CINEMATOGRAPH FILMS (LIMITS OF LEVY) ORDER 1979 (Hansard, 29 March 1979)

§ Lord LEONARD

rose to move, That the draft order laid before the House on 6th March, be approved. The noble Lord said: My Lords, I should like to preface my explanation of this draft order with the assurance that it does not in any way reflect a change in policy towards the film industry, but that it arises as a result of a general increase in the level of admission prices to cinemas and from a most welcome upturn in cinema attendances.

This order amends Section 2(3)(b) of the Cinematograph Films Act 1957. This Act gave statutory force to the collection of the levy on cinema seats—better known to the House, perhaps, as the Eady levy. This levy is a proportion of the admission price paid in respect of all public cinema performances, with certain exceptions; for example, cinemas are exempt from levy in any week when their takings do not exceed a certain threshold, as are charitable and educational performances. This levy is therefore not a Government aid, but is what might be called a recirculation of "trade" money. It is collected by Her Majesty's Customs and Excise and paid to the British Film Fund Agency—a body established under the 1957 Act. Out of the proceeds, the 1664 agency, with the approval of the Secretary of State, makes grants to certain worthy bodies connected with the film industry. These are the Children's Film Foundation, the British Film Institute, the National Film School and the National Film Finance Corporation, on behalf of the National Film Development Fund. The balance is then paid by the agency to the makers of eligible British films in proportion to the current earnings of those films in the domestic market. The purpose of this distribution is, of course, to encourage British film production, to which it has proved a valuable aid.

When the Act was passed, Parliament wished the levy to be neither so small as to be of little benefit to the industry, nor so large as to be an unreasonable burden. Consequently, the Act specified in 1957 that the estimated annual yield should he greater than £2 million but less than £5 million. By 1975, the true value of that £5 million was much reduced and it was therefore decided in that year to raise the upper limit to bring it a little nearer its original value and it was increased to £7 million. This was said at the time to be sufficient to cater for any increases in the general level of prices over the following two years. It is now necessary to increase the upper limit again, but, I stress, with an important qualification. I shall return to this in a few moments.

The levy year, I must explain, is a period of 52 consecutive weeks. Last year it ran from 25th September 1977 to 23rd September 1978, and the total levy collected was of the order of £6½ million —very close to the upper limit. In the first 23 weeks of the current levy year, the sum collected was approximately £700,000 above that of the same period last year. Clearly, if this rate of increase were to continue, it appears that the present upper limit of £7 million would be exceeded this year. The enabling legislation provides that the Secretary of State may make a variation in the levy yield, but he is required first to consult his statutory advisory body, the Cinematograph Films Council. This council includes representatives of all sections of the industry. The council's advice was that the present maximum yield should be raised; and their advice has been accepted. This order therefore provides that the 1665 upper limit of the levy yield be raised by amending Section 2(3)(b) of the 1957 Act by substituting for £7 million the sum of £12 million. This raising of the ceiling will not, of course, increase in any way the rate at which the levy is collected from cinemas, which this order does not seek to change; but the new upper limit should prove sufficient to cover the levy yield for the foreseeable future.

My Lords, it has been said that there are other ways of dealing with the problem of the levy yield exceeding the present permitted upper limit. For example, the rate of the levy on each ticket could be adjusted or the exemption threshold raised in order to produce a lower yield. In response to requests from the industry for relief to cinemas, such adjustments have, in fact, been made two years running. In each of the years 1977–78 and the current year 1978–79, these adjustments were calculated to produce an estimated reduction in the total yield of £1 million. Despite these reliefs, the total yield has risen, partly as a product of higher prices, but, most gratifyingly, as I mentioned earlier, also because of a recent strong upturn in cinema attendances. Alternatively, it has been suggested that the collection of the levy could be suspended when the £7 million ceiling was reached—not that one would want to approach that ceiling too closely, as the levy is collected fortnightly and the total is not known to the Department of Trade until several days later.

I am certain, however, that we should not again tinker with the collection of levy in any of the several ways that have been suggested; simply because not enough is known about the ability of cinemas, particularly independents or small groups, to pay the levy at the present rate, nor, indeed, at any other rate. Some months ago, therefore, the Department put in hand a series of moves that will give us information about the levy that has never been available before. The important qualification to this proposed increase in the maximum levy yield that I mentioned earlier, is that it is only an interim measure to cover the period while the information now coming in can be collated and digested, interested parties consulted and the decision taken as to whether or not fundamental changes should be made in the levy system.

1666 Various moves have been put in hand to obtain more information. First, the Department of Trade is sharing with a number of trade associations the cost of a very thorough investigation by an independent firm of accountants into the ability of cinemas of different types in different circumstances to pay a levy. It would be quite wrong, I believe, to pre-empt the findings of this investigation by making any arbitrary alteration in the present rate of levy before their report has been most carefully considered by all the parties to it.

In addition, the publication has now been arranged of the levy distribution in respect of individual films, details of which have hitherto been unpublished. The first two such publications have now appeared covering the 14 weeks from 24th September to 30th December, 1978, and subsequent publications will be appearing at four-weekly or five-weekly intervals. The names of some of the films benefiting from levy distributions have attracted attention in the Press. In particular, criticism has been directed at films said by some to be of a pornographic nature which obtain levy distribution; and much has been made of the possibly untypical example of one short film which, under the present system, fortuitously attracted very large levy payments because it was screened with a very popular feature film. We accept that these appear to be shortcomings, but it is all to the good that these matters are now for the first time brought into the open, as there can be no intelligent debate about levy without this information. In addition, both the Interim Action Committee on the Film Industry and the Cinematograph Films Council are now considering the subject of levy and are to make recommendations.

In the next few months, therefore, a lot of new facts will be coming to hand, together with opinions which can take these facts into account. All this new information will be most carefully considered and there will be consultation with interested parties so that it may be determined—perhaps for years to come—whether fundamental modifications should be introduced to the levy system in the interests of the British film industry. The conclusion of this consideration may be given effect in a separate measure; or 1667 it may take its place in a wider measure which will give effect to the statement of policy the Government will shortly be making on their future plans for the industry.

Either way, I assure noble Lords that the matter will be dealt with as expeditiously as proper consideration and consultation permit. I do not believe we should engage at this time in any short-term fine tuning of a system about which there are basic doubts on a number of grounds. In order, therefore, to permit collection and distribution to continue meanwhile without interruption, I commend as an interim measure this increase in the maximum limit of film levy. I beg to move.