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The British film import duty 1947-48

In the period immediately after the ending of the Second World War, the British economy, and in particular the balance of payments, was in such an acute state that by the summer of 1947 the Labour government considered it necessary to restrict imports to reduce the outflow of funds to hard currency territories. Imports of food and other essential commodities were cut. Of total spending on imports from the United States, films made up a relatively small four per cent but it was deemed that the cost of these too should be contained. One political objective was to get Washington to unfreeze credits.
        On 6 August 1947 the Treasury used its powers under the Import Duties Act 1932 to impose a 75 per cent customs tax on all film imports, which became known as Dalton Duty (after the Chancellor of the Exchequer, Hugh Dalton). The tax came into effect on 8 August, applying to all imported films, of which the overwhelming majority came, of course, from the United States. US film company revenues from the UK had been in excess of $60m a year ($68m in 1946).
        The following day, 9 August, the Motion Picture Export Association of America (MPEA) announced that no further films would be supplied to British cinemas until further notice. (In fact, there was a stockpile of as many as 125 features already in the UK awaiting release.) This was not the first time, and certainly not the last, that the American industry had used the boycott weapon.
American film boycotts.

The Board of Trade did not believe that the MPEA would respond with a boycott because similar wartime threats had not been carried out and also because of the importance of UK earnings—which accounted for about a quarter of Hollywood's net earnings.
        Sir Henry French, director general of the British Film Producers' Association, later said, 'The first time I visited New York after I began to work for the British film industry was in 1947. I met with a very friendly reception from the heads of the American industry and was greatly impressed when I called on the President of one of the largest producing companies with the records which he showed to me. ... It was quite clear that the most American industry could do in any financial year was to recover in its home market the cost of production and that the industry, as a whole, had to look to its export trade to produce a profit.'
        A less benign opinion prevailed elsewhere in British government. The Foreign Office warned that the US film represented an 'immensely powerful propaganda instrument' and advised against alienating US opinion. Wilfrid Eady, Second Secretary at the Treasury, wrote in a memo that the US industry was 'an extremely powerful lobby in the State Department and capable of very considerably malice'.
        In an attempt to placate American sentiment, Glenvil Hall, the Financial Secretary to the Treasury, said in the House of Commons (3 November 1947): 'I want to make it clear that neither is it intended to obtain additional revenue nor is it an aggressive act against Hollywood in the interests of our own British film industry. The step has been taken simply and solely because the country cannot afford to allocate the dollars necessary to pay for the exhibition of American films in this country at the present time.'
        There was apparently no consultation with the industry. Tom O'Brien, secretary of the National Association of Theatrical and Kine Employees (NATKE— the film and cinema 'labourers' union) and himself an MP, said in the same Commons debate, 'When this measure was first introduced by the Chancellor of the Exchequer he promised that there would be consultations with the appropriate interests, but that promise was broken. If the Government, the Chancellor, or the Board of Trade had convened a meeting of the appropriate interests, American, British and so on, including the trade unions, we would have been able to find a solution for the Government which would bring to the Government the ends they had in view without the bitterness which has been occasioned.'

There was no overt intention and perhaps not even an underlying motive to provide a opportunity for the British film industry to have a clear run at the home market. That, however, was an inevitable outcome.
        British cinema was already going through a 'golden age' in terms of quality. Many of the films now regarded as among the greatest in British film history date from the mid 1940s. They were even beginning to achieve a tentative foothold in the US box office, led by such war-effort films as In Which We Serve. There was the additional prospect of an opening that might be created by the antitrust moves that were getting under way to break up the vertical integration of US production, distribution and exhibition which cultimated in the Paramount 'divorcement' decree in 1948.
        In fact, when the import duty was announced, J Arthur Rank, the most powerful figure in the British industry at the time, was in America arranging distribution deals for some of his pictures. The strained relations between the two countries scuppered his chances, while at the same time cutting off the supply of American films from his Odeon and other cinema circuits in Britain.
        Other British exhibitors were not happy at the prospect of losing their most popular programming. American films filled about 80 per cent of screen time, limited by a statutory screen quota of a minimum of 20 per cent British product. They were concerned that their interests could be harmed if films had to be held over for longer runs or if more titles were re-released.
        Obviously British producers could not fail to take advantage of the elimination of their main competition. Their problem was how to make the most of the situation. There would be no prospects of selling films in America, the domestic market was unlikely to be able to provide an adequate return on investment, assuming that were forthcoming, and quality might suffer. Worse still, cinemagoing might shrink without the regular flow of American films alongside British productions.
        The Board of Trade estimated that the British studios' maximum annual capacity of around 75 new feature films was less than half the number needed per year. In fact, the total number of feature length films registered in Britain was 39 in 1946.
        Nonetheless, with government encouragement (moral rather than financial), the industry rallied and increased output. The number of registrations in 1947 rose to 48, and was to be up again by a whopping 28 per cent to 68 in 1948.
British film registrations.

Reflecting the changed trading conditions, in October 1947 the British screen quota—which had been unchanged at 20 per cent since 1935 (plans to increase it were abandoned in October 1942 because of wartime conditions)—was increased to 25 per cent for exhibitors and 35 per cent for 'renters' (distributors).

Negotiations between the British government and the MPEA began by the end of 1947, with the President of the Board of Trade, Harold Wilson, leading the British side. Early in the new year (3 January 1948), Wilson said that it was proposed that the American companies could take more of their earnings than the 25 per cent left after the duty, 'but only in return for a real effort not only to accept but also to show British films in the United States market'.
        Talks led to an Anglo-American Film Agreement, announced in March 1948. In return for abolition of the duty, which was lifted on 3 May 1948, the American studios would again export films to Britain.
        There was to be no limit on the number of films that could be brought into the country nor on their earnings but for each of two years from 14 June 1948, only $17m of American films' earnings could be repatriated to the USA. The balance was blocked and would have to remain in Britain but it could be used for investment in film production, rights acquisition, prints and advertising and even the purchase of studios and other properties, excluding cinemas. Up to 2.5m could be invested outside the film industry. True to Wilson's comment in January, it was agreed that the amount that could be remitted to the USA could be increased by an amount equivalent to the earnings of British films from distribution in the US. It was estimated that the saving to the British economy would be about $33m.

By this time, the increased production effort of the British studios was ready for release—just as the floodgates opened for the backlog of American movies. Rank was particularly badly hit when, releasing its productions into its own cinemas, it found that audiences were going to rival chains showing American films. It lost out both ways, as producer and exhibitor.
        British producers did manage to start selling films to American television, alongside some of the smaller US producers, but never made much of an impact on the American theatrical market.

Already flagged in Wilson's statement in January as 'plans on the basis of an all-out effort by our own film industry ... to achieve this maximum output on a sound economic basis', the British government's reaction to the situation was for it to become much more directly involved in film industry affairs. In July 1948, the government took further steps intended to help British film, announcing plans for a National Film Finance Corporation (NFFC) to make production loans. The industry's problem was a lack of working capital but the commercial financial institutions of the City did not regard film production as a potentially profitable activity. In connection with the launch of the NFFC, President of the Board of Trade Harold Wilson, says (not without irony) that ‘pretty well the whole of the rest of the industry [apart from Rank] is now facing a stoppage, unless financial provision is made available’. Moreover, there would no longer be any American representative on the Cinematograph Films Council Advisory Group to the Board of Trade. Whether this was also to protect the British industry or just spitefulness is not clear (although having competitors advising on national film trade in the first place is a rather odd arrangement).
        The new Cinematograph Films Act increased the screen quota to 45 per cent for first feature films and 25 per cent for supporting programmes, effective from October. Unfortunately, British films accounted for no more than 25 per cent of releases. And, in fact, British films as a proportion of all releases never achieved the percentage set by the quota ever again.
British film registrations and the quota compared.

Thus began a period in which the affairs of the film and cinema industry of the United Kingdom was subject to direct state involvement which generally failed to produce the intended effect.
        With the added benefit of hindsight, Sir Henry French, speaking as director general of the British Film Producers' Association, summed up the effects of the duty and the boycott in his 1955 lecture. 'I often wonder where British film production would stand today if the Labour Government in August, 1947, had not made the most terrible blunder in trying to reduce the earnings of American films in this country. ... I have no doubt that the Ministers concerned thought that by imposing an ad valorem duty of 75 per cent on foreign films they would save dollars and at the same time do something which would benefit the British industry. But their judgment was entirely wrong. ... This nearly ruined the British industry.'

The lesson was learned. In 1964, when a 15 per cent surcharge was imposed on most British imports, films were significantly exempt.

Sources:
The British Film Industry (PEP, May 1952).
Board of Trade Journal.
Thomas H Guback: The International Film Industry: Western Europe and America since 1945 (Indiana University Press, 1969).
Sir Henry L French GBE KCB: The British Film Industry, with particular reference to film production (pamphlet of lecture given 7 February 1955 for the University of London Department of Extra-Mural Studies and the British Film Institute).
Margaret Dickinson and Sarah Street: Cinema and State: The film industry and the British government 1927-1984 (BFI, 1985).

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David Fisher