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Lord Graham of Edmonton: Colin Welland.

The Viscount of Falkland: My Lords, I am reminded by the noble Lord, Lord Graham, of the name. However, I should not like to go down on record in Hansard as having blackened his name in such a way--an admirable man, I may add.

People who are enthusiastic about films do not care whether they are British. They want to be entertained by good products, in good surroundings, and in a language they can understand. English is the language which we understand. Subtitled and dubbed films do not do very well outside London. In this country we are always in the shadow of the American industry. Because films are one of their largest exports, the Americans see to it that we do not become too powerful. They always have done so. When Lord Willis (who made such useful contributions) was in the House, he always used to stress that. We have to find a niche for ourselves in this area with the kind of films that we do well.

I see from the Clock that time is running out. I remind your Lordships of films like "Sense and Sensibility". That is the kind of film we do well. It is a relatively low budget film and shows our acting skills. That is the kind of film that should be supported. Pressure should be put on exhibitors to show it as much as possible. That is the only way we can hope to compete with the American majors. I hope that that point will be taken on board.

7.49 p.m.

Lord Donoughue: My Lords, I join other noble Lords in congratulating the noble Earl, Lord Drogheda, on his excellent maiden speech in opening the debate. It was a brave way to make a maiden speech but I was not surprised, having known and respected his father greatly.

The British film industry, or art, is not big but it is not inconsequential. It is, for instance, bigger than our motor vehicle industry. It periodically employs some of the world's best directors, writers, actors and technicians. It has great potential, not least because it uses the world's prime language. We also have in the UK a booming consumer market for film, but those audiences are watching American films distributed by mainly American distributors. I agree very much that that is of crucial importance and often under-estimated. Those audiences are in fact starved of British films.

When looked at more closely, and given the enormous potential, the condition of Britain's film industry is far from satisfactory. In fact, very few British

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films are made here and many of those great directors, actors and so on, have to work abroad. The recent upward blip in US film making here, which the Minister will certainly make much of, is mainly because of weak sterling since the EMU debacle. The reality is fundamentally unsatisfactory. We do not seem able to finance our own films, let alone secure national distribution for them. Nothing the Minister says tonight, I fear, can disguise the fact that this Government have done little to help, and some things to harm, our film industry.

In 1984 there was at least government policy activity, which subsequent experience in the industry suggests was not overwhelmingly helpful. Then we waited 11 years until last year's response to the Select Committee report, and that did not add up to much either. There was in that response welcome support for a London film commission and for a so-called West End showcase. I ask the Minister where that is. It was supposed to give a high profile to British films, but itself demonstrates a very low profile. The BBC was prompted to help save Ealing Studios, the National Lottery to give money to films, and that was puny in total and little of it was in fact given by the Government.

Above all, at the heart of the Select Committee report were proposals for self-financing fiscal incentives to promote production, which is at the centre of our debate tonight. The Government ducked all of that. Mr. Dorrell, in another place, as relaxed over film as over beef, said that the Chancellor would, in his Budget, carefully consider the Select Committee recommendations together with the logic which underpins them. We waited for the Budget and found nothing. I hope today that the Minister is not again going to say that we must wait for the Budget because the Government cannot keep ducking out that way.

The most amusing and, perhaps with hindsight, the most ominous aspect of Mr. Dorrell's announcement of 6th June 1995, was that he had in fact dramatically set up a new committee within his department to ensure that the needs of the industry, "are better understood by Government". That, I must say, was a really major initiative. It was also an interesting admission, by implication, that the film industry's needs had not been properly understood over the previous 16 years. I ask the Minister what this great new team has achieved? Are they responsible for the subsequent total silence and total absence of constructive Government proposals?

Outside government there has been no shortage of constructive proposals for tax incentives for the industry. Apart from the excellent Select Committee report, there were the recommendations of the British Screen Advisory Council last October for fiscal measures. There was also, last May, the British Film Commission paper on the economic case for stimulating investment in the UK film industry. The latter seemed to involve some loss of tax revenue, but the Select Committee's recommendations were aimed to be self-financing, as are Ireland's famous Section 35 reliefs, which have been frequently referred to tonight and which have certainly had a dramatic effect on the

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Irish film industry and employment in it. The cost to the Irish Treasury trebled to £19.9 million, but the additional revenues to the Treasury also trebled. So I ask the Minister what is the Government's approach to such self-financing, or nearly self-financing, fiscal incentives. We cannot accept that subventions from the lottery constitute a proper Government response. We cannot accept another invitation to await another Budget. We would like some precise response today, even if it is only to say "goodbye".

In 1918, the American President, Woodrow Wilson, introducing legislation specifically to benefit the US film industry said,


    "when people see American movies, they buy American products".
I fear that with this Government a more relevant quote is from Bette Midler who said,


    "when it's 8 p.m. in New York it's still 1938 in London".
I hope that that is not true in Whitehall and Westminster. I ask the Minister to think about 1996. After 17 years of non-incentives to the film industry, have the Government still nothing to offer?

7.56 p.m.

The Parliamentary Under-Secretary of State, Department of National Heritage (Lord Inglewood): My Lords, I must begin by saying how grateful we all are to the noble Earl for giving the House the opportunity to discuss this important topic today. It is one which my Secretary of State and I both feel matters a great deal to this country. Perhaps I may pick up the comparison made by my noble friend Lord Mersey. We believe that it is both an industry and an art. It is also important to our culture and, as has been explained, to tourism.

The noble Earl made a bold and interesting maiden speech, which no doubt owes a lot to his own profession: photography. That is an occupation for the "best" people. I can say that with confidence because it is my wife's profession as well, and I know from her how well known he is. Certain reference was made to some of the subjects of his photographs. On one occasion, which he will have forgotten, he took a photograph of me, but I do not believe that that entitles him to any great accolade!

This has been a tremendous week for the British film industry. Our actors, actresses, directors, writers, designers, animators and technicians, have mounted their annual raid on the Academy Awards, and I am delighted that they have once again come away with so many richly deserved prizes. I am sure that the whole House would want to join me in congratulating all of our winners and all of those who received nominations. I would particularly like to congratulate Nick Park, of Wallace and Gromit fame, as a distinguished graduate of the National Film and Television School, for his incredible achievement in winning a third Oscar. I believe that this means that Nick Park has now won as many Oscars as the film "Jurassic Park"!

Perhaps I may come down more to earth. Your Lordships will be aware, as has been debated through most of the contributions this evening, that the question of changing the tax system for film was most recently

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considered at the Committee stage of the Finance Bill in another place on 7th March. At that time my honourable friend the Financial Secretary reiterated that the Government take the needs of the film industry very seriously. He explained that the industry already enjoyed a tax regime which is more favourable than that for many other industries, and that the Government provided assistance to the industry in a number of ways.

Finally, he made clear that the Government would keep the situation under careful review, which I hope explains the Government's position that was asked for by my noble friend Lord Mersey. The Government will always consider the case for further assistance in the light of developing circumstances. While I know that my colleagues in the Treasury have made it clear that they do not see a case for any action now, they will keep the matter under careful review as they consider future budget proposals.

Much has been made by a number of contributors this evening, not least by the noble Baroness, Lady Wharton, about the tax incentives offered by the Irish Government. This is a system which rewards people and companies which invest in film production companies. It is not a relief for the cost of making a film. Furthermore, a report commissioned by the Irish Government shows that the cost to the Irish Exchequer for special reliefs to encourage investment in the film industry has far outweighed the benefits. The report estimates that the measures cost the Irish Exchequer around £19.4 million during 1994-95, while the benefits that arose totalled no more than £13.5 million, which I notice is the definition of "nearly self-financing" used by the noble Lord, Lord Donoughue.

As a result of this report, changes to the scheme have been introduced in the recent Irish Budget to improve targeting and cost effectiveness because there has been great concern that it is not actually the film industry, but the big middlemen, who have been the beneficiaries of much of what has occurred.

It has been rumoured that certain films have been shot in Ireland in preference to this country because of the reliefs available there to the investors. However, the evidence is that factors other than tax are in play, such as the availability of members of the Irish armed forces as extras at very little cost to film makers. In this context, it is as well to remember that the incidence of VAT has come as a nasty surprise to one or two people.

Reference has been made to other countries. International comparisons are notoriously difficult. Looking round the world, it is difficult to compare one country with another in this respect. It has been suggested that Canada provides a good model for this country. However, that is based on an entirely different approach to taxation from that which we have in this country. I understand that in certain circumstances it is possible to receive a tax credit that exceeds the cost of the film.

The noble Baroness, Lady Wharton, and the noble Lord, Lord Freyberg, referred to the withholding tax. The withholding tax merely exercises our taxing rights over people who earn money in this country. Before its introduction, our experience was that some foreign actors made films here, returned home and the tax was

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rarely paid. That led to significant loss of tax which was due from people who could well afford to pay it. Because these are difficult matters, the Government have brought together, in an advisory committee under the chairmanship of a former permanent secretary to the Treasury, Sir Peter Middleton, key figures from the film and financial sectors to discuss the obstacles to obtaining private finance for films and how they may be overcome. The committee is currently consulting the film industry and potential investors and is due to report to Ministers in July. We look forward to seeing some practical and effective proposals at that time which we hope will be of interest to the noble Lord, Lord Donoughue.

I should like to explain briefly what the Government are doing to help the British film industry. We believe that the industry is in very good shape. The number of films being produced in this country has increased in each of the past three years. That contrasts with figures for other leading film-making countries such as the United States and France where production has fallen since 1990. Part of the reason for that investment has been the changes to the tax regime introduced by the Finance Act 1992. Big budget productions like "Rob Roy" and "Judge Dredd" have been filmed in this country as a result of those changes. Our confidence in the strength of the British production sector is reinforced by the fact that currently our studios are so busy that two major new investments in studio facilities are planned. I refer to the proposed developments as Leavesden and Hillingdon. The latter is an American proposal, which hardly suggests a United States antipathy to doing film business in this country. They will add significantly to our production capacity and, along with the best technical support available in the world, will help to ensure that even more films are made here in future.

As the noble Viscount, Lord Falkland, pointed out, cinema admissions are buoyant. They have recovered from the slump in the mid-1980s. Admissions in January of this year were 29 per cent. up on January 1995. We are delighted that British film makers are rising to the challenge of producing high quality films for which there is such a strong demand. I say to the noble Lord, Lord Jenkins of Putney, that this has been achieved without the reintroduction of an Eady levy, for which we understand there is no great clamour from the industry.

Reference has been made to the National Lottery. We estimate that in the next five years about £70 million could be invested in film production in England alone by the Arts Council. If one takes the whole of the United Kingdom, the figure should amount to something like £80 million.

In addition to looking at more general problems about overcoming obstacles to attracting finance, Sir Peter Middleton's committee will look in particular at one proposal in advance of its final report. I refer to the proposal of the European Commission for an audiovisual guarantee fund to attract additional private finance by reducing the risk involved for individual investors in single film productions and the

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development of portfolios of film investments. The proposal is an interesting one, and we look forward to receiving Sir Peter's report next week.

The noble Lord, Lord Donoughue, asked about the showcase cinema. A feasibility study is to commence next week to look at whether or not a cinema dedicated to showing British films can be viable and what other complementary activities may be undertaken to ensure the best use of it. We expect the consultants who undertake the study to report before the end of May. In addition, the Government have announced their pump-priming support for a new London film commission which has already opened its doors and is very busy, although the formal launch will not take place until the summer.

The Government are very proud of the British film industry and the highly talented and internationally renowned people who work within it. One remarkable statistic that is often repeated, but is none the worse for that, is that over the past 20 years 30 per cent. of all Oscars have gone to British talent. We are delighted that this tally has been added to this week. We wish to ensure that the industry continues to thrive. I have explained this evening the many important initiatives that are being undertaken. I conclude by reiterating what I said at the beginning of my remarks. We in the Department of National Heritage believe that film matters. If there are things that we feel can properly be done, we shall not hesitate to do them.


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