FILMS BILL

HL Deb 25 June 1980 vol 410 cc1610-45

3.20 p.m.

Lord TREFGARNE

My Lords, I beg to move that the Films Bill be now read a second time. The main purpose of this Bill is to change the financial arrangements of the National Film Finance Corporation, (the public corporation created by statute in 1949 to finance film making). There is also provision for some existing measures to be prolonged, such as the screen quota, which ensures that at least a minimum percentage of screen time at cinemas is used for showing British-made films, and the Eady levy, which is collected at the box office and provides a pool of money to be used as an incentive to film production in Britain. Some adjustments to current provisions are also proposed; for example, the operation of the screen quota (to which I have already referred) at multi-screen as opposed to single-screen cinemas. Finally our films legislation will be made compatible with the Treaty of Rome in that the labour cost requirement under our legislation for a film to be registered as "British"—thus becoming eligible for payments from the Eady levy—will now be extended to include citizens of EEC countries.

Before I explain the provisions of the Bill in detail, I think your Lordships might like me to say a few words about our film industry. Since the last war the United Kingdom has become a major centre of quality film production. We now enjoy an enviable reputation. There is the excellence of our actors and actresses, the expertise of our producers, technicians and script-writers, and the highest professional standards of all who participate in the making and finishing of films. Our studios have been in the forefront of modern technological advances.

Despite all this, some will say that the film industry is now in a state of crisis. But I recall the opening sentence of the Second Report of Sir Harold Wilson's Interim Action Committee on the Film Industry: The British film industry has been having crises for over 50 years, for most of its long life". Film making is an odd hybrid; a mixture of manufacturing and art, producing an end product which is never standardised. Each film is a unique one-off product. This makes it impossible to predict the reaction of the market with any certainty. Yet the scale of investment in a film can be very great and the risk enormous. I am told that only one film in 10 shows a profit and perhaps another two in 10 break even. Clearly it is not easy to keep a sense of proportion about an industry with such characteristics. It is hardly surprising that for over 50 years opinions have frequently swung between extremes of pessimism and optimism.

There is no doubt that change has had, and is still having, a great impact upon the film industry in most countries. The rapid growth of television and leisure activities in the United Kingdom has led to dramatic reductions in cinema attendances. Immediately after the war there were on average about 31 million attendances a week; last year there were about 2 million a week. Over the same period the number of licensed cinema screens decreased from 4,700 to 1,600, while seating capacity has declined to about one-sixth of what it was thirty years ago. It is difficult to believe that even massive sums of public money, if they had been available, would have done much to halt this decline, which, I fear, simply reflects changes in leisure habits. And we need to remember that television has provided a growth market for filmed material, and thus for the employment of many people who a generation ago might have worked in the cinema film industry.

The Bill now before your Lordships gives effect to the statement of policy in July last year by my right honourable friend the Secretary of State for Trade. That described our intention of restructuring the finances of the National Film Finance Corporation which is now approaching the end both of its statutory power to lend money and of the funds available under existing legislation.

Clause 1 of this Bill extends for five years, that is, until the end of 1985, the power of the corporation to make interest-bearing loans for the production or distribution of films on a commercially successful basis. The functions of the corporation will remain unchanged except that it will now have power to give direct financial assistance to meet expenses such as script-writing fees, which are incurred before the commencement of film production. Your Lordships will appreciate that fees for script writing have to be paid on many more projects than ever turn into films; and these have to be paid (even on successful scripts) some time before production begins.

Since the passing of the Cinematograph Films Act 1975, loans for such assistance have been provided from a body called the National Film Development Fund, which in turn is financed by payments from the Eady levy. This type of assistance formerly provided by the National Film Development Fund may now be made direct by the National Film Finance Corporation. Experience has shown that the fund has not had the means to market scripts, whereas the corporation will be better able to take full advantage of the scripts it backs. I should like to thank most warmly all of those who have given their services, largely voluntarily, to the National Film Development Fund, particularly all those who have served on its advisory committee.

Clause 2 of this Bill introduces the "new look" to the corporation's finances which my right honourable friend announced last year. Since its inception the corporation has borrowed from Government at appropriate rates of interest. Its borrowing limit has been progressively raised to £11 million. This limit has now been reached and the corporation is thus unable to give further support to the industry. Although the corporation has laid upon it a statutory duty to achieve a financial break-even, it has not been able to do so and bit by bit it has lost money; although over the years it has advanced over £31 million to aid the production of some 750 feature films. Film making is a very speculative business and, although the corporation's track record in selecting projects is no worse than the industry in general, it has not yet managed to back what the trade calls a block-buster. It is on these that investors receive handsome returns to offset the more frequent but smaller losses.

Clause 2 repeals the department's power to lend the corporation money and proposes to write off all its capital debts owing to Government, at present £11 million. Your Lordships will not be surprised to learn that this proposal has been publicly welcomed by the corporation. Although these loans have been made to the corporation at Government lending rates—and indeed over £4 million has been paid to Government in interest charges over the years—no interest has been paid for the last three years. The interest outstanding is now nearly £2 million. This and the capital debt of £11 million, making £13 million in all, will be written off. Clearly the corporation cannot repay these sums and we should not delude ourselves by pretending it can. We want to give it a fresh start. To this end we propose to make a once-and-for-all grant to the corporation of £1 million as financial pump-priming until other sources of funds are forthcoming.

What are to be these sources of funds? One may be short-term commercial borrowing. The corporation has long had the power to borrow up to £2 million from non-Government sources, with the approval of the Secretary of State and the Treasury. This limit is to be increased to £5 million. Such borrowings will be approved but not guaranteed by Government. As an interim measure, pending the enactment of this Bill, we have recently undertaken to guarantee borrowings up to £1 million. This guarantee will cease when the new measures have come into effect.

The other main source of funds for the corporation brings me to an important innovation in this Bill. It is to provide the corporation for the first time in its history with an assured annual income, enabling it to plan and budget ahead. I have already mentioned to your Lordships the so-called Eady levy, which has been a major feature of the post-war British film industry. After payments from the levy, which may be made annually to certain bodies associated with the film industry, the remaining amount of levy is then distributed to the makers of films which qualify as British. We propose that an annual subvention to the corporation shall in future be the first call on the levy. Each year for the next five years the corporation will receive £1.5 million, or 20 per cent. of the levy, whichever is the greater. This alone, the corporation estimates, should ensure its participation in four or five feature-length films a year that might not otherwise be made.

We believe that these measures, taken together, will enable the corporation to continue to play a distinctive part in British film making, and to play it far more independently than ever before. The board of the corporation is composed of seven persons, all appointed by the Secretary of State. At present five members can be appointed in addition to the chairman and the managing director. Clause 3 proposes that one extra member may now be appointed. The maximum number of members will thus be six, plus the chairman and the managing director. This will provide more scope for a broader balance on the board. One possibility, for example, is that because of the diversion of part of the Eady levy to the corporation the extra member might be a person directly representative of the interests of the makers of British films. This has not yet been decided, but it is an example of the possibility of a broader balance that I mentioned.

Clause 4 extends the life of the levy to 1985. It will continue to provide an incentive and a reward to the makers of films in this country. It will also provide a guaranteed income for the corporation in the manner I have described. The details of the collection and distribution of the levy are dealt with separately in regulations which are laid before Parliament in the usual way.

Under Clause 4 there will be four levy periods of 52 weeks and one of 56 weeks. The 56-week period has been introduced at the request of cinema exhibitors. It is simply to correct an anomaly in the calculation of their levy payments caused by the calendar. After 23 years, the commencement date for the levy is now almost one month earlier than in the original legislation, putting cinema exhibitors with high seasonal fluctuations in their takings at a disadvantage in the calculation of levy payments. Clause 4 will correct this anomaly by moving the starting date of the levy periods further away from the end of the holiday season.

Clause 5 extends the life of the screen quota for five years, to the end of 1985. The quota is the oldest form of legislative protection for the film industry. Since 1928, there has been an obligation on cinema exhibitors to show a prescribed quota of British films. Since 1973, Community films have qualified for quota levy equally with British films. In fact, films made in this country still account for by far the greater part of the quota achievement. The Bill does not make any changes in the percentage of United Kingdom and Community films which must be screened. These have been 30 per cent. for first feature and 25 per cent. for supporting programmes since 1950 and 1948 respectively. Changes in these percentages may be made by the Secretary of State only after consultation with the Cinematograph Films Council, the statutory advisory body on film matters, and by an order which must be approved by Parliament.

Clause 6 also concerns quotas, and deals with a problem which has arisen in the last few years. Many cinemas have been subdivided into smaller auditoria, known as multi-screen complexes. This development offers not only more economic operation but also more variety to cinema-goers. Under present arrangements exhibitors must achieve the 30 per cent. and 25 per cent. quotas on each individual screen in a complex. It is proposed under Clause 6 that all screen performances in a complex may, providing the screens are in common ownership, be added together for calculating quotas. Exhibitors at complexes will thus be able to show films on whichever screen they consider to be most economic in terms of seating capacity. They will be able to devote certain screens to certain types of films instead of having to move films around from screen to screen within a complex, after making time-consuming calculations as to how they may achieve the required quotas on each screen. In short, there will be greater flexibility and simplicity for exhibitors, helping them to make the best use of their facilities.

Clause 7 proposes that the Secretary of State shall have power to suspend, but not abolish, the quota requirements; and to reimpose them should this seem necessary. This power could not be used before consultation with the Cinematograph Films Council. An order made under this section would have to be approved by both Houses.

In recent years doubt has been cast upon the effectiveness of the quota, and Sir Harold Wilson's Interim Action Committee were unable to come to a unanimous verdict about it in their second report. The report explained that, although in general producers and the unions are in favour of the quota, distributors and exhibitors would be pleased to see it go. The point was also made that, to the extent that the quota obliges exhibitors to show films other than those they might choose on commercial grounds, the cinema is that much less attractive to the public and less levy is therefore collected. The Cinematograph Films Council, after an investigation of the quota, voted last year—with some members dissenting—for power to be taken to suspend the quota. The council considered that it no longer fulfilled its original protective purpose.

I should like to make quite clear, however, that we have not made up our minds about the quota. But it would seem less than sensible not to at least have the power to suspend it. Before taking such a decision there would be consultations with all sides of the industry. Even if it were then decided to embark upon a trial period of suspension and if the experiment showed no ill effects, amending primary legislation would still be necessary to do away with the quota system. In other words, there would have to be further detailed assessment and scrutiny by the industry and by both Houses.

Lord DAVIES of LEEK

My Lords, would it put the Minister off his stroke if I asked a simple question about Clause 5 and Clause 7 together? I may be completely wrong. Under the quota it was obligatory to show a British film. I understood from the Minister's speech as he was going along—here I may be wrong—that if an EEC film—a French film or a film from any country in the Community—is shown the exhibitor will have followed the law and will have shown his quota. Lastly, the Minister put a saving provision in Clause 7. If the Government feel like it, and exhibitors all over are dead against it, the quota system can be abolished. Have I got it right or have I muddled it up?

Lord TREFGARNE

My Lords, the noble Lord is not quite right, I think. I wonder whether he will allow me to deal with that point more fully when I come to wind up at the end of the debate we are to have. The noble Lord has raised a proper point which I will deal with properly at the right time.

Clause 8 amends our existing legislation. Section 17 of the Films Act 1960 requires that for a film to be registered as British a requisite amount of the labour costs should be payments to British subjects or citizens of the Republic of Ireland, or persons ordinarily resident in a Commonwealth country or the Republic of Ireland. The "requisite amount" referred to is usually 75 per cent. of the total labour cost. The significance of the 75 per cent. requirement is that to be registered as "British" is the first hurdle a film must clear on its way to be eligible for distributions from the levy. In August 1979, the EEC Commission drew our attention to their view that this requirement appeared to be incompatible with Article 48 of the Treaty of Rome, concerning freedom of movement of workers within the Community. Similar observations were addressed by the Commission to four other member states in respect of their film aids.

Following discussions between my honourable friend Mr. Tebbit, the Parliamentary Under-Secretary of State at the Department of Trade, Viscount Davignan, the Industrial Commissioner, and M. Vouel, who is concerned with competition policy, it was proposed that, first, the United Kingdom would broaden the 75 per cent. labour cost requirement to include citizens of other member states; and, secondly, at the same time amendments would be introduced to preserve the infrastructure of the British film-making industry.

Clause 8 deals with the first aspect of the 75 per cent. labour cost requirement. Citizens of other member states will now count equally in the labour cost qualification with Britons, Irishmen, Australians, et cetera. This satisfies the requirements of the treaty but is unlikely to make much difference in practice to the way our industry works. Films are the product of teamwork. People who have worked together before, knowing each others' talents and idiosyncrasies, understanding each others' language and style, often prefer to work together again.

As regards the second aspect—preserving the infrastructure of our film industry—this will be done later by statutory instrument. Clause 8 of the present Bill will not come into force until that instrument is approved by both Houses, when there will be full opportunity to discuss the details. These have not yet been drafted, but their objective will he to ensure that films that are to qualify wholly or partly for levy distributions are prepared, made and processed wholly or largely in this country; or, where overseas location shooting is involved, that shooting is prepared in and based on this country. There have been discussions with representatives of film-makers and film unions, and they are broadly satisfied with this concept. But it must be made clear that until the statutory instrument is approved by Parliament, the present labour cost provisions and the present levy distribution regulations will continue to apply. Under Clause 9, this Bill (except for Clause 8) comes into force on the Sunday after the day it is enacted, mainly because of technical aspects of the levy.

I should like to conclude by saying that the Government whole-heartedly support the concept of an indigenous British film industry. Our priorities are to put the National Film Finance Corporation on a better financial basis, and to renew those arrangements such as the screen quota and the Eady levy which benefit the whole film industry. These are the matters with which this Bill mainly deals. They are matters of some urgency; without this Bill they will soon lapse and uncertainty will be caused in the film industry. Although described as "a modest Bill", it is thus of considerable importance to the film industry. I trust your Lordships will therefore see fit to endorse its modest but worthy aims. I beg to move that this Bill be now read a second time.

Moved, That the Bill be now read 2^a.—(Lord Trefgarne.)

3.41 p.m.

Lord BEAUMONT of WHITLEY

My Lords, I should like to thank the Minister very much for his explanation of the Bill. May I be allowed to say, since by some chance it is the first time that I have been speaking on a matter of which the Minister was in charge, how much we all appreciate—I certainly do—the clarity of exposition which he brings to everything in your Lordships' House. It certainly is outstanding, in my experience.

This is a modest little Bill, as the Minister said. In fact, it is so modest that it almost disappears. It was very noticeable that of all the time spent on it in another place, including three sessions in Committee, very little was spent on the actual Bill and a great deal on what the Bill should have been, or what another Bill should be, because there is very little to the Bill itself. Probably one of the most interesting things about the Bill and this debate will be that we shall be able to welcome the maiden speech of the noble Viscount, Lord Gormanston. I have had the pleasure of knowing the noble Viscount in times past in Ireland in different capacities, and I look forward very much to hearing him speak often in your Lordships' House.

One of the matters which took up a great deal of time in another place was the fact that this Bill in effect merely carries the position on to 1985. This was distrusted by a number of speakers because they thought that it gave the Government too much of a let-out. They would have liked to see something rather more permanent on the statute book, given the difficulty that there always is in finding time to consider Bills. I do not take that point of view. I think that we are very lucky that this Bill goes on only to 1985, because it means, I am sure, that we shall have another opportunity of discussing the whole matter. I hope that it will give this Government the opportunity to consider what it should do about the whole film industry in the rather difficult position in which it finds itself. I will refer to that in a moment.

First, I should like to mention one or two of the details in the Bill. Although a little disquiet has been voiced in certain quarters about the provision for multi-screen showings—the possibility that it may allow people to get away with always putting the quota films in the smallest cinemas—I think it is probably a very wise and good one and that we can, on the whole, see that it works more to the benefit of the quota than otherwise. Certainly flexibility in any matter like this is useful. It reduces the resentment which some people have at being under the obligations of the quota, and it enables those obligations to be fulfilled rather more wholeheartedly.

As to the matter of the EEC, your Lordships will not expect a spokesman for a very European-minded party like my own to object to this aspect, but obviously the industry may have legitimate qualms about it. On balance, I believe that it will probably be all right. In the cinemas in the capital which show EEC films anyway there will not be any great tendency to squeeze out the British ones, and in other places the British films will make up a large proportion of the films which are shown under the quota.

I remember previously quoting in your Lordships' House the plaintive statement of a lady: "We do not see very many foreign films in Bury St. Edmunds". I do not expect that under this Bill she will necessarily see many more foreign films shown there. We can be reasonably happy about the situation. But there is a question mark over it and that is one of the reasons why we ought to do our best to keep the levy and these arrangements.

I am dubious about the provision for the suspension. I am in principle not happy about opposing something which gives Government greater latitude for experiment. It is just a question of whether one trusts a particular Government to make wise use of that latitude. On that I had better reserve judgment. I think that there will be a number of people in your Lordships' House who care greatly for films, who will keep a close eye on this matter and who will question strongly any proposals which the Government may put forward to suspend the arrangements.

I return briefly to the main point, where it seems to me that this Government will be in a difficulty over the next few years if they are to work out a good film policy. This Government are opposed to both Quangos and lame ducks. There is no point in pretending that cultural efforts and cultural projects in this country are responsive to the kind of hard, rash, abrasive economic laws which the present Government would like so much to apply. If we are to cultivate the arts in this country we have to protect them.

It is going to be very necessary over the next few years to do this, not just because of the special needs of the arts in a period of high inflation, when they suffer more than a great many other things, but because when a country is going through a depression (and the whole of the western world is going through a depression which has certainly not yet reached its nadir) artistic and cultural resources are extremely important for a country, so that it does not lose its heart—its soul, if you like. I think we should pay very great attention to this. In so many branches of the arts in this country, the fact that we are able to subsidise them has helped them greatly. The BBC is a prime example. The National Theatre is another.

All these things have probably paid off in monetary terms, as well as in terms of the total balances for this country. Certainly the number of visitors that we attract to this country to see our theatres, the number of productions that we sell abroad in theatre, film and television, are all worthwhile. However, film, which is one of the most expensive and important of the arts, gets very little help at all. Indeed, all the arts get very little help at all. I was having lunch today with colleagues of mine from the Liberal Party in the Bremen Land and they were telling me how very, very sad it was that the theatre (and the theatre alone) in the city of Bremen got only 20 million marks a year, how disgraceful that was, and how it must get much more.

We in this country subsidise our arts very, very little and we subsidise our films hardly at all. Over the next few years we need to build a plan for a national film authority, which would stop this ridiculous situation whereby film is dealt with by two Government departments, and which would bring together all the various and sometimes unwieldy bodies that try and do something for films in this country. We should face up to the fact that we probably ought to put the support of film, both as something valuable in this country as trade and also as an important art form, on a really satisfactory, protected and flourishing basis.

Meanwhile, I think this measure gives us enough time. I hope that the Government will be able to assure us today that they will look at some of the problems that I have spoken about, and which I am sure other noble Lords will speak about, and that they will use the time wisely before we face this question again in 1985. In the meantime, I wish this Bill, such as it is, well.

3.51 p.m.

Viscount GORMANSTON

My Lords, I hope your Lordships will give me the indulgence of the House. I am fortunate that on this occasion I am able to address your Lordships for the first time on a subject that I have been interested in for many years. My interest in the film business started during a school holiday many years ago, when I worked as an extra on a film in which the noble Lord, Lord Olivier, was the star. For my two days' work as an actor I was delighted to receive what in those days seemed to me an enormous sum. At that time in the industry, with substantial United States investment behind it, the level of production was extremely high throughout the United Kingdom. This, as has been widely reported in the newspapers in recent weeks, is definitely no longer the case.

It has been said that this Bill's purpose is to relaunch a modest, independent but effective British film-making body and to renew measures which assist all British film-makers. One can only welcome this, for without the quota system and the Eady levy, long-term survival would be rather doubtful. There has always been a question as to whether film-making is a creative art form or a commercial venture.

To give an example, I recently went to see an exciting and inventive screen adaptation of Shakespeare's Tempest, made by a talented young English director who, not without considerable difficulty, independently financed and completed his film for the modest sum of £125,000. After opening in just one cinema, to very good reviews, it is on its way to recoup its investment for its backers. So a creative and original film can emerge as a commercial prospect.

The National Film Finance Corporation last year provided the majority finance for another similar independent production called Babylon, which is soon to emerge. But I wonder if in future the provisions of this Bill will permit them to continue financing the independent young directors in a sufficiently positive way. It also seems odd that it is not possible for us to support this kind of indigenous filmmaking as an art form to the same extent as we do opera and the theatre, bearing in mind that the end product has an extremely high export potential.

In the Working Party report entitled The Future of the British Film Industry there was a recommendation aimed towards bringing the film and television industries into closer co-operation. Recent technological developments seem to indicate that this is happening, in the shape of cable television. In the near future, in the United States, every house to which the Bell Telephone Company has cable access will be able to dial the telephone company in response to advertising campaigns and ask them to relay to it a showing of a newly released feature film—to be shown on their own television set in their own home. The Bell Telephone Company will then charge the subscriber for the showing of the film, on his quarterly telephone bill. On a recent visit to Los Angeles I saw a film in just this way on their own Channel Z cable network, the charge for this facility being a mere 45 dollars per quarter. I believe there is a similar cable network, called "Home Box Office", with 24 million subscribers, each paying 174 dollars per year.

When the four major cable networks in the United States are fully operational they will have an immense product requirement and, consequently, it should prove possible to recoup the costs of a high-budget film in maybe one or two nation-wide showings. With the enormous volume of films used in this system, not only should the large production companies, who far-sightedly own several of the cable companies in America, gain quite a proportion of the market but also the small independents should find a place there.

In concluding, may I point out that the consequences of allowing our film industry to run down at a point when such a large new potential market is on the horizon could have disastrous consequences for its competitiveness in the future. The dispersal at this juncture of our technicians, who have been largely instrumental in attracting such major foreign productions as "Star Wars" and "Alien", may well prove fatal to future hopes of revitalising the industry.

Hopefully, your Lordships will not regard this Bill as the final answer to helping the film industry, for in order to encourage private sector finance into such a high-risk market some constructive tax incentives, along the lines recommended in the Working Party's report, must be found to enable the industry to expand its production without detriment to the taxpayer.

3.56 p.m.

Lord LLOYD of HAMPSTEAD

My Lords, it is my very pleasant task to be the first to offer our congratulations to the noble Viscount who has just spoken for his admirable, charming and extremely well informed maiden speech. He has also, if I may say so, set us all a very pointed lesson in the art of delivering an interesting speech with the highest degree of brevity.

Several noble Lords: Hear, hear!

Lord LLOYD of HAMPSTEAD

I am particularly gratified that he should have chosen this subject to come along and address us upon for the first time, because it is a subject of immense importance but, nevertheless, one which on the whole does not tend to arouse very great interest, having regard to the number of those who actually attend our debates on this subject in your Lordships' House. I am sure it is our wish that the noble Viscount will attend our proceedings frequently from now on and address us on this subject, as well as on others about which I am sure he can speak with full competence.

I should like also, if I may, to express my admiration for the way in which the noble Minister has introduced the Bill, with his customary lucidity, and displayed once again his extraordinary versatility. This, I believe, is his first incursion into the jungle area of the British film industry, and he has acquitted himself with remarkable skill in this first encounter.

I am sorry, therefore, that my opening remark needs to be that I find myself able to summon only one cheer for this particular Bill and the manner in which it seeks to deal with the film industry. The reason for that is, of course, not so much for what it contains as for what it leaves out. I think we would all agree on the importance to the United Kingdom of having a film industry which is capable of producing indigenous films of high quality and with international appeal. We have in this country a remarkable tradition of achievement in the film industry and an endless fund of talent. Thinking in terms of past achievement, one has only to mention such outstanding names as Alexander Korda and Sir Michael Balcon, with his remarkable repertory of Ealing films which created such an immense impact both at home and abroad.

But, of course, as has been pointed out, the making of feature films is a high-risk industry; it involves a good deal of finance. But finance in itself is not enough. That finance has to be linked with a great deal of creative flair, and this is rather emphasised by the very unhappy announcement made only the other day that one of the greatest names in British films in the past—Rank—after putting forward a fairly ambitious programme only about three years ago, had now decided to withdraw from film production.

I was particularly dispirited by the report of an observation attributed to one of Rank's leading executives. When asked about this unhappy development he said, seemingly with great candour, that "there are better things we can do with out money". I venture to think that that is not a view that would commend itself to the moguls of the cinema industry in Hollywood who have found the enterprise of film-making in recent years one of the most profitable which even the enterprise of that very enterprising country, the United States, has been able to attain. Indeed, it is not a sentiment which would have commended itself to the great J. Arthur Rank, himself, who played such a role in putting the British film industry into a position of international repute.

The fact is that the private sector alone cannot be left to pursue the making of films. They tend to lack courage and vision, and the experience of all European countries which are concerned to any major degree with film-making has been the same: that private sources are not enough; that substantial Government backing is what is needed. For the last three years, the Interim Action Committee, under the admirable chairmanship of Sir Harold Wilson, has been pursuing its labours. I speak of the activities of this committee with a little diffidence, being a member myself, but one can say that it has laboured very hard under Sir Harold's chairmanship. I am sure all in the House would join me in the sentiment of wishing Sir Harold, who has just undergone an operation, a speedy recovery from that unfortunate event. On our committee we are certainly most anxious for his speedy return to assist us in our labours.

This Committee has laboured now for some three years. It has so far issued three reports. There are further reports to come. It has made a number of proposals, especially the proposal in the first report for the establishment of a British Film Authority. This proposal, I think I can fairly say, has been widely welcomed; and indeed the arguments for it, which are very well known indeed and need no repetition at this moment, are overwhelming. Some hostility was aroused in Government circles when the proposal was first put forward, on the basis that this appeared to be setting up a new kind of super quango, but I think that on the whole these fears have been dispelled. It is accepted that far from being a quango it is, in fact, a body which will eliminate at least three other bodies and will very largely be financed from the monies that those three other bodies at present either deploy or engender by their activities.

I am sorry to say—and this is one of the reasons why I started off with a single cheer towards this Bill—that the thinking and proposals of the Interim Action Committee have very largely been ignored in this Bill, and all we have really is a kind of holding operation to keep the National Film Finance Corporation alive. I personally have the highest regard for the NFFC and for the remarkable job that it has done over a long period of years. I should like, if I may, with your Lordships' permission, to take this opportunity of paying a tribute to Sir John Terry, so long the managing director of that body, who performed such arduous and successful activities in making the NFFC play a most valuable role in the development of feature films in this country.

Equally, I should like to express confidence in his successor, Mr. Mamoun Hassan, as a person who can certainly be expected to do everything possible to enable the NFFC to do whatever job lies within its scope. The fact of the matter is, as indeed anybody familiar with the NFFC would be ready to admit, that the basis on which that body functions, and the very limited resources at its disposal, hardly put it in a position to make more than a fairly marginal contribution to what should be a healthy industry.

It is very sad, therefore, for those of us who have a deep concern for this once great industry, which played such a role in spreading British prestige both at home and abroad, to see it now neglected and virtually abandoned by Government at the very time when its European rivals are being strenuously and increasingly supported by their Governments. Nor is it only in Europe that this phenomenon occurs. One sees it happening in other countries; for example, in Canada and Australia, with very considerable effect.

This is not in any way a partisan matter. There is no question of any sort of party consideration or party point. Indeed, one could say in fairness that just as, so it seems to me, the present Government are failing to do what is necessary to help to put this great industry on its feet, so too the same charge could be made of the previous Government who, at the very last moment before the election, suddenly came out with a resounding declaration that they supported the setting up of a British Film Authority, but of course at a time when they were in no position to implement that proposal, notwithstanding the fact that they had had a very considerable time before then to reflect upon it and to take the appropriate action.

I find all this particularly saddening because at the present time I detect genuine signs of goodwill by the present Secretary of State, and also by his Ministers, towards the industry. But the fact is that, however resolute be the arguments that one makes on behalf of the industry, one is simply faced with the inevitable plea of lack of money.

So I would ask your Lordships whether they want to see this vital industry, and all the native wealth of talent that we possess, eager as that talent is to make British films, simply dissipated and forced to emigrate to Hollywood or other countries; however reluctantly that body of talent may be to go to other countries, and however anxious they may be to make British films. One could mention numerous names—I am not going to weary your Lordships; many of them will be known to you—of distinguished figures in the film industry who have given up the task of trying to make films in this country because it has not proved to be a viable proposition, and they have gone over to America and have been greeted with open arms.

Speaking as a former chairman of the British Film institute, as chairman of the National Film School since its inception and as a member of the Interim Action Committee, I am only too well aware of the frustrations which are felt at the present time by young film-makers in this country. Of course they turn to television, and there is nothing wrong with that; there is the closest connection between films and television. This is most desirable, and indeed it is an issue which the Interim Action Committee is examining at the present time; but we have to recognise that television is no substitute in itself for a feature film industry. Indeed, as Mr. Norman Tebbit, who introduced the Bill in the other place, pointed out, half the graduates of the National Film School go into television and, unfortunately, television at present makes only a trifling contribution to the existence and financial subsistence of the National Film School. Mr. Tebbit went on to describe this, and I quote his words, as "inherently unfair and wrong".

That is a point of the greatest importance, and although I cannot develop the argument here because it would probably be too far away from the Films Bill as such, nevertheless I venture to make the point to your Lordships and to the Government. Perhaps we may have an opportunity of returning to it in a more appropriate focus when the Broadcasting Bill comes before us later on.

One thing which the work of the National Film School has demonstrated is that the United Kingdom is uniquely placed, at any rate so far as human material is concerned, to restore and develop a flourishing film industry. But that must depend—and this is the crucial point—on a reasonable injection of equity capital along the lines suggested by Sir John Terry's working party which was set up a few years ago and whose proposals have since been substantially endorsed by the Interim Action Committee. Of course, a contribution from the Eady money can play a useful part; but it is not sufficient just to give the industry a final £1 million and then "leave it to Eady". Eady is a comparatively modest annual subvention; and it must always be remembered, of course, that Eady money is not government money: it is not revenue but comes out of the box office returns, and is part of the industry's own revenue. Be that as it may, simply to rely on a modest subvention of this kind is palpably insufficient and, with all respect, really cannot be said to be more than tinkering with the problem.

I come now to my final point. Eady provides not merely finance for British films but also a subvention to certain bodies in the film world, in particular the National Film School, the British Film Institute Production Board and the Children's Film Foundation. A large slice of Eady money is to go to the NFFC. In its second report, the Interim Action Committee was careful to point out when it made recommendations about the use of Eady money to support film-making, that the BFA, that is the British Film Authority, should ensure in administering this matter that the annual grants to these various bodies should continue to be paid, and indeed should provide a more secure basis for such payments in the future.

Speaking in particular in regard to the National Film School, that derives a substantial part of its revenue from the Eady money and of course it could not survive a sudden reduction or elimination of this subvention without some alternative provision. I venture to think it would he highly irresponsible to suggest that by using Eady money for something else the National Film School should thereby get along without this subvention, or with less. I should like to ask the Government whether they could give some assurance that the National Film School, as well as the other bodies to which I have referred, will not suffer any loss of revenue as a result of Clause 2 of the Bill.

Of course, the Cinematograph Films Council has to be consulted when questions arise as to what allocations should be made out of the Eady money for such purposes. In many ways, the Cinematograph Film Council has proved to be a rather unsatisfactory body. I cannot go into the details of that now, but one of the reasons for wishing to have a British Film Authority was the belief that the functions now performed by the CFC could be far better performed by a body such as the British Film Authority. It is fair to say, notwithstanding that, that the CFC has always shown considerable understanding and appreciation of the work of the National Film School and has given it full support. It has always advised the Minister year by year that the annual requests for an appropriate sum out of the Eady money should be fully met. I am happy to say that the Minister has always accepted that advice. However, there is a danger that future subventions may be imperilled, and I would ask the Government, therefore, to give an assurance that this is in no way their intention.

I am also a little concerned by the wording of Clause 2(8) of the Bill. I think I understand what is intended, but it seems to me to contain a provision which could lead to some misunderstandings. Subsection (8) says this: It shall be the duty of the Agency"— that is the body which hands out the Eady money— to make any payments in respect of any amount due to the Corporation"— that is, the NFFC— under subsection (5) above in preference to any other payments they are authorised or required to make …". As I understand it, all that is probably saying is that if it turned out that there was not enough money in the kitty to pay everybody, the NFFC would be a sort of preferential creditor and would have to be paid first, and nobody else would get anything. That is understandable, but it is a remote contingency because it is highly improbable that the Eady money would ever shrink to that degree.

What gives me some anxiety about the wording of this clause is that it might suggest to some people that in some way the right of the other bodies to have their claims considered is to some extent diminished because of this other payment. There might conceivably be arguments raised because this 20 per cent. is now to be paid to the NFFC for film production, it therefore must be taken that in some way subventions to the other bodies might be considered as less pressing and so conceivably could be reduced. I hope the Government will make it clear that that is entirely remote from their intentions.

In conclusion, I would say that this is a small Bill which can only be regarded as an interim measure. Can we not hope for some broader and more imaginative approach which, sustained by the thinking of the Interim Action Committee, could do something to revive and inspire an industry with both life and hope—an industry, I may say, as I think will be universally accepted, which has served this country well in the past and may do yet greater things to restore, at a very critical time, our prestige and morale both at home and abroad?

In his final words on the Third Reading in another place, Mr. Norman Tebbit agreed that "more needs to be done". I can only say that I hope that that holds out some expectation that the Government have grasped the nature of the problem, and are still ready to move on to a comprehensive solution, not excluding a British Film Authority, without which, I venture to suggest, real recovery is hardly possible.

4.21 p.m.

Lord GRANVILLE of EYE

My Lords, I found the speech of the noble Lord, Lord Lloyd of Hampstead, very interesting, because he knows this subject. He is one of the very few people who tell us about the film industry who have had any real and practical experience in this very difficult and complicated industry. I should like to join him in adding my congratulations to the noble Viscount, Lord Gormanston, on his maiden speech in which he managed to say so much in a short time. I am sure that your Lordships' House will listen to him in future with very great interest.

I suppose that the Government would call this a brave little Bill, in many ways, but, as the noble Lord the Minister said in introducing this Bill, we have had much legislation since the days of the Board of Trade, the quota and the Eady levy, and I suppose that this is really another one of those Bills. Like the noble Lord, Lord Lloyd, I am not sure that it will help us all that much, because the industry is going through such a very difficult time at present. As he said, unless you can find backing, capital, money to finance these various films, then even this Bill with its good intentions will not help very much.

I was interested in the Minister's explanation of Clause 8, which extends to a certain extent the quota arrangements. But my experience of this industry—and I think that it is the experience of most people—is that America always seems to get round the quota. In trying to help this industry we have to consider, as the noble Lord, Lord Lloyd, suggested, exactly how America comes into this as the biggest film and television producer in the world. For a start, they have a home market of 200 million, so that when they budget for a film they can nearly always expect to break even on the home market. Then they have the opportunity of coming to that other English-speaking market which requires no Continental dubbing, the United Kingdom, and making their profit. That has been the story of the film industry for the last 50 years.

Of course, in America, or Hollywood, they have this amazing international star system and block booking in cinemas, but, nevertheless, as the noble Lord, Lord Lloyd, said, the French—who started it—the Canadians and the Australians are today producing good films on a shoestring. I am sure that the Minister realises that when one has a story and has someone like—in the old days—Rank, who is interested in making films, the first things that are required are a script, stars, a producer and a director, in what is called a package deal, and then financial backing from what are called "angels".

When all is said and done—and all the committees, the National Institute, the Film Corporation and so on have dealt with this—if the industry is short of capital to finance films, then no films will be made. I suppose that if we really hope to attract considerable investment into this very important and interesting industry, we need a Korda, a Hitchcock or, as the noble Lord said, a Michael Balcon, because they had flair and understood the British market and what would be a commercial success.

But today, in films and in television, there are some directors who think that a film begins and ends with a brass bed like a nickelodeon and "What the Butler Saw". As the noble Lord, said Rank's have now retired, although they still have Pinewood which they are prepared to let to any ambitious company or package deal which can find the finance to back a film and pay the rent. But on the larger scale, we are left only with what is called the Grade-Delfont syndrome, which—and much of its success is due to this—manages to penetrate that 200-million American market for its distribution. I should like to suggest to the Minister that, maybe, there is a case for United States-Great Britain co-operation to develop films in this country with a guarantee of American distribution, because we have tried everything and without that the film industry is in the doldrums.

I am not sure what this Bill will do to help the National Film Finance Corporation. I am not sure that that can help or even understand the mass market, where the real talent is not always encouraged. It is the same with television. The level of television today is such that it is concerned only with "Coronation Street', sex, porn, "Star Wars" and so on.

The Bill does one thing which is helpful. It deals with the triple cinema problem. The existence of many cinemas has necessitated their depending upon ice-cream, pop and children on Saturday mornings to keep the doors open. Without that, they would have had to close the doors on many of the circuits. So I think that the suggestion in this Bill will help quite considerably. The Government ought to try to do something about this industry now. We have first-class technicians in this country. We have brilliant script-writers. We have excellent directors but, as the noble Lord said, all this, and even this Bill, gets us nowhere at all, unless we can get the required financial backing to put the films into production.

4.30 p.m.

Lord BIRKETT

My Lords, I thought that if I added my one cheer to the one cheer uttered by the noble Lord, Lord Lloyd of Hampstead, it might, by the end of the afternoon, add up to a modest welcome for the Bill. I am reminded of the American Senator who is reported to have said, "A billion here, a billion there, and pretty soon you're talking real money". That is not utterly inapposite to the film industry because the sums of money involved are so very much larger than they are in the other arts.

Before going further, I should like to add my own welcome and congratulations to the maiden speaker, the noble Viscount, Lord Gormanston. It is particularly cheering that he should have chosen to speak upon films and to have spoken with such obvious weight and knowledge. I hope that we shall hear much more from him. I also found his speech rather encouraging, rather heartening, especially about cable television. It would be churlish to disagree with anything in a maiden speech. I simply wish that I had the noble Viscount's confidence in its future. I, too, have seen the benefits which it can offer, and I wish I were more confident that it would arrive soon. It would be a blessing to us all. I wish it well, and I hope that his optimistic view of the future is righter than my slightly less rosy one.

The problem that films in this country have always faced—and it is something with which I must not weary your Lordships because I feel sure that I have said it before in your Lordships' House—is that films, being, as they are, so expensive and often so excessive, acquire a generalised overall reputation for excess which is unfair but understandable, in view of the publicity that some films at some time or another have achieved. It is quite possible, with a pencil and a piece of paper, to be inefficient or even downright irresponsible. It is possible to be so with a canvas and a paintbrush. But imagine how much easier it is with a 35 millimetre camera, thousands of pounds worth of stock and the enormous crew that goes with it. The excesses of our industry have always been notable but they are not, and never have been, the norm.

Equally, the success of some of the products of the film industry has been its own worst enemy. Because one or two films make such a spectacular "killing" in the market place, it often seems that the film industry as a whole only has to adjust itself to the level of "Star Wars" and it will be perfectly all right. "Make another Star Wars'", everybody says. It is not possible to do this, with the best will and the best intentions in the world. So sometimes its very success has meant that the film industry does not look as though it needs the help which it does. That is why I, too, utter one cheer for the Bill. It does preserve the National Film Finance Corporation.

May I echo the tribute paid by the noble Lord, Lord Lloyd of Hampstead, to Sir John Terry, for all his work in the past? He, like everybody else, has been subject to the seemingly inescapable law that only about one in, say, five or possibly 10 films is a success. Every film intends to be a box-office success. Even if it is a small and quite avant garde film on a tiny budget, nevertheless it has every intention of recouping at the box office more than it costs. There is no exact statistic, but somewhere between one in five and one in 10 is the success ratio, and it is not a success ratio which most wise bankers would view with any degree of enthusiasm. Nevertheless, film is an art. It needs encouragement. It is an art which is probably more persuasive and more influential and which has certainly done more in terms of what, in an old fashioned way, used to be called propaganda for this country than any other art form, despite the notable successes of our theatres, our orchestras, our artists, our authors, and so on. So my modest cheer is beginning to turn into a sigh of relief that the film industry is not yet, at least, being allowed to die.

The noble Lord, Lord Lloyd of Hampstead, mentioned one recipient of the Eady funds, which are now to be reallocated, about which he is most concerned. That is the Film School. I have another concern. I am chairman of the production committee of the Children's Film Foundation who, for over a quarter of a century now, have been making what we like to think is a first-class and almost unique contribution to children's entertainment. The matinée movement in British cinemas, for which our body was designed, is unfortunately inescapably declining. As a result, the contribution made towards our production funds from the Eady funds has already been cut in half, with a severe warning that it may decline further. That is not to say this is not economic sense. It is possible that as audience figures go down, the amount of money that the industry itself should spend in direct subsidy ought to go down with it.

We are at this moment trying to put together a new form of Children's Film Foundation. The new set-up will be a multi-media one. It will encompass all the media. This needs the agreement of a very large number of bodies within the film industry, so it may he a little time before we can announce that we have achieved it. I hope that when the Eady funds are re-allocated, as they needs must be now that the National Film Finance Corporation is to be dependent upon them, the Children's Film Foundation, which has done so much for this country in terms of prestige, both here and abroad, will not be forgotten.

Finally, I should like to echo what other speakers have said: that out of the interim action committee's report one vitally important thing must not be allowed to escape—namely, the setting up of a British Film Authority. For me, the mere intimation that by setting up one body we can get rid of three others is a recommendation in itself. As an industry, we proliferate in terms of technical bodies, management bodies, consultative bodies. Quangos we do not have, but bodies we do, in very large numbers, and anything which will reorganise them into a more rational form will certainly he welcomed by me. That is not the only recommendation in favour of a British Film Authority but it is a strong one, and I most earnestly beg the Government to consider the setting up soon of such an authority.

4.38 p.m.

Lord DONALDSON of KINGS-BRIDGE

My Lords, I prepared some remarks on the basis of yesterday's speakers' list which consisted only of the noble Viscount, Lord Gormanston, but we have had such an informed series of additions to that list that the greater part of my preparation would be repetition. So I can skate a little faster over my notes than I should otherwise have to do. In particular, I am very glad that the noble Lord, Lord Lloyd of Hampstead, pointed out the needs of the National Film School, which is disgracefully little supported by television and which is truly and well supported by the Eady levy. I very much endorse his hope that the Minister will keep up the pressure. I was going to say something, too, about the Children's Film Foundation, but I am delighted that its chairman has anticipated me. It is an absolutely first-class body and it is very important that it should be helped.

Both the noble Lord, Lord Lloyd of Hampstead, and the noble Lord, Lord Granville of Eye, spoke about the need in this country, culturally as well as economically, for a proper film industry. So, of course, did the opening speaker, in whose praise I must join. It is unusual for a Minister to get praise of this kind and I do not wish not to take part in it. It was a very clear exposition and we all enjoyed it. All the noble Lords spoke about the need in this country for a proper film industry.

I am very puzzled as to what one ought to do, so I can add a cheer to the two already given for this Bill. It is a Bill which nobody can oppose. It is necessary. I should like to see it go a great deal further, but at this stage I cannot say in exactly what direction. I think that the noble Lord, Lord Beaumont of Whitley, made clear that he hopes—as I think we all hope—that this is working up to a careful study of the Wilson interim report, when it is finally finished, and a real examination of what can be done to help an industry of this kind.

It is most difficult. Lord Granville did say that the French succeed in doing this on a shoestring, and exquisitely. So they do; they have got to because they have only got the limited market of their language in general. We were beginning to do this before television changed the film prospects throughout the world, and it is extremely important that we should go back to doing it.

There are one or two things in the Bill about which I should like to comment. In the first place, I think it does well to write off £11 million and a couple of million interest on past debts for the National Film Finance Corporation, and give it £1 million to go on with. This, plus £1½ million of Eady money will keep it alive until 1985. I do not think it will do much more. I think somebody said earlier that what it used to take to invest in 20 films a year it now can invest in four. This is a tremendous decline, but it can potter along at that rate I think. I feel that the distribution of the rest of the Eady levy back to the industry is a very crude way of helping it. I would have much preferred, as my colleagues in the other place suggested, there to be an increase in the proportion of Eady money going to the NFFC to 30 per cent. rather than 20 per cent. and to give the corporation more power to back hopeful ventures rather than add to the reward of the successful ones, which is what the balance of the Eady money is now being used for. Some of these may be successful for very dicey reasons, including pornographic ones. It is a very crude way of assisting the industry. I think it desirable to do it, but I think it could be done less, and more could be given for the more positive use of the NFFC.

There is said to be a tendency for distributors to demand the makers' Eady contribution as a guarantee against loss in return for putting on the film. This was certainly not the intention of the levy. I do not know whether the Minister has anything to say about it. It seems to me very undesirable, but I do not know how easily it can be stopped. The distributors are virtually a duopoly, two distinguished companies, and I make no criticism of them except that I think they are much too powerful. The history of that marvellous film Kes, for example and the great difficulty of getting it distributed shows how easily too much power can be misused.

Let me now turn for a minute to congratulate our maiden speaker. I thought that the four minute tour de force was extremely satisfactory, and if the noble Viscount never speaks for longer than that he will be an extremely popular speaker in this House. Also, he said many things of the greatest interest. I do not quite agree with the noble Lord, Lord Birkett, I do not want to be able to have a film in my home by ringing up or whatever one does. I hardly have time to read a book as it is, and I like to look at the news and an occasional television programme. I do not want something else in the home; I have all I want already. But this may not be true of other people. Anyway, the speech of the noble Viscount was a most enjoyable one and I hope we shall hear from him on many occasions.

I should like to come back to the Eady levy. May I ask the Minister to answer in unequivocal terms the question that the noble Lord, Lord Lloyd, asked? I was going to ask it myself. The position is that the Eady levy is an uncertain figure; the £1½ million for the NFFC in the Bill is a certain figure. Therefore, the balance may fall. If the balance falls, can we have an absolute assurance that the other smaller things, like the British Film Institute, the Children's Film Foundation, the National Film school and one or two others, will get their slice without any reduction? If there is any reduction it goes into the rewards for success to the industry, which the Eady levy is used for finally.

As to the quota, the Bill maintains it precariously to 1985, and I hope the tendency of the erstwhile protectionist party opposite to move slowly into the shadow of Cobden will not induce the Minister or his successor to exercise his rights under Clause 7 and abolish the quota before 1985. One does notice in the monetarist approach to economics something very much like a free trade element of a rather violent kind, and I hope this will not be the case. I think without the quota our film industry would pack up altogether; I think we have simply got to keep it for the moment. It is true to say that the quota is in fact regularly being met at this moment without any particular difficulty.

Over the question of the BFA, which has been brought up by a number of people, let me say a word of caution. There is a strong case for a body of this kind to co-ordinate the activities of what after this year will be a completely unsubsidised industry, both film-making and distributing, the only subsidy being from the NFFC which is taken from the industry itself and not from Government. I am anxious not to interfere with the cultural side of the business. The cultural side is subsidised to the extent of £5¾ million by the Department of Education and Science under the Minister for the Arts. This money is paid to the British Film Institute.

The functions of the BFI are not primarily commercial, and under its new chairman two years ago, and its new director this year, I think it has an important future. Let me tell noble Lords the kind of things it has to do under its articles of association. It has to keep and maintain a national film archive. This is most important. This is just as important in a sense as books in the British Museum or records in the British Institute of Recorded Sound. It is a very important thing; it is a very expensive thing—expensive to store and expensive to change, because most of the old films are inflammable and they have to be moved across. The BFI also arranges the exhibition of films of cultural importance through the National Film Theatre. It has a production board, which a noble Lord said he had been on, which produces films of an infinitely different kind from the commercial blockbusters we have been talking about. It produces experimental films. It gives students the opportunity to produce first films and to recoup the money later on. Generally speaking, it is doing exactly what ought to be done on the cultural side, getting good films made and giving opportunities to people interested in the cultural side of films. Then, of course, it has 30 theatres which it subsidises throughout the country for film societies.

These functions are not commercial but they really are important. There is in all the arts a progression from pure entertainment to something of greater artistic value. In general, the pure entertainment can look after itself commercially, but the higher artistic values need subsidy. The noble Lord, Lord Beaumont, has already said this. The film is an admirable source of entertainment, which should need no subsidy, but it can and should also be an art of the most expressive and moving kind with the highest aesthetic values.

The only word of caution I want to say about the proposed British Film Authority is that I do not want to see this body, the BFI, which is absolutely dedicated, in rather a highbrow way if you like, to the film as an art, to be subsumed under a body run by enormous companies investing huge sums of money and regarding the whole thing as commercial. So let me say I am very glad the Government have not rushed into the BFA; I should want a lot of notice before I thought it right to absorb the BFI into it.

I certainly believe that we should give the Bill a Second Reading, but I think that it is in the hope, on all sides, that this is an interim Bill and that the Government will try to tackle the larger and very difficult problem in the course of the next five years.

4.50 p.m.

Lord TREFGARNE

My Lords, I am conscious after all the kind words that have been said about my earlier intervention, that I face something of a crisis of expectation at this point, not unlike, no doubt, the crisis that has been facing this industry, according to some of its critics, for all of its long life. However, I shall deal as best I can with some of the points that have been raised.

To start at the end, the noble Lord, Lord Donaldson of Kingsbridge, and, indeed, the noble Lord, Lord Lloyd of Hampstead, and others, asked about the position of the levy allocation after the amount has been paid to the National Film Finance Corporation, as provided for by the Bill. I am afraid I cannot assure noble Lords that bodies such as the National Film School or the Children's Film Foundation will have allocations at any specific level. I understand that the allocations are considered annually by the Cinematograph Film Council which advises my right honourable friend the Secretary of State, who makes the final decision in these matters. However, my right honourable friend is very well aware of the importance of these bodies—and I may refer to them again in a moment—and their need for financial support, and I am certain that that will remain the position.

I should like to jump back in time to the first speech this afternoon, by the noble Lord, Lord Beaumont of Whitley. He asked about the Government's position vis-à-vis the British Film Authority. That point was also raised by the noble Lord, Lord Birkett, and the noble Lord, Lord Donaldson. The Bill, of course, in no way pre-empts or prejudges the setting up of a British Film Authority. The Government have, as yet, taken no decision on that subject. As I have described, the Bill has two priorities—that is, the continuation of some existing measures to serve the film industry in general, and a re-launching of the National Film Finance Corporation. To set up an authority such as has been suggested would, of course, require major legislation and indeed, the provision of sizeable finance. Neither of those is a step which we could contemplate at this moment, although we certainly do not rule it out for the future.

I turn now to the admirable maiden speech of my noble friend Lord Gormanston which, like that of every noble Lord who has spoken, was of the greatest benefit to your Lordships. I hope, like the rest of your Lordships, that we shall hear my noble friend again soon, and often. My noble friend referred in his speech to the question of tax allowances and I should like to make some remarks about that matter. The Inland Revenue statement of practice in August last year, indicating that expenditure on the master print of a film would qualify for 100 per cent. capital allowances, was, I believe, widely welcomed by the industry. Unfortunately there were signs, not indeed confined to film investment, of complicated schemes being developed to make individuals handsome returns from the taxes thus allowed. I understand that the Finance Bill proposes to stop that loophole, but in a way that should not adversely affect film production where most investment is undertaken by corporate bodies.

The noble Lord, Lord Lloyd of Hampstead, expressed regret—regret which we share—as regards the decision by Rank to stop film production. It is, of course, regrettable that Rank has decided to cease producing its own films. The company has made a major contribution to the post-war British film industry, but clearly it is a decision that has been made only after a close review of the company's film-making activities. However, we understand that Rank intends to continue its long-established policy of renting out the excellent facilities of Pinewood Studios which it owns and which, I think, the noble Lord, Lord Birkett, mentioned, and Rank is also a major cinema exhibitor. The company owns about 270 screens in some 130 cinemas and we understand that it intends to continue those activities.

As the company's decision to re-enter the film-making business was as recent as 1977, and it had not been engaged in major film projects of its own for some 10 years prior to that, hopefully the decision to discontinue film production will not have a major impact on the activities to which I referred earlier and which, of course, Rank has been carrying on for a great many years.

Several noble Lords asked me why the Government were not putting more money into the film industry in one way or another. I think that perhaps it might be helpful if I just recapped on the money that we are actually making available through this measure and in other ways; and I point out of course, that it goes further than noble Lords suggest. The Bill provides for a writing-off of no less than £13 million, which would otherwise have to be repaid by the film industry. Furthermore, the Government are foregoing £0.7 million of interest per annum which would, in due course, have been payable by the NFFC, on the debt which we have written off. We are providing a £1 million grant to the NFFC. We make a grant of £5.75 million, as the noble Lord, Lord Donaldson mentioned, to the British Film Institute; and the National Film School, which the noble Lord, Lord Birkett mentioned, receives a grant of about £0.69 million. If my arithmetic is right, that is very close to £20 million altogether. So, the total sum that we are making available is really not insignificant by any standards. Indeed, I think that that point was also mentioned by the noble Lord, Lord Lloyd.

If I interpreted him correctly, the noble Lord, Lord Granville of Eye, felt that the Bill was making an inadequate contribution to the problems of the film industry. It is perhaps worth saying that without this Bill the NFFC would be unable to continue investing in film production at all. The Eady levy would lapse, removing an incentive for film production and the support of several worthy film industry institutions to which I have already referred. Moreover, the quota would also lapse, and we have had evidence of the alarm that that would generate.

1 should now like to say something specifically about the National Film School to which the noble Lord, Lord Birkett, referred. The grant to the NFS comes from two sources: first, the Office of Arts and Libraries, which is part of the Department of Education and Science—as the noble Lord, Lord Donaldson, mentioned—provides £0.7 million, as I have said; and secondly, there is the Eady levy, or a contribution from the Eady Levy, which is £0.215 million. While it is clearly impossible to anticipate what the level of the future grant will be, the Government are very conscious of the importance and quality of the NFS contribution and there is certainly no reason to believe that Clause 2, of itself, will lead to a reduction in the Eady grant to the National Film School.

As regards that point the noble Lord, Lord Lloyd, and the noble Lord, Lord Donaldson, asked why the payment to the NFFC was to be a first call on the levy. I can assure noble Lords that there is no sinister significance in that. It is intended only to guarantee the payment annually to the NFFC for budgetary purposes—after all film production is a long-term business—and, if necessary, to show that an annual income will be forthcoming as a surety for its commercial borrowings.

The noble Lord, Lord Davies of Leek, intervened earlier. I can tell him that he is correct in thinking that European films qualify equally for quota under the quota arrangements. As for the quota system, the Bill authorises only the suspension of the quota system, not its abolition, and even that suspension will need parliamentary approval.

I should like to refer once more to the Children's Film Foundation, on which the noble Lord, Lord Birkett, spoke. I can only repeat the admiration that has been expressed by Government spokesmen for the past work of the Children's Film Foundation in this country and for what I hear of the value of its present work overseas. However, markets are not static. I fear that the foundation's audience at home has been largely tempted away, and my right honourable friend has, therefore, urged the foundation to seek other markets and, indeed, other sources of revenue as distinct from the Eady levy, upon which perhaps they have for too long been dependent. We understand that they have set up a committee to look into these matters and, clearly, this is the right way in which to proceed. Other sources of funds might, of course, include television sources.

Finally, the noble Lord, Lord Donaldson, referred to what he called "French shoestring assistance" for their film industry. It is a fairly handsome shoestring, amounting to something like £35 million per year. Their circumstances are, of course, very different from ours, and I think that the admittedly interim arrangements which we propose under the Bill stand examination. On that basis, I beg to move that the Bill be now read a second time.

On Question, Bill read 2^a, and committed to a Committee of the Whole House.