HL Deb 26 March 1985 vol 461 cc936-63

7.13 p.m.

Report received.

Clause 3 [Dissolution of National Film Finance Corporation]:

Lord McIntosh of Haringey moved Amendment No. 1: Page 3, line 38, at end insert— ("(c) that at least one independent director should be appointed to the board of the company to represent the film production industry.").

The noble Lord said: My Lords, this amendment arises out of a substantial debate in Committee in which a whole series of amendments were put forward in the attempt to ensure some stability for the privatised British Screen Finance Consortium. In particular, it arises out of an exchange between my noble friend Lord Willis and the noble Lord, Lord Lucas of Chilworth, about the possibility of there being an independent director for the British Screen Finance Consortium and whether the Minister would consult with the members of the consortium to see if there was any possibility of their agreeing to an independent director.

The noble Lord, Lord Lucas, was not particularly forthcoming to my noble friend, but he did say at column 1494 of the Official Report for 7th March 1985 that he would think about it and consider whether any action would be appropriate at Report stage. The purpose of our putting this amendment to the noble Lord now is to remind him of that remark. It was in no sense, I think it is fair to say, a commitment; but we remind him of what he said then and remind him of the importance of this issue in the eyes of the British film industry and those engaged in it.

The British Screen Finance Consortium, which the noble Lord calls by the impossible acronym BSFC, is a very strange body. It is first of all to be a limited partnership under the Limited Partnerships Act 1907 and the noble Lord will be as aware as will the House that this is an unusual corporate structure. It is one which has not been adopted with any significance over the past 78 years. The noble Lord will also be aware that changes in the tax position of limited partnerships were proposed by the Chancellor in his Budget last week, and there are limits about the ability of partners in a limited partnership to offset losses in the partnership against their profits elsewhere which require some study. There is also the consideration that the £1.5 million per year for five years which is to be provided by the Government to the BSFC is to be, as I understand from the heads of agreement, in the form of a loan in the first instance and therefore the interest of the Government is not all that secure and not all that strong in the form of commitment.

Above all, there is the fact that the four members of the consortium—I applaud them for their agreement to take part in this consortium—have themselves particular interests in the production of films. Channel 4 Television Company Limited has an interest in the production of films for television. It has used that interest to encourage films for the big screen, and all credit to it. Two of the partners in the consortium are concerned with the distribution industry, and the interests of the distribution industry, if I may put it at its lowest, are not necessarily the same interests as those of the film production industry which is referred to in the amendment.

Finally, the British Videogram Association—again, all credit to it for proposing to set up a company to take part in the consortium—has an interest of its own which is of course important to the film industry but is only part of the interests of the British Film production industry on which all of these industries in the end will depend. For that reason we are not pursuing some of the more wide-ranging amendments which were put forward by the noble Viscount, Lord Falkland, in Committee but are pursuing only one which we considered to be the most essential of all. That is why we put forward this amendment tonight.

We do so saying that it really cannot be denied that there ought to be a voice for the film production industry in this country in the British Screen Finance Consortium. It is inconceivable to me after reading very carefully the reports of the proceedings in another place and the report of our own Second Reading and Committee debates that the Government can put forward a coherent case against this very modest but still very important amendment to the Bill, an amendment designed to protect the interests of the film production industry in this country. I beg to move.

The Viscount of Falkland

My Lords, I think that my noble friend Lord McIntosh of Haringey has covered most of the important points here. The reservations that we have had through the Committee stage of this Bill on this new consortium have largely been directed towards the constituency of this new body; but of course it is a welcome fact that we have a new body which we sincerely hope will go forward into this new era of film making.

All the signs are good but there are, as my noble friend said, conflicts of interest that one can foresee among the four main parts of this new consortium and it seems to me absolutely essential that we should press for an independent director to sit on this company. Not only will that give us a safety valve, as it were, a safeguard against conflicts of interest which are detrimental to the general aim of this body which is to go forward to finance new British films, but also it will bring fresh ideas and a new approach to this new venture, which cannot do any harm, and it will conceivably bring more enthusiasm from all parts of the British film industry. This is a sensible measure that we all support, and it can do nothing but good.

Before I close on that, I would like briefly to say at this early stage from these Benches—and I am sure others will join with me—that we congratulate those well-known figures who have won Oscar awards in Hollywood. It is particularly pleasing that Dame Peggy Ashcroft has won this incredible accolade after an incomparable stage and television career. Now she has the crowning award as a film actress and this all combines to give us, as it were, a good send off.

Lord Willis

My Lords, your Lordships will remember that in Committee I asked the noble Lord the Minister a direct question as to whether he would consult the participants in the consortium to see if there was any objection on their part to an independent director. I look forward very much to hearing what he has to say in that respect, because I think he said he would go down that road.

The only other thing I have to say is that this is an important amendment. The points have been covered by other speakers. But I would say this. It really is not very vital from the point of view of the Government, because it will not upset the balance of the consortium in any way. The main shareholders will in the end still have a final financial voice, but it would enormously please the film production industry and the independent producers if they had such a voice. I cannot for the life of me see that there can be any objection to this.

Viscount Mersey

My Lords, I would like to agree with the general sentiments expressed by other noble Lords, but I do feel that the watch-word for tonight is brevity, so do not wish to add anything except my support.

Lord Lucas of Chilworth

My Lords, may I first echo the remarks of the noble Viscount, Lord Falkland, in reminding the House this evening of the awards which the British film industry, the actors and those involved in the industry won yesterday. That merely suggests to me that the industry is in fine fettle, in good heart, and has the approbation of its peers.

The noble Lord, Lord Willis, reminded your Lordships that I gave an undertaking during the Committee stage to establish whether the British Screen Finance Corporation partners would be content to accept the appointment of an independent director to represent the film production industry. This I did. I confirm that, although they would very much welcome future entrants to the consortium on matching terms, they do not consider the appointment of an independent director as either appropriate or necessary.

I accept the view of the consortium partners. May I add also that I believe the amendment is founded on a misconception of the role that the British Screen Finance Consortium board will play in investment decisions. I would like to make clear it is not the intention that the consortium shall operate as the National Film Finance Corporation presently does, with the board having a close active involvement in individual investment decisions. It is made clear in paragraph 3 subsection (3) of the heads of agreement with the Secretary of State that the chief executive will be the ultimate decision-maker on whether or not to support particular applications within such broad parameters as may be laid down by the board. This commitment to the independence of the chief executive has been given by reputable and substantial organisations and it would be quite unjustified I believe to doubt either their good intentions or, indeed, the ability of the Secretary of State to ensure that the consortium will comply with the terms of their agreement.

In case there are any lingering doubts, may I remind your Lordships that the chairman of the consortium will himself be approved by the Secretary of State, and that among his other duties he will be charged with overseeing the terms of the contractual arrangements between the Government and consortium and reporting back to the Secretary of State if these commitments are not met.

Another reminder perhaps I might make is that there will be a Government-appointed director on the board. This director will be the watchdog of the Government in the sense of seeking to ensure that the terms on which the Government have agreed to fund the consortium, the heads of agreement, are observed. Furthermore, he will be expected to have regard to the interests of the film industry at large.

From the conversations and advice I have received since we last discussed this matter, I am not convinced—nor, indeed, am I by the arguments that have been put forward by the noble Lord, Lord McIntosh of Haringey—of the need for an additional director specifically to represent the film production industry on the consortium board. I believe the assurances that the consortium members have provided are comprehensive. They more than adequately dispose of any fear that the partners will not have at heart the wellbeing of the film production industry. I invite the House to reject the amendment.

Lord Willis

My Lords, I find that reply rather frightening. In my mind, it casts a shadow of gloom over the new consortium. What is frightening is that they themselves have said they would not welcome an independent director, and I find that rather strange. They would welcome an independent director provided he put up a million-and-a-half a year, but there are not many independent directors who can do that.

I cannot see how the appointment of one additional director could change the shape or the policy as laid down in the Bill. On the contrary, it would give an additional channel of advice to the chairman, and an additional channel of advice to the chief executive. It would also help the Government representative, who has been mentioned. So I feel personally that I would want to press this matter strongly, because I think the consortium should be told that this amendment, if passed, will create great pleasure in the industry and will give a measure of confidence in the consortium, which at present I am afraid they do not have.

Lord Jenkins of Putney

My Lords, I believe my noble friend had it in mind, if he received any encouragement from the noble Lord the Minister, to withdraw this amendment in favour of that encouragement, but as he has received none whatever, it is my hope that my noble friend will press this matter to a Division. In my view, it is right that we should have the feeling of the House on this matter, and since my noble friend has received no help whatsoever. I hope he will decide that this is a matter on which the House ought to decide.

Lord McIntosh of Haringey

My Lords, I am grateful for the observations of my noble friends. As they did, I have listened carefully to what the noble Lord the Minister has said, and I have to agree with my noble friend Lord Willis that the situation as it has been put by the Minister is in fact worse than it was when we started.

If I had been wrong in thinking that the interests of the members of the consortium were only partial—not to be deplored in themselves but partial—in representing the views of the film industry as a whole; and if I had been wrong in thinking that the Government's interest, which is limited as I said to only £1.5 million a year for five years, and that, according to the heads of agreement, presently intended to be in the form of a loan, then it might have been possible to say that all was happy, that the consortium was funded with the maximum of goodwill, and that we ought to give it a fair wind for now. It might have been possible, subject to the amendment to be moved by the noble Viscount, Lord Mersey, to say that we ought to give it an opportunity to prove itself.

But everything the Minister has said has confirmed my conviction that all is not well and that the members of the consortium, despite their goodwill and despite their obvious concern for the public welfare, have not appreciated the need for the voice of the film production industry to be represented on the board of the company. In that, they are joined by the Government, who clearly have not appreciated in any sense the force of the arguments put forward both in Committee and at this stage. Under those circumstances, I believe it would be right for me to invite the House to take a view on this matter.

7.31 p.m.

On Question, Whether the said Amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 68; Not-Contents, 82.

DIVISION NO. 3
CONTENTS
Airedale, L. John-Mackie, L.
Ampthill, L. Kagan, L.
Ardwick, L. Kilmarnock, L.
Auckland, L. Llewelyn-Davies of Hastoe, B.
Barnett, L. Lloyd of Hampstead, L.
Birk, B. Lockwood, B.
Blease, L. Lovell-Davis, L.
Brooks of Tremorfa, L. Mcintosh of Haringey, L.
Campbell of Eskan, L. McNair, L.
Carmichael of Kelvingrove, L Marley, L.
Cledwyn of Penrhos, L. Mersey, V.
Collison, L. Meston, L.
Craigavon, V. Monkswell, L.
Davies of Leek, L. Mountevans, L.
Dean of Beswick, L. Nicol, B.
Elwyn-Jones, L. Ogmore, L.
Ennals, L. Perry of Walton, L.
Evans of Claughton, L. Ponsonby of Shulbrede, L.
Ewart-Biggs, B. Raglan, L.
Falkender, B. Rea, L.
Falkland, V. Ritchie of Dundee, L.
Fisher of Rednal, B. Robson of Kiddington, B.
Gallacher, L. Seear, B.
Galpern, L. Shackleton, L.
Graham of Edmonton, L. [Teller.] Stedman, B. [Teller.]
Stewart of Fulham, L.
Granville of Eye, L. Stoddart of Swindon, L.
Hampton, L. Taylor of Blackburn, L.
Harris of Greenwich, L. Taylor of Gryfe, L.
Houghton of Sowerby, L. Taylor of Mansfield, L.
Howie of Troon, L. Tordoff, L.
Hylton-Foster, B. White, B.
Irving of Dartford, L. Willis, L.
Jeger, B. Winstanley, L.
Jenkins of Putney, L.
NOT-CONTENTS
Airey of Abingdon, B. Kinloss, Ly.
Allerton, L. Kintore, E.
Atholl, D. Kitchener, E.
Bauer, L. Lauderdale, E.
Belhaven and Stenton, L. Lindsey and Abingdon, E.
Beloff, L. Long, V.
Belstead, L. Lucas of Chilworth, L.
Brabazon of Tara, L. McFadzean, L.
Brougham and Vaux, L. Macleod of Borve, B.
Bruce-Gardyne, L. Margadale, L.
Caithness, E. Molson, L.
Cameron of Lochbroom, L. Monckton of Brenchley, V.
Campbell of Cray, L. Morris, L.
Cathcart, E. Munster, E.
Colville of Culross, V. Norfolk, D.
Colwyn, L. Nugent of Guildford, L.
Cork and Orrery, E. Orkney, E.
Craigmyle, L. Orr-Ewing, L.
Davidson, V. Peel, E.
De La Warr, E. Rankeillour, L.
Denham, L. [Teller.] Reigate, L.
Elliot of Harwood, B. Renton, L.
Elton, L. Renwick, L.
Faithfull, B. Robertson of Oakridge, L.
Ferrier, L. Rochdale, V.
Gisborough, L. Rodney, L.
Glanusk, L. St. Aldwyn, E.
Glenarthur, L. Saltoun, Ly.
Gray of Contin, L. Sandford, L.
Greenway, L. Shannon, E.
Gridley, L. Sharples, B.
Harmar-Nicholls, L. Skelmersdale, L.
Henley, L. Somers, L.
Hornsby-Smith, B. Stamp, L.
Ironside, L. Stanley of Alderley, L.
Stodart of Leaston, L. Ullswater, V.
Suffield, L. Vaux of Harrowden, L.
Swinton, E. [Teller.] Whitelaw, V.
Teynham, L. Wynford, L.
Trefgarne, L. Yarborough, E.
Trumpington, B. Young of Graffham, L.

Resolved in the negative, and amendment disagreed to accordingly.

7.39 p.m.

Clause 5 [Financial assistance by Secretary of State in connection with the production of films]:

Lord Lloyd of Hampstead moved Amendment No. 2: Page 6, line 44, at end insert— ("( ) The Secretary of State shall use his best endeavours to secure annual payments from the film and the television industries to the National Film and Television School to assist it in pursuance of its objects.").

The noble Lord said: My Lords, in moving this amendment, which I shall endeavour to do as briefly as possible, it is necessary for me to sketch in the background in order to explain its purpose. As some of your Lordships will doubtless know, the National Film and Television School has been going for only a relatively brief 14 years, but during that period it has established a remarkably high reputation, both at home and abroad. Its value is acknowledged widely throughout the industry and, one may say, by the Government themselves. Indeed, the White Paper stated that the school has attracted universal praise for its excellence and its responsiveness to the needs of the industry. The White Paper also went out of its way to pay a very well-earned tribute to Colin Young, who has been director of the school since its inception, and who, shortly before, had been given one of the premier awards by BAFTA—the Michael Balcon Award—for the person who had made the most distinguished contribution to the cinema during that particular year. If I may venture to do so, I should like to repeat that tribute.

From the beginning of the school the principle was accepted that its finances should be a partnership between the Government and industry. Ideally, the notion was that eventually one would arrive at some kind of parity so that the Government and the industry would support the school on a 50–50 basis; although I am sorry to say that this ideal has not yet been fully attained. The Government contribution has of course come not from the department that the present noble Minister represents but from the Office of Arts and Libraries. As for the industry, we have been dependent upon a grant from the Eady money—the British film fund.

As regards television, although the school has only recently adopted the word "television" into its title, in fact it is universally recognised that from the beginning the school has made just as great a contribution to television as it has to films. Strangely, the television industry has been less than magnanimous in recognising that contribution, at any rate from the financial point of view. It has been very ready to accept the very great services that the school has performed in providing top flight people to work in television but at the same time it has been very miserly in making contributions. I am afraid that this applies to an even greater extent to the BBC than to independent television.

As a result of all this and due of course to the fact that the school has had to look for its income from year to year to differing sources, its position has always been financially precarious. But one might have hoped, I should have thought, that with the introduction of this Bill some attempt would have been made to make this great school, whose merit is so widely recognised and by the Government themselves, less rather than more precarious. Unfortunately that has not happened.

7.45 p.m.

As regards Eady, the way the system works, and will be working until Eady is eventually abolished under this Bill, is that under the Films Act 1970 a provision was inserted which enabled a grant to be made, with the approval of the Secretary of State who has to consult the Cinematograph Films Council for the purpose, to support a film school. The National Film School was not mentioned by name in that provision. That may seem a little curious but the explanation is very simple. The reason was that the school was not actually in existence when the Bill was passed. It had not been incorporated, and the legal advice was that the Act could not refer to a non-existent body. Therefore, a formula was devised under which the grant was made to one school only which was to be approved and designated by the Secretary of State. Shortly after the Bill was passed the school was duly registered as a company, limited by guarantee, and the Secretary of State approved this as the one and only school which should be eligible to receive this grant.

The advantage of this formula from the point of view of the school's relation to the film industry, at least, was that it gave the school a kind of legislative reference which conferred a status upon the school and which, as has been proved over the years, has greatly increased its bargaining situation vis-à-vis the film industry. We do not quarrel with the removal of Eady. As I have indicated on several occasions in the course of these debates, we recognise that there is no case for retaining Eady in its present form since it imposes a major obligation on that part of the industry which is least able to bear it, and therefore makes no sense at the present time. However, the effect of abolishing Eady in this way, apart from the financial consideration, is to deprive the film school of its status. The importance of this is particularly emphasised by the experience of the school over the years in dealing with the independent television industry. The fact that it has no statutory standing vis-à-vis the television industry has undoubtedly weakened the bargaining position of the film school in seeking adequate and suitable financial support.

In the other place Mr. Trippier, speaking for the Government, sought to brush aside this question of the status of the school under the Films Act. That, I may say, was in relation to an amendment of a very different character from the one that I am moving. It was an amendment, it is fair to say, that the school was not altogether happy about and which has not been repeated in your Lordships' House. Be that as it may, Mr. Trippier sought to brush aside the importance of this provision by saying that all the Films Act did was to recognise the school for the purpose of making it eligible for an Eady grant and that it in no way guaranteed the school. That is absolutely right and no one would quarrel with that. But this is something of a quibble, if I may say so, because what the provision has done is to confer, as I said, a statutory standing upon the school. This has reinforced the school's position to two ways: first, by reinforcing its bargaining position vis-à-vis the industry; and, secondly, in enabling it to establish its independence and making it very difficult for the industry to seek to impose conditions on the school or to interfere with its autonomy.

Now that Eady is going, what are we getting in return? We are getting a rather vague understanding which has been negotiated, not by the school but by the Minister, with three sections of the industry—Independent Television, the BBC and the Cinematograph Exhibitors' Association on behalf of the cinema industry. But, as I say, there is no statutory status given to the school in that context.

What the amendment now before your Lordships does is to follow the pattern of the Films Act in the sense that it confers statutory recognition on the school and thereby imparts to it a modest leverage—I will put it no higher than that—for the future. It does not impose, and deliberately does not impose, a positive duty on the Secretary of State to carry out the task of securing annual payments from the industry for the film school. Advisedly it does not do that, because it was realised that that would be to impose an impossible burden on the Secretary of State. After all, he may come back and say, "They just will not pay anything, so I cannot secure anything for you". It was not part of the purpose of this amendment to try to achieve an impossible objective. Accordingly, what has been done is to impose on the Secretary of State the much more limited obligation simply to use his reasonable endeavours to obtain suitable finance to support the school.

The expression, "use reasonable endeavours", is not only a phrase that is familiar to lawyers generally, but is also consecrated in this very Bill. As your Lordships know, in Clause 3(4)(a) it is, in a different context, specifically provided that the Secretary of State in relation to the transfer of certain rights—and I need not go into that in detail—has to be satisfied that the new company or partnership, will use its best endeavours to encourage the production of relevant films", and so on. It seems to me, if I may say so, that there is no reason at all why the Secretary of State should not accept this sort of obligation and thereby confer upon the school a statutory status and the ability to ask the Secretary of State or the Minister in the department to ensure, so far as he can, that adequate finance be derived from the industry.

Another argument which I believe has been raised in the context of this amendment is that it is unprecedented and therefore it cannot be countenanced. In fact I suggest that, far from being unprecedented, it represents the very practice that the Department of Trade has been adopting in regard to this matter. If one considers the situation, under the Films Act, with Eady operating, the position was that a grant could be made from the levy, and the ultimate decision rested within the discretion of the Minister or the Secretary of State as to whether the grant should be made, he being under an obligation first to consult the CFC.

When it was proposed by this Government that Eady should be abolished the Minister obviously and reasonably accepted that there was some obligation upon him to find a financial substitute for this very substantial slice of income that the present Bill was to take away from the film school. What the then Minister—in fact it was Mr. Kenneth Baker who was the film Minister at that time—did was very properly to go around the industry to see whether he would negotiate some sort of arrangement, as it has been described. Eventually he arrived at the agreement of which we know whereby these three sections of the industry are making a contribution for the next few years.

All that we are seeking in the amendment is, in effect, for the Minister to continue this process in order to ensure some measure of financial security for the school, but to do it in the context of the statutory recognition of the National Film and Television School. That will make its future, at any rate to that degree, less precarious. After all, the school will obviously be in a very difficult position, especially without any statutory countenance. What it will be left to do is to go around with a begging bowl, asking these various gentlemen in various parts of the industry whether they can possibly scrape up a little finance to keep the school going. If it is given, as this amendment suggests, a statutory recognition, with the Minister under a duty to use his best endeavours to secure adequate finance, the school will have the sort of backing which will, at any rate to some considerable measure, reduce that precarious situation.

In those circumstances I would venture to submit that recognition of that kind is the very least that the Government can do to relieve the school of that precarious situation. After all, is it really the appropriate way to finance what is recognised, even by the Government themselves, as a great national institution—if I may say so, one of the jewels in the crown, if I may borrow that favourite phrase, of the arts ministry which presides over the school?

In those circumstances I would most strongly urge that the Government should not brush aside this amendment in the manner in which I venture to think they have tended to do on other issues, but that they should indicate that they are at least in sympathy with this amendment. If for some reason or other, which I cannot at the moment fathom, they find its form not quite to their liking, they could reintroduce a suitable amendment at a stage which still remains open to us in order to fill this very unhappy gap. I beg to move.

Lord McIntosh of Haringey

My Lords, the noble Lord, Lord Lloyd, has spoken with unrivalled authority about an institution to which he has devoted a great deal of his energy. We must all be in debt to him for his speech tonight. I do not think that there is anything effective I can add to what he said. I believe that he has anticipated, as a good law professor should, all the possible arguments which might be put forward by Government and Opposition to his amendment. I believe that he has shown effectively that there are good precedents for the action which he has proposed—good precedents from this Government themselves. I believe that we have a right to expect conciliatory statements from the Government in response to this amendment.

The Viscount of Falkland

My Lords, there is very little that I can say to follow the noble Lords in their remarks about the National Film and Television School. It is the cradle of talent in this country—not only the cradle of talent to supply the British film industry; indeed, it supplies all the creative and technical people in television and films who are at present used by the American film industry over here. They are people who are very keenly sought and at the moment it is very much to the financial advantage of American companies to use them. But that resource, which we hope will continue to serve not only our industry but also other industries, will not go on automatically and for ever unless this kind of unique institution is maintained at the very high level which is at present recognised the world over. It deserves to have its status enshrined in statute. The status gives it a better bargaining power and, hopefully, if we move forward into a more prosperous era of film making, it will not only serve television but the film industry equally and can do nothing but enhance our reputation abroad. I can add nothing further to the eloquent way in which the noble Lord has spoken.

8 p.m.

Lord Willis

My Lords, I have two brief points to make. First, the noble Lord, Lord Lloyd, mentioned the BBC's contribution as being miserly. In fairness to the BBC, since it seems a national hobby today to knock that magnificent institution, it has to be said that they have their own training facilities, and in fact had them long before the National Film School existed. Having made that minor negative point, I want strongly to support everything that he has said about the National Film School. The road to "Chariots of Fire" and to "The Killing Fields" and the other great and successful British films, alas!—and this was not mentioned earlier—was largely financed by American money although they were made by British producers. The road to those films stretches straight back to training in the National Film School; the noble Viscount, Lord Mersey, said it was the cradle of our talent. I therefore strongly support the amendment.

Lord Lucas of Chilworth

My Lords, I assure the noble Lord, Lord Lloyd of Hampstead, that I have listened very carefully and I have no wish whatsoever to brush this issue aside. The Government are well aware of the excellence of the National Film and Television School as they are extremely well aware of the excellence of the noble Lord, Lord Lloyd of Hampstead, who moved the amendment; because it is he who has brought the school into the very high esteem in which it is held. There is no doubt that its reputation for producing highly skilled film and television personnel is acknowledged across the film-making world. We said this in our White Paper on film policy.

However, the real strength of the school lies very much in the close links which it has developed with the industries it serves. I do not believe that the school or anyone could be helped if those links were disrupted by the statutory intervention of the Secretary of State, whether it is permissive or otherwise. The funding of the school, as the noble Lord, suggested represents a partnership between Government and the particular industry. This is quite different from the arbitrary role that is envisaged for the Government by the amendment. I believe that it is very much in line with the wishes of the school itself since the dual funding enables it to preserve a measure of independence and freedom from undue influence; although, of course, the school equally prides itself on its reputation for being responsive to the needs of the industry it serves.

In round terms, the school's budget is approximately £1.5 million a year. The film and television industries, which benefit so much from the high quality graduate output of the school, contribute significantly towards costs; and I shall refer to that in a moment. But by far the largest contribution to the school's costs is made by the Government. My noble friend Lord Gowrie provides annual grants-in-aid for the school. His department is in constant touch with the school to assess its funding needs. Your Lordships will be aware—and will probably recall from a recent debate on the arts in your Lordships' House—that my noble friend's department has very great pressure upon its resources for support.

Nevertheless, my noble friend was able to announce an increase of no less than 13 per cent. this year in the Government's contribution to the school. Some £850,000 was granted in 1983–84; £990,000 for 1984–85, and £1.12 million for 1985–86. On top of this very significant support, the House will recall the commitment announced in the White Paper of a capital grant of a quarter of a million pounds that would be made available by my department to help refurbish the school's television facilities. In terms of the Government's commitment to the school, I suggest that these figures speak for themselves. If the noble Viscount, Lord Falkland, wants somebody to push the cradle, then the Government are pushing that cradle to a considerable amount of money. I would not accept from your Lordships that the Government's commitment is anything other than extremely firm.

The industry's commitment comprises two main elements. The television companies provided £140,000 in 1983–84 and £225,000 in 1984–85. The bulk of the industry's funding was, however, made from the proceeds of the Eady levy. In the last levy year this source provided £500,000. For the current year it may well be £600,000. Finally, tuition and application fees have contributed over £70,000. I might add in parenthesis that if, as the noble Lord, Lord Lloyd, suggested, the school has a worldwide acceptance and appeal, there is little doubt in my mind that it can attract considerably more revenue from its tuition and application fees in future.

We have to remember, I am sure, that funding from the Eady levy has never been a fixed amount. The existing legislation has merely made the school eligible for payments; but the level of payments has been a matter for determination year by year on the advice of the Cinematograph Films Council. Nevertheless, the school has plainly been dependent to a significant extent upon income from the Eady levy. Accordingly, as the White Paper described, in making a decision to abolish the levy—and that decision has been accepted by all sides of the industry—the Government were at great pains to find an alternative new source of funding to replace the industry element which then would be lost.

I do not accept, as the noble Lord, Lord Lloyd, suggested, that some vague arrangement in substitution for Eady was made. The Government, in discussion with the industry, in the course of the review of the policy, secured firm commitments from the BBC, the Independent Television Companies Association, and the Cinematograph Exhibitors' Association to provide payments to the school totalling £600,000 a year for five years. That period seemed about as far ahead as it was reasonable to look. It was, of course, the same period for which the existing legislation provided in 1980. The new arrangement has the advantage now of giving the school greater advance information about its income than was ever possible with the cap-in-hand uncertainty that the school had to live with when seeking a share of an unreliable and declining Eady levy.

I would point out that the contributions from the television interest will be additional to their existing contributions, and in that respect alone I believe that the new arrangements will be a significant improvement in that television interests in the future will be providing a contribution which will more closely reflect the industry's reliance on the school's product.

In the course of his remarks, the noble Lord, Lord Lloyd of Hampstead, said that the opportunity should now be taken to make the position of the school less precarious. He described the position of the school prior to this Bill. It is only necessary for me, I think, to remind the House that the existing films legislation does not mention the school by name at all. It would always have been possible, were the Secretary of State so minded, to approve a different film school. In that respect, neither the future nor the funding of the National Film and Television School was guaranteed by statute. The position will not change with the repeal of that legislation. Nor do I believe that the school itself would like to find itself in the position of becoming a statutory body or a body constrained by statute.

Where I part company with the noble Lord who proposed the amendment, and with other noble Lords who have given some support to it, is on the desirability or indeed the need for such an amendment. Frankly, does it not come down to this? The Government's support is given in tangible and substantial form by the grant made by my noble friend Lord Gowrie. The beneficiaries of the school's product are the film and television industries alone. These industries are committed to supporting the school for the next five years. So long as the school continues to give industries the service for which it exists, I really do not believe that those beneficiaries will deny it the means to provide the service. If the school ceased to perform its functions to the satisfaction of those industries, I do not think that it is realistic to expect them to continue their support. The continuance of the old legislation would not protect that position.

In other words, I believe that the relationship will prosper so long, but only so long, as both sides carry out their responsibilities each to the other. In the Government's view, it really does not make sense to seek to impose on the Secretary of State a duty to encourage the industries involved to support the institution which serves them. If the industries believe that their interests in terms of training and resource of skilled manpower are met by the school, they will support it; if not, they will not. The passing of an amendment of this nature, however it is phrased, will not alter that fact of life. Nor will the absence of such an amendment in any way weaken the Government's genuine interest in the school's future wellbeing. I cannot, with all—

Lord Graham of Edmonton

Sympathy.

Lord Lucas of Chilworth

—sympathy—thank you—for the way in which, accepting his great knowledge, the noble Lord, Lord Lloyd of Hampstead, has put forward this proposal, recommend your Lordships to accept the amendment.

Lord Lloyd of Hampstead

My Lords, I cannot but express a certain degree of sadness after listening to that reply to the arguments that I attempted to put before your Lordships. I wish to choose my words with a certain amount of care, but I am bound to say that I cannot see that the noble Lord the Minister with the greatest respect for him, has really attempted to address himself to my arguments at all. For example, he tells us, as if it is a point against the school, that the Films Act does not mention our school by name. In view of the history of the matter, which I hope that I put clearly before your Lordships, how can that possibly be an argument of any kind against the entitlement of the school to support from the industry?

Then the noble Lord tells us, in great detail, the contributions that the Government have made to the school: these I fully acknowledge, acknowledged in my speech and always have acknowledged. No complaint is being made. The noble Lord then couples that with the point that he takes the view, as I myself have indicated, that the school looks to a kind of partnership between the Government and the industry. The last thing that we wish is to ask the Government to take over this obligation of the industry. All that we wish to do is to put ourselves in an adequate bargaining position vis-à-vis the industry.

8.15 p.m.

It is all very well for the Minister to say that he has total confidence in the fact that the industry will recognise the great merit of the school and will be forthcoming with money. The whole history of its 14 years of existence shows that we have had a tremendous struggle from year to year trying to extract the smallest sums from those industries, while they are prepared to sit back and take advantage of the services being provided. The fact that an arrangement has been made for five years, which I still suggest is a vague arrangement—the school is not a party to this agreement—makes no provision as to how it is to be enforced. Even if one assumes that it will go on steadily for the five years, what is to happen afterwards? Here, we are to have our statutory status taken away from us—incidentally, of course; not deliberately—by the removal of the Films Act. All that one is asking from the Government is a simple recognition of our statutory status and an obligation on the Secretary of State to do no more than use his best endeavours in the event of the industry proving difficult, as may happen. If, for example, television thinks that it has had rather a poor year and may have a poor year ahead from its point of view, although perhaps not in the judgment of other people, it may well say, "It is a very good and a useful school but we cannot find much money to help". The whole status of the school will thereby be substantially diminshed.

I was even more astonished to hear the Minister refer to the possibility of supporting this school by enlarged fees. I wonder whether he appreciates that the whole quality of the National Film and Television School has been due to the process of selection of candidates solely on the basis of outstanding creative quality. I know that some schools here and elsewhere may be run on the basis of charging vast fees which many people from countries like America might well be ready to pay. But where does the question of quality come in? This is a formula, really, for depriving the school of its essential quality. It would be the death knell of the school.

In all those circumstances, I am bound to express my profound disappointment at the reaction of the Minister on what I venture to think—I was happy to hear several of your Lordships concur—a very reasonable proposition. No reason has been adduced as to why the Government should not accede to it. It seems to me, in those circumstances, that I am duty bound to invite the House to express its view on the matter.

On Question, amendment negatived.

Viscount Mersey moved Amendment No. 3: After Clause 5, insert the following new clause:

("Levy on feature films, pre-recorded video cassettes or blank video tapes. The Secretary of State, after one year beginning with the day on which this Act is passed, and after consultation with persons considered by him to be representative of the film production industry may by order made by statutory instrument, establish arrangements to supplement the financial assistance provided under section 5(1) of the Act by funds derived from any or all of the following schemes, that is to say—

  1. (a) a levy from independent television contractors and the BBC of an appropriate sum of money to be determined by him in respect of the showing by them of feature films on television, or
  2. (b) a levy at such rate as he may determine on pre-recorded video cassettes containing feature film material and sold in the United Kingdon, or
  3. (c) the appropriate film proceeds of any levy scheme approved by him in respect of blank video tape sold in the United Kingdom.").

The noble Viscount said: My Lords, I move here a composite amendment, greatly modified from the various levy amendments which were moved at Committee stage. Perhaps I may remind noble Lords of the history of amendments such as this. They were in fact recommended by a Select Committee in another place in the 1981–82 Session. They were, indeed, passed by a Select Committee in the other place in this Parliament, and then they were overturned by a whipped vote on Report. So I have high hopes that this modified, composite amendment, as it is, will find favour with your Lordships. It is truly an all-party amendment and arises from the simple fact, which I keep on and on about; that is simply that 30 years ago I paid my 1s. 9d. or my 3s. 7d. to see excellent films such as "The Blue Lamp", so ably written by the noble Lord, Lord Willis, and now I can see the modern equivalent for nothing, or next to nothing. That is the problem. I do not complain; I do not wish to look a gift horse in the mouth. But the inevitable consequence of this is that the British film industry is in dire financial straits.

I know that my noble friend Lord Lucas has already said that it is healthy. I know that people have, very rightly, praised Dame Peggy Ashcroft for her award last night. But with all due respect I must point out that the major awards last night went to an American film about an Australian and an Italian, called Mozart and Salieri. Noble Lords tend to quote "Chariots of Fire" as the great hope and sure sign of revival of the British film; that is the one they keep falling back on. Honestly, I think noble Lords have been quoting "Chariots of Fire" ever since I came into this Chamber. As a matter of interest, its maker, David Puttnam, thinks that we should not keep quoting it. It makes it stand out as an isolated pinnacle of excellence. It is three years old. If the British film industry were really healthy, claims Mr. Puttnam, we should not need to quote "Chariots" as something exceptional because we should be having a new "Chariots" once a month just as the norm, so to speak. It might perhaps get only a passing reference in the Sunday papers.

We could have that very high standard of film making if the Government took this amendment aboard, and we could have it for very little money indeed. What we are talking about is 10 new British features a year, if I may put this slightly into context; that is, we are talking about 20 hours of film. That is, indeed, a small David beside the Goliath of television, with its 11,000 hours of screen time each year. Similarly, the sum of money we ask for is very small—£ 10 million or perhaps £20 million. Compare that to the BBC's £700 million and ITV's £900 million. With due respect to my noble friend Lord Lucas, it is nickels and dimes compared to the sort of money we are talking about for television.

We suggest raising it by levy, as other methods are not possible in this House; but my noble friend Lord Lucas knows full well that were he to suggest another method, we should of course accept it very gratefully. There seems to me to be still a yawning gap in Government logic. The Eady levy, they say, is too complicated, too small—they are quite right—and it should be scrapped. How right they are. So far, so good. It brings in only £1,500,000. That is quite so; but what do they propose to put in its place? Surely it is the same sum of money: £1,500,000, with, it is true, a few hundred thousand coming from other sources; but it is nothing really very significant. It is a total of £3 million, and we need at least five times that amount to ensure a healthy British film industry; shall we say £15 million? Compared to television income, that is £15 million against £1.5 billion. I think it is 1 per cent.; it might be 0.1 per cent.; it is very small.

I have been speaking mainly of a levy on feature films transmitted on television; that is in fact in paragraph (a) in the new clause. My noble friend Lord Auckland, who I see has had to leave us, spoke at Committee stage about paragraph (b)—the levy on pre-recorded tape. I am pleased to say that the principle in paragraph (c)—that is, the levy on blank tapes—seems to have been already enshrined in the Government's Green Paper. Thus this composite amendment gives the Secretary of State freedom to choose how best to raise that essential minimal £10 million. I hold that it is a very moderate amendment. I hope that my noble friend Lord Lucas will be equally moderate and show us just a pinpoint of light at the end of the tunnel. My noble friend Lord Lucas may not be wearing his coronet, but I believe he has a kind heart. My Lords, I beg to move.

Lord McIntosh of Haringey

My Lords, this, again, is an amendment which has had some discussion at earlier stages of this Bill. I think it is necessary to draw attention to the differences between the amendment now proposed by the noble Viscount, Lord Mersey, and the amendments on the levy issue which were proposed at Committee stage. The most significant by far is the fact that the amendment says: The Secretary of State … may by order made by statutory instrument, establish arrangements to supplement the financial assistance provided under section 5 (1) of the Act". That is significant in two ways. First of all, it says "may" rather than "shall". I believe that meets the objection which has been made by Government, both here and in another place, that the British Screen Finance Consortium ought to be given a chance to prove itself before any other machinery is put in place to supplement the financial provision for it.

What could be fairer than to do what the noble Viscount proposes, which is to say, "Yes, by all means let us give the British Screen Finance Consortium a fair run for its money. Let us give it perhaps five years; it may be less or it may be more—who knows? But let us see whether it can add to the amounts of money being found from the members of the consortium and from Government"? I repeat—not much attention has been paid to this—that the Government money is at this stage in the form of a loan and not in the form of fully-fledged financing. The amendment says that if the British Screen Finance Consortium succeeds in providing for the needs of the film production industry, there is no need for the Secretary of State to take the action proposed in the amendment. But if, on the other hand, as many of us fear, the argument is that the film industry is flourishing both at the top end, so to speak—the "Chariots of Fire" end—and, much more important, in its duty to provide opportunities for new film directors and new film production companies, then the Secretary of State has the power, without resorting to further legislation, to step in and use the means proposed in this new clause.

The amendment has the further virtue that it does not actually specify which of the forms of levy shall be given priority. It refers to: any or all of the following schemes". It leaves it to the time when the Secretary of State wishes to implement the new clause. He can consider which is the most appropriate in the economic conditions prevailing at the time. I believe that in all those respects this is a very much better amendment than that which was moved at Committee stage. I believe it is a better amendment in that respect than that which was passed in Committee in another place. I believe it deserves the serious consideration of the Government and that the House, again, has the right to expect that serious consideration, that sympathetic consideration which the noble Viscount, Lord Mersey, anticipates from the Minister.

8.30 p.m.

Lord Lloyd of Hampstead

My Lords, I wish to add a brief word in support of this amendment. As the noble Lord, Lord McIntosh, has said, it is very much improved compared with the previous amendment. On the previous occasion I expressed some dislike for the exact form of the amendment. First of all, this amendment covers blanks and it does not limit the redistribution to individuals, which I think was the great defect of the previous amendment.

The one respect which I would have favoured would have been to concentrate solely on the tape levy, simply because I recognise that the Government have totally set their face against the possibility of a levy on television. Therefore I think that the powerful case which exists for a tape levy is, to that extent, somewhat weakened by being linked with the television levy.

The only other point I wish to add, because the arguments were effectively deployed on a previous occasion, is that I recall that the noble Minister, Lord Lucas of Chilworth, said at the Committee stage that he found it extraordinary that all the industry could find to do would be to call for more taxpayers' money. This is quite a misconception because the essence of these levies is to avoid that recourse. What is intended is to provide a mechanism which would make those who now derive an illegal benefit by copying the products of the film industry contribute to the survival of the industry. Anybody who takes this threat lightly, in relation for example either to blank video tapes or to pre-recorded tapes, may have been stirred by an announcement that appeared in the press a week or so ago which indicated that a well-known Japanese manufacturer has produced for the market a two-video cassette machine which will enable the home user to copy a video cassette with the greatest facility. The cutting which I have from the newspaper refers to the fact that this machine, allows duplication of video tapes at home with a single machine. Previously two recorders connected by cables, were required to reproduce tapes. It has already been dubbed an outrage by Hollywood and the video cassette recording industry as a new, cheap way of pirating films and videotapes". Far from imposing a further tax upon the unfortunate taxpayer (which I have no desire to see) the whole aim of this scheme is that those who are receiving undue benefit from the products of the film industry should be obliged to make some contribution. That is not being taken from them for nothing, because the object of the scheme is that they should then have conferred on them the considerable privilege of being enabled lawfully to make such copies for the future. It seems to me that that line of criticism is ill-founded.

I have no desire to take up an unnecessary amount of time at this late hour. I am appreciative of the fact that there is doubtless another lengthy debate still to take place in your Lordships' House. I conclude by saying that one is saddened to see the present Minister taking a negative view on all these issues, and a more negative view, so far as one can judge, than is adumbrated in the Government's Green Paper. I hope therefore that in answering those who have spoken this evening on this matter, the Minister will show understanding of the objective of this amendment and indicate that the mind of the Government is not closed on a matter which, if I may say so, should, ex hypothesi, be open because they have published a Green Paper which is intended to be a consultation paper and not a pronouncement of definitive views.

The Viscount of Falkland

My Lords, I briefly support the amendment which I think is a reasonable one. In the Committee stage some noble Lords expressed misgivings, particularly about the negotiations with television. However, in my case I was more strongly in favour of getting some return from the video industry. This is a likeable amendment and I hope that the Minister will find it likeable. It gives some flexibility in the event of the new consortium needing to draw from these areas which benefit enormously from the production of films. I hope that the Minister will give careful consideration to a well thought out and reasoned amendment.

Lord Lucas of Chilworth

My Lords, I am grateful to my noble friend Lord Mersey for the way in which he re-introduced his amendment that we discussed at some length during the Committee stage only a short while ago.

This is an amendment par excellence. If I may borrow a phrase; it floats like a butterfly and stings like a bee. If your Lordships recall the Bees Bill in 1979 that passed through the House when I was sitting a little further back in the Chamber, I have some experience about how a bee can sting. I want to spend some little time in describing how this modest amendment has a rather vicious sting in its tail. It is tempting and it is seductive, but the Government will not fall for it. I have to give notice now. I shall go to some lengths to explain why; even though it is slightly repetitious and even though there is important business yet to follow in your Lordships' House.

I shall deal with the levy principle. In this amendment three schemes are envisaged. I have to explain why the Government cannot accept any one of the three. The first is the suggestion of a levy in respect of films shown on television. We discussed this extensively during Committee, but the proposal that my noble friend has brought back again raises important issues of principle. The House will be aware that the case for a redistributive levy was reviewed at some length and the Government's response to the representations we received is summarised in the White Paper published last summer in paragraph 5. We explained then, and it remains our view now, that we do not believe that a redistributive levy is the right way of encouraging an economic activity that should have its feet planted firmly in the market place; a market place which is expanding through new outlets.

Furthermore, the argument that the system was efficient because it rewarded success cannot be used as a justification for taxing commercially successful productions so that films can be made which perhaps would otherwise not have found investors. We stated in the White Paper that we did not believe that the Government should intervene by introducing a television film levy which would increase the costs both of the BBC—with consequent implications for the television licence and we have already read in the press what the viewing public feel about an increase in licence fees—and also for the independent television companies. Therefore, in line with our general approach away from statutory intervention and towards the creation of the right business environment, the White Paper rejected the idea of a statutory levy. My noble friend referred to nickels and dimes; but it is not as easy as that.

Let us look at another principle. I have to say that I do not base my entire argument on the view of the noble Lord, Lord Willis; but I acknowledge his experience in these matters. I agreed with him when he suggested that those advocating such a levy on television were mainly concerned to find from somewhere a pot of money for the film industry and they did so without perhaps reflecting on the merits of trying to obtain it from the television industry. He said that they look around and think, "Well, who can we best clobber here? Who can we get it from?", and television may seem an obvious target. I share the view of the noble Lord, Lord Willis, that the television companies are already poviding substantial support to the film industry and it would be quite, quite wrong were we to clobber the television industry again.

Channel 4, for example, has allocated £96 million to film and video. By 1987 it anticipates having funded about 100 full length feature films, low and modest budget films. I utterly reject the suggestion that I have heard advanced that they are produced solely for showing on television. Fifty per cent. of them are intended for exhibition in cinemas.

Noble Lords may point out that the amendment is carefully worded to exclude Channel 4; but frankly I question whether this is possible. It is the independent television contractors who provide the funding for the fourth channel. If they were subject to a levy for showing feature films, they might quite reasonably respond by seeking to reduce the amount of money they contribute towards Channel 4's involvement in film production now. After all, why should they pay both for Channel 4 to commission films and then for the TV companies to buy and show the films?

Lord McIntosh of Haringey

My Lords, I wonder whether the noble Lord will permit me to say this? The levy paid by the independent television contractors to Channel 4 is not determined by the contractors themselves, it is determined by Government. Quite apart from that, the amount of the levy which they pay to Channel 4 affects, in turn, the amount of levy which they pay to Government. In other words, it is not open to independent television contractors to exercise the kind of choice which the noble Lord has suggested.

Lord Lucas of Chilworth

My Lords, I disagree with the noble Lord, Lord McIntosh of Haringey. Channel 4 is funded by subscriptions levied by the IBA—it is certainly a levy—on the ITV companies. These are agreed annually, and the total fourth channel subscription in the financial year 1984–85 was £139 million. It is the IBA and the ITV who agree that. It is not the Government who set it. We have to be absolutely and abundantly clear about this matter. If the IBA who, through the independent television, receive their funds primarily from advertising but also including overseas sales, and so on, do not provide sufficient money for those at that level which I have just described, then Channel 4, like others, has a reduced amount of money. Therefore, the noble Lord, Lord McIntosh, is not correct in what he has said.

Additionally to that contribution which television makes, both the BBC and the ITV companies support the National Film and Television School, which I have described earlier. They, with the Cinematograph Exhibitors Association, are committed to providing £600,000 a year in addition to their existing contribution. Channel 4 is also a founding member of the British Screen Finance Consortium. That provides finance to help meet the costs of low and modest budget films. Increasingly, the television companies are providing work for independent film production companies or setting up their own production arms, all of which helps to sustain and promote the British film production industry. For these reasons I must say that I can see little merit or justice in the idea of a television film levy. It is plainly and simply a case of robbing Peter to pay Paul.

Noble Lords have referred to a levy on pre-recorded video. The noble Lord, Lord Lloyd, made some mention of this. I have to say to him in particular that in this Bill we are not talking about pirated material; we are talking about the perfectly proper business of publishing video copies of a film, rather like publishing a book. The arguments that I have advanced against a redistributive television film levy are in many ways applicable in this case, too. Certainly the arguments of principle against a statutory recycling mechanism apply with equal force. In fact, a video levy would almost be a case of robbing Peter to pay Peter since the video companies, such as Virgin, not infrequently hold the rights in the films they produce and distribute. The film "1984" is an example. This idea would plainly not make good sense.

8.45 p.m.

I now turn to the question of video companies supporting the film industry. I understand that of the 65 video distribution companies listed in the BFI directory, no fewer than 21 have co-invested in film production, and nearly all of these have used British studios. Some, such as Palace, with their "Absolute Beginners" which is now in production at Shepperton, are even producing films themselves. Increasingly, the industry recognises that it is dependent upon a supply of good quality product, and that it is therefore in the industry's own interest to support the film production industry and sustain that supply. Furthermore, the video industry increasingly recognises the importance of a good cinema release in boosting demand for the video. Some companies—Polygram is another example—become actively involved in film distribution and promotion. That is again of benefit to the film industry.

Many films simply would not be made if they were dependent upon cinema exhibition alone. It seems to me quite clear that the video industry is helping to sustain the film industry, and this is reflected again in the participation of members of the British Videogram Association in the British Screen Finance Consortium. Why, then, should they be subject to a levy? That is yet a further impost, almost a further tax, on what they are already doing for the industry.

What would be the practical consequence if such a levy were imposed? If noble Lords recall, I said during the Committee stage that this is a highly competitive industry. Margins are slim. Even a small levy could depress demand and force companies out of business. Since this matter was raised in Committee, I have had another look at those kind of companies. My understanding is that in the past 12 months more than 10 of the small independent companies have collapsed. Of 65 companies listed in the BFI directory, 20 per cent. have gone bankrupt, ceased trading or undergone major financial restructuring as a result of heavy losses. My information is that those closures have been not solely due to the crackdown on video nasties but simply to the highly competitive situation in this marketplace.

In short, a redistributive levy would not only be difficult to justify on grounds of principle, but would be quite counter-productive in terms of its effect on the film production industry. It could kill a number of geese which are, with some difficulty, laying their golden eggs.

Let me now turn to the last of these levies, the blank tape levy. I assume that noble Lords who support the amendment have in mind the Green Paper entitled, The Recording and Rental of Audio and Video Copyright Material, and in particular that part of paragraph 7 which states: One possibility might be for the film proceeds to be diverted to a central fund to be used in the film industry to support production". The consultation period for the industry and the public to send in their comments on these proposals does not end until the end of April, and I think it would be quite wrong to pre judge the outcome of that consultative process, so I do not intend to comment on the desirability, or indeed the feasibility, of introducing a copyright levy.

However, there are two points that I want to make in this connection. Any levy introduced as a result of these consultations would have to be based on copyright criteria, and this evening we are not talking therefore in that context about a redistributive levy, as we are in the context of this amendment; we are talking of a compensatory levy. Secondly, any channelling of film proceeds into a central fund for the film production industry would have to be on a voluntary basis. Since the purpose of such a levy would be to recompense copyright holders for an existing injustice, there could be no question whatsoever of the Government's insisting that their compensation by way of levy should automatically be taken away and diverted into a central fund. If the copyright holders themselves wished to make a voluntary arrangement, subject to the approval of the Secretary of State, that is a different matter and one which, if I may say so, I frankly would encourage.

I have spoken at some length because I attach, as indeed do your Lordships, considerable importance to the outcome of this discussion. I hope I have explained why each of the options outlined in the amendment raises serious problems in terms both of issues of principle and of practical consequences, and why the Government therefore oppose the amendment. During Committee, the noble Lord, Lord McIntosh, commented at one point on remarks that I made, and he said that the Government's response was totally uncompromising.

In this case I believe it would be quite wrong to compromise; and I turn to his latter remark tonight: his latter contribution to our debate was to argue that, if the proposed new levy powers are only permissive, they should be allowed to stand. I would say this to the noble Lord, and indeed to your Lordships. I have explained the Government's view on redistributive levies of this kind. I have described our objections in principle to economic interference of this kind. We have no intention of introducing such levies.

Let us then consider the effect were we to incorporate the amendment in the Bill and it was to go onto the statute book. It is quite simple: there is no question in my mind that it would lead to great uncertainty about the Government's intentions. It would be counter-productive to the interests of the industry and those participants in the BSFC who are concerned with the furtherance of the film industry. They would not know what the future held. They would be unsure of what might happen. We have no intention of allowing that. For the reasons which I have outlined at some great length, for which I apologise to your Lordships, I urge the House to reject this amendment.

Viscount Mersey

My Lords, I thank my noble friend. I think he has spoken very thoroughly about the various forms of levy, and I will certainly read his remarks with interest. I also think he has very properly confined himself to the levy. What he has once again ignored, however, is my standard "let-out" sentence, which I put into both my speeches, which is, "O.K., we have to approach this problem by way of levy because we cannot approach it in other more direct financial ways, but if my noble friend Lord Lucas can think of a better way, my gosh! we are all going to be jolly pleased".

I am not altogether happy about this, as I said. The issue is very, very simple. As I keep saying, I am getting something for nothing; I am watching a lot of very expensive television. I will happily give way to my noble friend Lord Lucas if he wishes to intervene, but I cannot see how I am paying for this expensive product on television. I am watching something for nothing. The British industry tells me it is in bad financial trouble. I put two and two together and they make four to me.

Lord Lucas of Chilworth

My Lords, I do not know how my noble friend thinks he is watching for nothing. I certainly hope he pays his television licence fee, and therefore he does not watch for nothing. He buys goods from the shops and the manufacturers of those goods advertise on television. He therefore buys that element—because he cannot tell me that he does not buy some goods that are advertised on television. He pays, and all of us who watch television pay.

Viscount Mersey

My Lords, I thank my noble friend for that intervention. I do indeed pay 6p per film: I have worked that out. In view of the lateness of the hour, what I should like to do is to take this away. I am certainly not altogether happy with what my noble friend has said, but I have not found him to be totally inflexible; and I certainly would not dream of withdrawing my remark about that, despite the lack of coronet, there remains a kind heart. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 [Certification for purposes of section 72 of Finance Act 1982 in case of British films]:

Lord McIntosh of Haringey moved Amendment No. 4: Page 12, line 12, leave out ("a member State") and insert ("the United Kingdom").

The noble Lord said: My Lords, with Amendment No. 4, I propose to speak to Amendments Nos. 5, 6, 7 and 8. Amendment No. 5: Page 12, line 15, leave out ("a member State") and insert ("the United Kingdom"). Amendment No. 6: Page 12, line 16, leave out ("a Commonwealth country") and insert ("the United Kingdom"). Amendment No. 7: Page 12, line 20, leave out from second ("or) to end of line 23 and insert ("any citizen of the United Kingdom."). Amendment No. 8: Page 14, line 46, leave out sub-paragraph (3).

I am a supporter of the European Common Market, although I remember with some chagrin that when my son, then aged 11, learned that I had gone to vote, "Yes" in the referendum in 1975 he persuaded my wife to go down and vote, "No" in order to cancel out my vote. I am a supporter of the Common Market but I am not a supporter of lying down and waving my legs in the air whenever my interests or the interests of this country are ignored or flouted by the European Common Market.

The history of the definition of British films is that from the 1960s there was a perfectly good definition of British films, which did in fact ensure that the money which went from Government and from private investors into the British films industry was confined to the British film industry. My noble friend Lord Willis has referred on a number of occasions to the tendency for American interests to take advantage of British public subsidy, and that has been an element in the film industry right from the very beginning.

But the situation changed with the 1980 Films Act, which obeyed the judgment of the Commission and the European Parliament that the Eady levy was a para-fiscal tax and that this ought not to be permitted. We, the British Government, then amended the existing law in the 1980 Films Act to say that for the purposes of the Act, "a British film" meant a film made—I am generalising to save time—by any individual or company resident in a member state. There were still protections in the 1980 Films Act. It sought to secure that the preparation work for the film had to take place in the United Kingdom. It sought to provide that laboratory processing took place in the United Kingdom and that 50 per cent. by value of the technical equipment had to come from the United Kingdom.

Nevertheless, that Act ran rings around the protection which we were attempting to provide before that time for the British film industry, and made a huge dent in the commonsense identification of what is meant by "British film", because I think noble Lords will agree that when you see in the Act itself the phrase "British film" and you see in the schedule the definition which says that this means a film made in a member state, and you have the position that a British film could mean a film financed in Italy, and made in Germany with virtually no British participation, that flies in the face of common sense.

Even that would be bearable if it were not for the fact that all the other members of the European Community have failed to adopt the same high-minded attitude which the British Government did in the 1980 Films Act. That situation has gone on for five years on the basis that the Eady levy, which is to be abolished, quite rightly, in this Bill, was considered to be a para-fiscal tax. That last shred of justification for the 1980 Act disappears with the Films Bill as it is now proposed, because in no sense of the phrase can it be thought that the provision which is to be found from the British Screen Finance Consortium, or from the loans from Government or from any of the other sources which are referred to in this Bill, can be described as a para-fiscal tax. I am at a loss to understand why the Government should be so determined on this question—which is perhaps not important in relation to other European Community matters, but is still important—to perpetuate in this legislation, in Schedule 1, the nonsense, the insult to common sense, the insult to British national interests, which arose out of the original concept of British films, as criticised by the Common Market in the late 1970s.

These amendments are now brought up for the first time. They may still be defective in wording, but I believe that they deserve a response which indicates on what basis the Government are prepared to defend British interests and to defend the British film industry as all of us would understand it in everyday language. My Lords, I beg to move.

Lord Lucas of Chilworth

My Lords, I am most grateful to the noble Lord, Lord McIntosh of Haringey for his very lucid explanation of the amendments standing in his name on the Marshalled List. I am also grateful to him for coupling Amendments Nos. 4, 5, 6, 7 and 8 together, which I am sure is helpful.

May I say at once that I fully appreciate the sentiments that lie behind the spirit of the amendments, but I have to tell the noble Lord that that is about as far as I can go this evening and I shall explain why. I should begin by emphasising that, with regard to feature films, the definition in the schedule is virtually identical to that which at present applies to the registration of British films under the Films Acts 1960 to 1980. Amendments Nos. 4 and 5 would be directly in conflict with the provisions of European Community directives on the attainment of freedom of establishment and freedom to provide services in the field of film production, and I suggest that they have to be rejected on that account.

Paragraph 5 of the schedule, which draws up very tight rules as to films which will not qualify as British, will still apply and it is the safeguard for the British film industry which I think those supporting the amendments are seeking. To them I would say that the safeguards are already there and that attacking the concession to Community labour, which the treaty obliges us to make, and which in any case I am not convinced has a significant effect on the British film industry, will do no more than produce an embarrassing and quite unnecessary conflict between the United Kingdom and Community law. Obviously, British companies are entitled to corresponding benefits under these Community directives. Similar considerations have to apply to Amendment No. 7, certainly to the extent that it would exclude Community nationals or residents.

With regard to the concession to Commonwealth studios, which is the subject of Amendment No. 6, I should explain that we have traditionally made this concession to strengthen our economic and cultural ties with the Commonwealth by encouraging British film makers who particularly need overseas locations to use Commonwealth locations where possible. The Government, and for that matter the industry, are content for that position to continue and I think that the noble Lord is also content with that position.

In any event, I have to emphasise that the concession is not unlimited and one must take into account when considering the amendment the exclusion in paragraph 5 of the schedule. Paragraph 5 states that, if the playing time of so much of the film as consists of photographs taken or sound recordings made in any studio outside the United Kingdom exceeds 7½ per cent. of the total playing time of the film", the film will be excluded as a British film. The concessions traditionally accorded to Commonwealth labour, which would be removed by Amendment No. 7, are also based upon our historical ties with the Commonwealth and, again, I should be most reluctant, as I think most of your Lordships would be, to see them broken.

So far as labour costs are concerned, the House will be aware that the current position is that, for a film to qualify as British, its labour costs must be either at least 75 per cent. British, which may exclude the labour costs of one person—for example, an American star—or at least 80 per cent. British if the labour costs of two people are excluded, provided that one is an actor or an actress. However, the Secretary of State has a discretion, which Amendment No. 8 seeks to remove, to lower those figures by 5 per cent., if he is satisfied that the maker of the film has taken all reasonable steps to achieve the appropriate percentage of British labour costs, but for reasons beyond his control marginally failed to do so.

This provision is of great value to the film industry. It will, I am assured, be badly missed if removed from the schedule. Film making is a risky business. We have heard that in all our discussions on the Bill. An over rigid system on such things as labour costs, where so many unforeseen problems can and do arise, could make it even worse.

I think I have directed my argument against the principle underlying the amendments which the noble Lord, Lord McIntosh of Haringey, has proposed. I hope that I have said enough to convince your Lordships that these amendments are not appropriate and I trust therefore that the House will resist them if the noble Lord pursues them. However, I invite him, on the strength of what I have said, to withdraw.

Lord McIntosh of Haringey

My Lords, I have listened most carefully to what the noble Lord has said and I have listened even more carefully for what he has not said. The House will observe that the noble Lord did not deny that Britain is the only country which observes the direction from the European Commission and that other countries have not followed suit in this—

Lord Lucas of Chilworth

My Lords, I am most grateful to the noble Lord for giving way. I did not say anything about that because I thought it was fairly obvious to those of common sense in your Lordships' House—the noble Lord himself referred to it—that two wrongs have never made a right.

Lord McIntosh of Haringey

My Lords, I think the House will wish to make its own judgment on that statement. I adhere to my statement that Britain is the only country in the Community which is adhering to the direction from the European Commission. If it is true, as the noble Lord says, that to put us in the wrong as well is the wrong way to do it, then I invite him to bring forward concrete proposals for ensuring that within a finite period of time there is either agreement by the other members of the Community or an agreed amendment to this Bill—an agreed withdrawal from our isolated position.

The second thing for which I listened very carefuly in the noble Lord's speech but did not find was a denial of my statement that the original widening of the definition of "British film" was brought about because the Eady levy was thought to be a parafiscal tax and that in no sense could any present Government support be thought to be a parafiscal tax; and therefore all of his claims about the conflict within the British Government and their partners within the European Community fall to the ground. Instead, the noble Lord chose to make a quite fanciful point, a quite fanciful attack on my arguments, in which he appeared to be saying that I was arguing that British films should not be filmed in other parts of the country, that British filmgoers should be forced to watch films about Skegness rather than about Corfu or St. Tropez.

That of course was not what I was saying. That was no part of my argument whatsoever. It was no part of my argument that there should not be financial co-operation, production co-operation and a sharing in acting talent between different countries. One of the great features and one of the most welcome features of the film industry in recent years has been the ability of production companies to make use of talent from all parts of the world without discrimination. I have enjoyed most of the roles of Jeremy Irons in recent years; for example, his part in the French production, "Swann in Love", made by a German director, with an Italian co-star. There is no sense in which I would accept to be thought to be critical of that kind of production.

The point I was making was much more simple. In common sense terms, if we are providing support from a consortium or from the Government for British films, it ought to be what we all recognise to be British films, and what has previously been perfectly adequately defined in statute to be British films.

In the sense only of concern for the time of this debate and for the speakers who have to follow afterwards, and in no sense in concession to the proclaimed strength of the arguments of the Government, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 5 to 8 not moved.]