Motion before us. My understanding of the position is that value added tax is an across-the-board tax on all matters, with certain named exceptions in respect of food, children's clothing, books, periodicals and newspapers.

I have listened with great attention to the points that the noble Lord made about the cinema industry, and to his concern that value added tax should be put on the price of cinema seats and the possible effect that this could have on the industry. I will certainly take note of what he has said. In the future I should have thought this is a matter that the cinema industry—which I know has already had discussions with my honourable friend in another place—might raise when the whole question of taxes will again be reviewed next year for the Budget.

On Question, Motion agreed to.