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Westminster Hall

Wednesday 4 December 2013

[John Robertson in the Chair]

Energy Intensive Industries

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Evennett.)

9.30 am

Paul Farrelly (Newcastle-under-Lyme) (Lab): I thank Members and the Minister for attending this early-morning debate, which appears on the Order Paper with the catchiest of titles: “Cumulative electricity tax burden for energy intensive industries”—truly a headline writer’s dream. Their presence speaks volumes for the importance industry gives this issue. I have been approached in the corridors this morning and in the past two days by people who cannot be here, but who are closely following the issue because they have had representations from their local manufacturers, too.

I and other colleagues applied for the debate at the urging of the British Ceramic Confederation, which represents tableware firms and brick and tile makers in my area—north Staffordshire—and across the country. Indeed, on Friday, I am visiting one of them—Ibstock Brick, in Chesterton, in Newcastle-under-Lyme—to view first hand its £20 million investment in brand-new kilns, which use the Etruria marl in the company quarries just a couple of miles away in Knutton and Silverdale, in my constituency. The fact that we are having this debate is also due in no small part to the urging of my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith), who has been cracking the whip for not only her local industry, but the sector.

The debate is very timely. It comes not only as energy prices for domestic customers have taken centre stage following the price-freeze initiative introduced by my right hon. Friend the Leader of the Opposition, but just a day before the autumn statement. The ceramics industry has lobbied the Chancellor of the Exchequer and the Minister hard for measures to tackle rising energy costs. It is not only the ceramics industry that has done that, but the glass, steel and chemicals industries—all sectors that describe themselves as highly energy intensive industries. In short, they are the cream of the UK’s manufacturing industry. We will no doubt learn tomorrow whether their pleas have fallen on deaf or, hopefully, receptive ears.

When it comes to my local ceramics industry and the potteries, I am more used to hearing cries of anguish over gas than electricity, because gas mostly fires the kilns. Only last week, 13 Members with ceramics interests, from across the parties and across the country, signed a joint letter to the Select Committee on Energy and Climate Change ahead of its session last Thursday on gas storage. A delegation of us also recently met the Minister to raise issues along the same lines on behalf of the industry. In our representations, we questioned the Government’s recent decision not to involve themselves in actively encouraging more storage to tackle gas price volatility and future security of supply. We were pleased

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that the Committee’s members took those concerns on board in their questioning of key representatives of the gas industry last week.

The debate is about the cost of that other staple and crucial energy source: electricity. On average, the ceramics industry uses more gas, but quite a number of our manufacturers employ some of the most electro-intensive processes in the UK and, indeed, Europe.

Mr Brian H. Donohoe (Central Ayrshire) (Lab): I congratulate my hon. Friend on securing the debate. Three of the five biggest users of energy are located in Scotland, so he will understand my interest in this subject and, in particular, in the effect of Government policy. These industries are not able to get the grants available to their competitors in mainland Europe, which is leading to the possibility of job losses. Does he accept that the Government need to do more in those circumstances?

Paul Farrelly: I totally agree. Without a level playing field, the issue is not just the possibility, but the reality of job losses, not least in Scotland, and I will come to that shortly.

Derek Twigg (Halton) (Lab): Before my hon. Friend comes on to Scotland, may I congratulate him on securing the debate? He is very knowledgeable on this matter. Is he aware that the INEOS ChlorVinyls plant in Runcorn uses electrolysis to manufacture chlorine? As a consequence, about 70% of the production costs on the site are accounted for by electricity. Some 1,800 people are employed on the site, so it is important that this matter be resolved. Is it not important that the Government look at the carbon floor price?

Paul Farrelly: I thank my hon. Friend for that intervention. I know the INEOS plant on Merseyside—it is an ex-ICI plant—very well, because two of my cousins from the extended Irish side of my family work there. Like all Members, I have had representations from INEOS, which is a major employer in my hon. Friend’s constituency. The company made exactly the same point—that 70% of its costs go on energy, so if we are substantially out of line with our competitors in Europe and the world beyond, it suffers a considerable disadvantage.

Neil Parish (Tiverton and Honiton) (Con): I thank the hon. Gentleman for securing the debate. Germany has methods of subsidising high energy use-based steel, because it has high green taxes. The trouble is that the unforeseen consequences of our green taxes—they were, in all fairness, started by the previous Government—are mounting for industry. If we are to carry on with green taxes on bills, we must find a way to help these highly energy intensive industries; otherwise, we will export our business abroad.

Paul Farrelly: I thank the hon. Gentleman for what is the third intervention. I will come to the comparative prices in Germany, which has long had a strong green movement. In the past, it has also had the benefit of wide-ranging, simple schemes, not least in respect of coal, something that affected my constituency years ago. One of the things I want to come to later is the complexity under which our industry has to suffer.

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David Simpson (Upper Bann) (DUP): I thank the hon. Gentleman for giving way—he is a very popular individual this morning. One of the issues I have received the most lobbying on in my constituency is green taxes. We have the second-largest manufacturing base outside Belfast. The Government have promised to make business easier and more competitive and to remove bureaucracy, but we need to do something about this issue, because our manufacturing industry is not competitive out there, and we need to keep our jobs in the UK.

Paul Farrelly: I am grateful to be so popular for the first time in many a month. I do not want to make this party political, but one of the lessons the Government seem to have learned from the Labour party’s initiative on energy prices is that we need to have simplicity and to reduce prices for domestic customers. However, the same message needs to be learned in respect of industry across these islands.

As I was saying, the ceramics industry, along with other industries represented here by Members, uses some of the most electro-intensive processes in the UK and Europe. The advanced refractory and technical ceramics manufacturers, which make products that must withstand high temperatures, operate electric arc and indication furnaces at well over 2,000° C, which is getting on for half the surface temperature of the sun.

That brings me to one of the key points I want to make. Several of our major manufacturers in these highly competitive industries have already moved overseas, relocating inside and outside Europe, including in Germany and France—our major European competitors—and they have cited electricity costs as a key reason for doing so. That is happening in not just the ceramics, but other sectors, such as chemicals and steel. We have heard about INEOS, and Members will no doubt want to refer to the steel industry and the experience of Tata.

To take one further example, the German multinational chemical company BASF, which is a major employer near Manchester, just north of my constituency, wrote to me to underline that electricity and other energy costs have been responsible for rendering uncompetitive its 60-year-old Scottish pigments plant at Paisley—the group’s second most energy intensive plant. As a result, that plant will close in 2015, with the loss of another 150 jobs. That is the stark message from the industry about UK competitiveness. Manufacturers now typically pay between £80 and £100 per megawatt-hour in the UK. Some of their German competitors pay nearer to €40—not even £40—per megawatt-hour, which is less than half that price. In France, they pay €50. If nothing is done, and if UK electricity costs rise further, more businesses, investment and jobs here will be put at risk.

Joan Walley (Stoke-on-Trent North) (Lab): I congratulate my hon. Friend on obtaining the debate. Must not we make sure that we can maintain manufacturing jobs in the UK, including in the ceramics industry, and support energy intensive industries, while enabling them to decarbonise? A key difference between the UK and Germany is the fact that in Germany the power sector has been transformed with a move towards clean energy. We must not lose sight of the necessary innovation and the transformation of the energy sector.

John Robertson (in the Chair): Order. I ask hon. Members to keep interventions a bit shorter.

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Paul Farrelly: That was one of my hon. Friend’s shorter interventions, Mr Robertson. Her constituency, Stoke-on-Trent North, includes Burslem, the mother town of the potteries. She is the Chair of the Environmental Audit Committee and will be sadly missed when, as she has recently decided, she retires at the end of this Parliament. I totally agree with her; what we need is a balance. What I want to show today, in the light of the pleas from industry, is that we have not got it quite right yet.

David Mowat (Warrington South) (Con) rose

Paul Farrelly: I see the hon. Gentleman is straining at the leash.

David Mowat: I shall be as quick as I can—and I, too, congratulate the hon. Gentleman on obtaining the debate. The topic of Germany has been raised, and we should all understand that its emissions are higher than the UK’s per capita and per unit of GDP—by about 30%. Germany has more renewables than we do, but burns far more coal and will not go along the route that we have taken so unilaterally and quickly.

Paul Farrelly: The hon. Gentleman makes the point very simply; we must look at things in the round when we consider reform of the system. I want to explain that industry wants reform to be simple and far-reaching, to permit competition with big companies that enjoy great support in Germany.

We are all familiar with the concept of fuel poverty—elderly people or less well-off families spending significant parts of their income on keeping warm. That concept could, strange as it may seem, equally be applied to some of our major manufacturers. Energy can account for up to a third of all costs in the ceramics industry and up to 70% of costs for major chemicals manufacturers, as we have heard. Big international price discrepancies matter, and will matter more if prices continue their inexorable rise. Like the household bills that we have put under the microscope in recent weeks, the price that industry pays for electricity also breaks down into three main components. One is the wholesale cost, which is rising. Another is climate-related charges. Hon. Members will have to bear with me while I go through a short list of what they include: the carbon price floor, the EU emissions trading system charges, the climate change levy, the renewables obligation, small-scale feed-in tariffs and, to be added to that bevy of burdens in the future, contracts for difference under electricity market reform. The third component is transmission charges, which are also increasing ahead of inflation, and which also include climate-related costs in the form of subsidies for offshore wind and other intermittent renewables.

I do not want to torture hon. Members and the Minister into torpor and total submission, but I shall give a couple of examples, provided by the British Ceramic Confederation, of the present and future impacts on industrial electricity prices of some of the carbon taxes and climate levies. Today, without climate change policies, the baseline electricity price that is being paid is about £70 to £71 per megawatt-hour. The climate change policies add £4 to £14 to that, so the cost rises to between £75 and £85. It is reckoned that, in 2020, which is not so far off, on top of a forecast base of £79 per

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megawatt-hour, the policies in question will add £15 to £35 or so; and in 2030, with the same forecast base, the cumulative effect of carbon tax and levies will, it is estimated, add £25 to £55, taking the price of electricity beyond £100 per megawatt-hour, to a top-of-the-range £130.

Alex Cunningham (Stockton North) (Lab): My hon. Friend referred to the bevy of burdens on energy intensive industries. When I talk to the likes of INEOS and GrowHow, in my constituency, they say they want certainty and simplification, which is surely the way forward, and a long-term policy, so that they know what is coming in five and 10 years.

Paul Farrelly: My hon. Friend anticipates the final paragraph of my speech—which is not too far off—with a plea for simplicity and predictability.

Industry’s message about comparative prices and prospective increases is simple. With non-baseload charges rising so rapidly, on top of wholesale price increases, the UK’s energy intensive industries will be at a growing disadvantage, not only compared with international competitors, but because of lower-cost countries internationally that are hungry for their investment. Of course, the fact that the playing field is so far from being level harms UK industry, but it will also do nothing to help with climate change or to reduce carbon emissions, if it means that manufacturing ends up in less energy efficient factories in countries with a laxer view of their environmental obligations. I know that my hon. Friend the Member for Stoke-on-Trent North (Joan Walley) is concerned about such prospects for carbon leakage.

Joan Walley: I refer my hon. Friend and the Minister to the report of the Environmental Audit Committee on the energy intensive industries compensation scheme and the issue of carbon leakage. There is a need for proper research on which to base future policy, to provide the necessary certainty.

Paul Farrelly: I hope that everyone will put the report on their Christmas reading list and that the Government will take note of the evidence base and the recommendations.

What is to be done? Industry, although deeply concerned, is not totally ungrateful to have had the Government’s ear in recent years. There has been a welcome for the announcement in the Budget that ceramics and other industries would be exempted from the full cost of the climate change levy. I recall that in giving that news the Chancellor paid tribute to his Tea Room discussions with my hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt), who chairs the all-party group on energy intensive industries. Of course Opposition Members thought that that compliment meant that his political career was done for, but changes since then have happily proved us wrong. The reality is that the tax exemption is hardly what the British Ceramic Confederation calls a game-changer. Welcome though that gesture was, it will save only an estimated 2% of energy costs for ceramics, mineral and metallurgical companies. Similar things can be said about the £250 million package to compensate energy intensive industries in the 2011 autumn statement—relief that was extended in the recent Budget—and about the sentiments behind the exemption, which the industry argues is too limited, from the UK’s new contract for difference charges.

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What further things would those vital industries like from the Minister today and from the Chancellor, if not tomorrow, then in the future? One thing is further news on practical implementation, without state aid complications, of the climate change levy exemption. Looking further ahead, they would like the compensation package that has already been announced to be linked to the carbon price floor, so that it remains for the duration of the policy, and so that its value will reflect the trajectory of the price floor, if that continues. The industries would also like a widening of the contract for difference exemptions, so that there will be help for more companies than the estimated 10% of the ceramics industry that it is thought will be helped. They would certainly like a bigger helping hand in relation to Brussels. There was dismay, a fortnight ago, in the ceramics, glass and cement industries at the discovery that they would be excluded from compensation under the EU emissions trading system, even though highly electro-intensive processes are employed in the sector.

Mr Donohoe: I am grateful again to my hon. Friend for giving way. I have had many representations from the glass industry about its being excluded. There is a highly successful glass factory in my constituency, but its concerns are so great that it is bound to lose jobs as a consequence of being excluded from compensation. Does he agree?

Paul Farrelly: I certainly do. As I move to the final page of my remarks, I have some brief comments on the glass industry that reflect my hon. Friend’s concerns.

What the industry wants most of all, however, is a radical change of approach to stop our international competitiveness from being eroded further and even faster. The carbon price floor has inflicted pain on the industry for no discernible benefit, and its dream scenario would have the Chancellor abolish it entirely tomorrow. As with the measures affecting household bills, energy intensive industries would also like to see new climate-related charges, such as contracts for difference, paid from general taxation, because the nature of their businesses are such that they cannot protect themselves against such charges.

Other hon. Members will no doubt want to talk about industries other than ceramics, but before I let them, I will just say a few words about glass, which is another staple industry that is crying out for help. British Glass tells me that, since the UK climate change agreements took effect at the turn of the millennium, half of UK glass manufacturing sites have closed, with some 3,500 jobs lost. Despite the difficulties, it is still a £1.7 billion a year industry, employing 7,000 in the UK, but because it faces rising costs through rising green taxes and being ineligible for the EU help that my hon. Friend the Member for Central Ayrshire(Mr Donohoe) referred to, it fears that yet more jobs will go. We will then simply import more glass, which is bad for our balance of payments.

Derek Twigg: My hon. Friend makes an important point. Energy intensive industries form a large part of our manufacturing base. All parties have said that they want to protect and, naturally, improve manufacturing. Otherwise, we will end up importing many more goods.

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That is why it is vital that we take radical action to ensure that our manufacturing industry is promoted and protected.

Paul Farrelly: I entirely agree. From my 12 years as a Member of Parliament, my experience is that—I hope the Minister can change this mindset—the UK’s generally laissez-faire approach to industry, as well as its studious approach to implementing directives, means that we, in effect, give less support to our manufacturers than France, Germany, Italy and other leading nations give theirs.

I want to end with a plea to the Minister, which I am sure will fall on receptive ears as I know him to be intensely practical. If the Government are not minded to be as radical as the industry wants, the industry would certainly like more simplicity, which is a particular plea from BASF and the chemicals industry. End the plethora of levies by merging them into a single carbon tax, with the existing rebate scheme under the climate change agreements, to cut costs and bureaucracy and to reduce the mind-boggling complexity around green taxes and levies that often reduces Members of Parliament to complete confusion.

Thank you for listening, Mr Robertson. I look forward to contributions from colleagues and to the Minister’s response.

Several hon. Members rose

John Robertson (in the Chair): Order. We have five speakers and a limited amount of time. If hon. Members stick to around eight or nine minutes, everybody will get their fair share. Keep interventions as short as possible.

9.54 am

Angela Smith (Penistone and Stocksbridge) (Lab): It is privilege to serve under your chairmanship once again, Mr Robertson. I congratulate my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) on his lucid explanation of the case for more Government support for energy intensive industries.

My constituency plays host to Tata Speciality Steels, Naylor Industries plc, which is a ceramics manufacturer specialising in clay pipes, and Wavin, which also manufactures clay pipes and lies a bit further to the west of the constituency. We are home to a paper mill at Oughtibridge, which is unfortunately due to close in 2015, ending a 140-year history of paper making on that site. My constituency is also home to British Glass, and I am very proud about that.

Manufacturing represented 12% of national output in 2011 and 8% of employment. In my constituency, 14% of output was generated by manufacturing, which accounted for 11.8% of local employment. Manufacturing therefore still matters in my constituency and in south Yorkshire. The big manufacturing employers in my constituency, in steel and ceramics, are also high energy users, and it is estimated that about a third of their production costs relate to energy use. My work as an MP is about not only talking up manufacturing and everything that is needed to support it, but making the case to the Government on how they can help to secure cost-competitiveness in a global context. For many such industries, energy costs are a key factor.

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What are the facts on energy costs for high-end users? Tata Steel stated on 2 December that wholesale electricity year-ahead prices are 70% and 45% higher than in Germany and France respectively. Policy-driven taxes and levies for the most intensive users were 2.5 and 6.5 times higher than in Germany and France respectively in 2011. The scale of difference is clearly large enough to turn profit to loss and to send out negative signals to potential investors.

Mr Gregory Campbell (East Londonderry) (DUP): On that point, there is a large company in my constituency whose parent company, which is overseas, is constantly reviewing its overheads and the bottom line, which, for many, is the cost structure. Where such companies see the opportunity for reduced costs overseas, there is the serious possibility of their relocating.

Angela Smith: I completely agree with the hon. Gentleman. BASF pointed out only a couple of weeks ago that there is a real risk of losing at least 10% of European manufacturing capacity to the US, because of the much cheaper energy costs, but we will not go into that debate this morning.

On taxes and levies, the British Ceramics Confederation has pointed out that the Department of Energy and Climate Change’s analysis shows climate-related charges are already 19% of the base load price, and that will rise to 47% in 2020. The Engineering Employers Federation states that the Government’s estimates indicate that industrial electricity prices will have increased by 70% by 2030. Moreover, Tata Steel is clear that the green levy with the greatest impact today is the renewables obligation, which, along with small-scale feed-in tariffs, will cost £10.50 per megawatt-hour in the year from April 2014, which is an increase of more than 100% in three years. Tata also points out that many steel makers in Europe will either be completely exempt from the charge or have their charge capped at €0.50 per megawatt-hour. There is clearly a serious problem here for such industries in the UK; spiralling energy costs, compounded with myriad taxes and levies, are threatening our ability to compete, even within the EU.

The British Ceramic Confederation points out that, as my hon. Friend the Member for Newcastle-under-Lyme said, some of its manufacturers operate some of the most energy-intensive processes in the UK, and that several companies have already relocated to Germany and France, with electricity costs cited as a key reason. Even more worrying is the real risk that the current tax regime will do nothing to lower emissions globally if, as the confederation suggests, manufacturing focus is encouraged by costs to emerge in less regulated and less energy-efficient factories abroad. Carbon leakage is therefore a real threat. There is a great irony here, because energy intensive industries are making a huge effort to improve energy efficiency and thereby cut their costs. Tata uses 40% less energy today to produce the same amount of steel as it did in 1975. That is a 40% cut in energy costs as a result of its energy efficiency measures. Ceramics industries have been heavily involved in trying to improve their processes. Naylor Industries in my constituency continually strives to reduce costs by improving energy efficiency.

In summary, it is clear that we need reform of the current system of green taxes and levies, because of the risk of losing capacity, either to the EU or elsewhere,

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with the linked risk of carbon leakage. However, let me be absolutely clear: I have not, as yet, come across one industrialist who disagrees with the principle of green taxation. Everyone understands that a well-designed taxation system has a role to play in stimulating growth of the low-carbon economy, but that process has to be balanced with the critical need to avoid damaging the cost-effectiveness of the industrial base.

Our energy intensive manufacturers are important in their own right; I know that because I come from a family who have been involved in steel making for at least four generations. Such manufacturers are even more important given that the industries that we are talking about have a key role to play in providing components for the low-carbon economy—a point often overlooked by critics of the industries. Technical ceramics are used for nuclear, wind and solar generation. Clay pipes are 100% recyclable and have an incredibly long life. It takes 1,000 tonnes of steel of six different grades to produce each offshore wind turbine. The steel exterior for the Nissan Leaf electric vehicle was developed and produced in the UK by Tata Steel. Last but not least, the polyurethane foam insulation developed by BASF saves 233 tonnes of carbon over its lifetime for every tonne used in its production.

As my hon. Friend the Member for Newcastle-under-Lyme asked, how should the Government act to remedy the problem? It is worth listing the array of schemes in play, or due to come into play soon: the climate change levy; small-scale feed-in tariffs; the emissions trading scheme; the renewables obligation; the carbon floor price; the energy company obligation; the carbon reduction commitment; and contracts for difference. We also have the aggregates levy and the landfill tax, but both are well embedded, and nobody would touch them. I might not even have included all the schemes on that list, but the point is made.

For industry, the green tax landscape is burdensome in two key ways: there is the cost, and the bureaucratic tangle involved in ensuring compliance. For example, one business in my constituency employs a full-time, highly skilled individual simply to ensure that it meets all its obligations on green tax. The Government have committed to the red tape challenge; this is a clear red tape challenge that needs to be dealt with. That individual could be employed to improve energy efficiency in the plant instead.

I repeat: what is to be done? Industry has a few ideas and key demands. First, it wants a level playing field for European and non-European competitors on climate-related taxes and levies, to ensure that world-class companies in the UK can remain internationally competitive. EEF pointed out that an assessment of that could take place within the context of the fourth carbon budget review.

Secondly, industries need to see the detail of the promised exemption of ceramics and other industries from the full cost of the climate change levy from next year. The autumn statement would be a good opportunity to provide that detail, as well as detail about how the Government will negotiate a way through without falling foul of state aid rules. In addition, the expected change in guidelines means that the Government have an opportunity to exempt such industries from the renewables obligation and small-scale feed-in tariffs. EEF and the British Ceramic Confederation make reference to the impact of those two taxes on their members. Industries also want the £250 million package moulded around

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the ETS and the CFP to be in place for the duration of the latter policy, until 2030, and they want the value of that compensation linked to the upwards trajectory, as my hon. Friend pointed out. The contract for difference worries energy-intensive industries, too. They look for comprehensive exemption for industries, so that they can remain competitive.

Finally, both the steel and ceramic sectors point out that the Government could do a great deal for their members if capital allowances were increased for a wider range of energy-efficient technologies, so that a much higher proportion of the green taxes raised went back into such investments. I could also make the point about including a wider range of industries in the state aid guidelines. It is incumbent on the Government to ensure that they make that case to the EU.

The Government face a bewildering range of choices. They ought to consider two more radical proposals before making up their mind. Perhaps we need a consolidation of all the taxes and levies, or to simplify the system, to reduce the bureaucratic burden on our manufacturing companies and make it easier to work out what the cost burden should be and how best to compensate industries that are at risk of losing that competitive edge. Transparency and good environmental tax design could be achieved simply by revising and reforming the complexity of the current regime. I would like to hear the Minister’s comments on that.

Perhaps we could scrap the carbon floor price altogether—let us just get rid of it. It is a unilateral tax that is projected to pull in more than £2 billion for the Treasury by 2020, but it threatens to undermine the competitiveness of our key industries.

John Robertson (in the Chair): Order. I ask the hon. Lady to bring her remarks to a close.

Angela Smith: Of course; thank you, Mr Robertson. The Minister needs to be clear today about the choices that the Government are prepared to make in response to the demands that I have just outlined. Indeed, the Chancellor needs to be clear in his autumn statement tomorrow that the political will to protect our energy intensive industries is there. We need to hear that. Our manufacturing base demands that. Industries deserve that. More than anything else, our country desperately needs to hear the Chancellor give us that message tomorrow, and the concrete proposals that will deliver a level playing field for energy intensive industries in the UK.

John Robertson (in the Chair): Unfortunately, we lost a lot of time with the previous speaker. I now impose a limit of seven minutes. That may go down, depending on interventions. I ask Government Members not to look at the clock opposite them for guidance, as it is not working.

10.7 am

David Mowat (Warrington South) (Con): Thank you, Mr Robertson. I will look at the clock behind my shoulder, or perhaps you will tell me when I am getting close to my limit.

I congratulate the hon. Member for Newcastle-under-Lyme (Paul Farrelly) on securing the debate. I have been an MP for three years, and I have taken part in many

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debates on green jobs and how we were not moving fast enough on green subsidies. It is good to have a debate today on the 900,000 jobs in our economy in the chemicals, steel, cement and ceramics industries. I will mention one more industry, which is represented in my constituency: the aluminium industry. It, too, is affected by high energy prices. Furthermore, although intensive industry is affected most by high energy prices, all industry is affected. We are trying to rebalance the economy back towards manufacturing, and gross domestic product growth correlates to energy use, so it is nonsense to say that only intensive industry is affected.

We are not talking principally about industries moving abroad, although that does happen; we are talking about marginal decisions about investments that do not come to our country, but go somewhere else. That is much less obvious. When an investment goes to Wilmington in the United States, instead of Teesside, or to Germany, instead of this country, nothing necessarily closes, but we do not get the expansion that we might have.

Let us look at our competitive position vis-à-vis Asia, the United States and Europe. Historically, perhaps because of cheap labour costs, we have been used to some manufacturing moving to Asia, but we are now finding manufacturing moving to the United States and to Europe. That is far more worrying.

Turning to the US briefly, it is worth noting that US gas prices have fallen from $9 per million cubic feet to $3 per million cubic feet. That is utterly transformational. It is not the Government’s fault—it has nothing to do with taxes—but when something like that happens to an economy, there is a stark transformation. It affects feedstock prices for the chemicals industry and energy prices right across the piece. It has had a massive impact on the US’s competitiveness, relative to ours. Luckily, the US is a couple of thousand miles away, so the impact will not be felt quite so much as it would have been had it happened in Europe; but the shale gas revolution in the US is one of the most important events to have happened in global politics in the past decade. Members who are tardy or reluctant to endorse our taking action on shale gas need to reflect on that fact.

A bigger and more worrying issue is the EU. Our big competitors are France and Germany, and we have already heard about the differential that is arising. The issue is not so much the differential today—some may disagree with me—as the direction of travel for all of us. We have talked a great deal about carbon targets since the Climate Change Act 2008. We are the only country that has carbon targets—no other country in Europe has the same degree of statutory enshrinement of carbon targets. That fact drives behaviour. We have seen that in the dismantling of the emissions trading system in Europe. To all intents and purposes, the carbon price in Europe is now €2 or €3 per tonne, but in the UK, due to the carbon price floor introduced in April, it is about €20 per tonne. That will be absolutely devastating. At the margin, power stations will go to Holland, which is now building coal stations, and supply us through interconnectors. I do not see where that gets us.

This is an issue for all industry, not just intensive industries. The Government have assigned £250 million to help intensive industries, but that will not be enough

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if we are going to give ourselves differentially high energy prices into the medium term. All of us in this place need to reflect on that. I do not want to cause discord between the two sides of the House, but we have a vote this afternoon on energy prices. Some of the Members asking today that we keep prices down—something I desperately want to do, both because of fuel poverty and for the reasons we have heard about industrial competiveness—have the chance to vote on an amendment brought forward by the Labour party in the House of Lords that asks that we accelerate the closure of coal-fired power stations in this country. In my opinion, that will have the direct impact of raising energy prices by between 3% and 5%. I see the Opposition Front Benchers are whispering to each other, so I may well be about to be told that the Labour party has decided not to support that amendment.

Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): On a point of fact, the amendment was from the Liberal Democrats. It will be interesting to see how they vote this afternoon.

David Mowat: I thank the hon. Gentleman for that information; whichever party brought the amendment forward, I am clean. I will not be supporting it, and I suspect that many of the people in the room are sympathetic to my petition. All I would say is that it is the official position of the Labour party that the remaining coal-fired stations in our country should be decommissioned on an accelerated basis, with all the costs that will incur for the industries we have been talking about. We should reflect on our debate this morning with regard to the debate this afternoon.

The decarbonisation target has a cost impact, as well. Nothing in the world is free. We have heard about PV tariffs; I went through the Division Lobby when the Government were reducing the subsidy for solar from six times grid parity to four times grid parity—a reasonable measure, but again, the Labour party divided on that. It is important to understand the impact of what we are voting for on fuel poverty and on the 900,000 jobs in these industries that we all care so much about.

Neil Parish: We have been sleepwalking into this situation for several years now. We have been driving energy prices up and up, and not only industry but domestic customers are paying for that. It is time we got overall energy prices down, not just for high users, but for everyone.

David Mowat: I thank my hon. Friend for that intervention. To wrap up, in terms of our position on Europe, I believe we need to cut carbon. It is important, and I am not a sceptic on that stuff. My difficulty is with the idea that we have to cut carbon unilaterally. We are responsible for 1.5% of the world’s carbon emissions. We produce two thirds as much carbon as Germany per capita, and per unit of GDP. That is similar to Holland and lower than the average in the EU, yet we are pushing ahead with unilateral actions that come with a severe price. We need to think hard about that when we negotiate our way through this maze.

The points that have been made about complexity are absolutely spot on. Myriad complexities have built up in the attempt to keep a diverse set of technologies available, and those complexities are really mindboggling.

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I have put points to Labour Members about solar, about their party’s position on the decarbonisation target and about the opportunity this afternoon to vote according to their feelings on an amendment that would increase electricity prices further in the UK. I will also make a few points to the Minister, which he may wish to address. We should look at our tendency to act unilaterally, hemmed in as we are by the Climate Change Act and the fourth carbon budget and all that goes with it. I ask that we get away from EU directives on renewables and the rest. Yes, Germany is big on renewables, but it has far higher carbon emission levels than we do because it burns so much coal, and because it is building 10 more unabated coal-fired stations.

Joan Walley: Is it not the case that Germany is having to rely on a greater amount of coal now, in the short term—

John Robertson (in the Chair): Order. We will move on to the next speaker.

10.17 am

Nic Dakin (Scunthorpe) (Lab): It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) on securing this timely and important debate. The contributions so far have shown that this issue is important outside this place, for the communities that we serve and the future of our nation.

There has been a kind of renaissance in the cross-party consensus on the importance of manufacturing over the past few years. The current Government should share some of the congratulations on that renaissance, as should all politicians. However, when we look at how our energy intensive industries are being treated, it is ironic, because their treatment undermines that consensus. The hon. Member for Warrington South (David Mowat) has drawn attention to many of the dichotomies that we need to act on in that regard.

Foundational industries such as steel, glass and chemicals are crucial to a modern, balanced economy, and very much dominate the industrial scene in the part of the world that I represent. In Scunthorpe, Tata Steel, the UK’s largest steel maker, has just announced 500 more job losses, after announcing 1,800 in May 2011, so the issue of jobs is a live one. What Tata has said is exactly what my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) reported earlier: a comparison shows that UK energy costs are 70% higher than in Germany, and 45% higher than in France.

For someone sat in Mumbai making decisions about where to place investments, those figures are going to have an impact. It is crucial to take urgent action to ensure that that impact is not negative for the UK. Furthermore, as Member after Member has said, if we displace industry from the UK to places that are less energy efficient and less carbon friendly, we will increase the global carbon impact. That would be negative not just for the UK, but for the globe.

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): The hon. Member for Warrington South (David Mowat) spoke about the explosion of fracking in America leading to an increase in manufacturing

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there. My great fear is that the traditional gas markets in the middle east, particularly Qatar, will start making overtures to industry to move to the middle east to produce there, rather than wait for the west to import their gas.

Nic Dakin: My hon. Friend makes an important point, which reminds us that we live in a global world with global decision makers and global impact. Tom Crotty, a director of INEOS, said:

“We are at a crisis point. We will not have an energy-intensive sector in this country in 20 years’ time”

if action is not taken. Karl Koehler, chief executive of Tata Steel’s European operations said:

“Our…manufacturing plants face electricity costs that are… 50 per cent higher than our key competitors in France and Germany…If the chancellor wants an industrial recovery and to rebalance the economy he must show real commitment to fair energy costs for foundation industries such as steel.”

The carbon floor tax is an interesting case study. It is a unilateral tax on manufacturing introduced by the coalition Government. They announced in 2010 that it would be introduced in 2013, and in 2011 gave a commitment to a package of support for energy intensive industries. In October 2012, the Department for Business, Innovation and Skills consulted on it, and it has now come into effect, but there is still no time scale for when compensation or mitigation will be in place because the carbon floor tax mitigation proposals are stuck in Europe. One would have thought that that would be checked out before we went down that route. Industry needs to be confident about when that mitigation will come into effect.

I have the highest regard for the Energy Secretary because he is on the side of manufacturing and wants the foundation industries to succeed, but in a written answer the Minister said that

“£16 million has been paid to 17 companies.”—[Official Report, 5 November 2013; Vol. 570, c. 142W.]

However, in a later written answer, he said that applications were still being considered, implying that nothing had been paid out. Last week, he said in answer to a question that 20 companies had had moneys paid out. There is still a bit of confusion about what exactly is happening. He is brandishing sheets of paper, which are probably complex but clarify the matter.

That demonstrates the fact that the landscape is confusing and complex. The carbon floor tax has been unilaterally imposed. There is no sign yet of any mitigation there. The mitigation of the European trading scheme seems to be trickling out. However, as my hon. Friend the Member for Penistone and Stocksbridge said, the issue of most concern to steel makers involves the renewables obligation and we need to ensure that that is addressed. The danger is that, if mitigation is not put in place, the current renewables obligation will be catastrophic to foundational industries in the UK.

What needs to happen next? We must maximise efforts to achieve state aid clearance on the carbon floor tax, to move to compensation or to implement quickly interim measures to give confidence to investors and our manufacturing base. We must extend the time horizon of the package, which is currently three years. Investment horizons in industries such as steel extend for decades. The principle of long-term certainty is accepted by the

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Government and Opposition for support schemes for low-carbon generation. We need the same sort of long-term certainty for these investments.

Robert Flello (Stoke-on-Trent South) (Lab): I pay tribute to my hon. Friend and parliamentary neighbour the Member for Newcastle-under-Lyme (Paul Farrelly) for securing this debate. In terms of the long-term vision, energy issues are important, but it was not that long ago that jobs, particularly in the ceramics industry in north Staffordshire, were being lost abroad not because of energy costs, but because of labour costs. Should we not look at the issue in the round and take all aspects into account?

Nic Dakin: Absolutely. I am aware, Mr Robertson, that other hon. Members want to contribute to the debate, so I will close by reinforcing the need for urgent action now. The autumn statement tomorrow provides a real opportunity for the Chancellor to deliver support for our foundational industries, so that they are here today, here tomorrow and can be a confident part of our future.

John Robertson(in the Chair): Order. I thank the hon. Gentleman for that. I am sorry that I must reduce the time for the last two speakers to six minutes each. I call Neil Parish.

10.25 am

Neil Parish (Tiverton and Honiton) (Con): It is a pleasure to speak in this debate, and I thank the hon. Member for Newcastle-under-Lyme (Paul Farrelly)—

John Robertson(in the Chair): Order. I called the wrong speaker. Did you stand up, Mr Parish?

Neil Parish: Yes. As you called me, Mr Robertson, I thought I would hold forth.

John Robertson(in the Chair): I am sorry. I call Mark Pawsey.

10.26 am

Mark Pawsey (Rugby) (Con): I congratulate my hon. Friend on his quick-witted response to your invitation to speak, Mr Robertson. May I add my congratulations to the hon. Member for Newcastle-under-Lyme (Paul Farrelly) on securing this important debate? He made a strong case in support of energy intensive ceramic industries in his constituency. I want to speak about an energy intensive industry in my constituency and to refer to the packaging industry.

My constituency has a company that has manufactured cement for more than 150 years. It was originally called Rugby Cement, but is now operated by CEMEX. It is one of the largest plants of its kind and the most recently erected in the UK, involving total investment of around £200 million. It is operated by one the world’s largest producers of cement.

Energy costs for cement manufacturers takes up to 40% of gross value added, of which electricity is a significant part, but not in this instance the primary

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source of heat. In contrast with steel, aluminium and ceramics, the primary heat source in cement manufacture has traditionally been coal, but it is now increasingly alternative fuel, often derived from waste, ensuring that waste is put to good use instead of going to landfill. In that way, it contributes a significant environmental benefit.

The electricity is used in the process of grinding the clinker to create cement powder, in the movement of various materials in the plant and the blending process to create different varieties of cement products, and finally in the bagging of the finished product for transportation and sale. Therefore, significant amounts of electricity are used.

Before coming to this place, I spent 30 years in the packaging industry and I find myself chair of the all-party group on the packaging and manufacturing industry. It represents companies involved in the manufacture of paper, board, aluminium, plastics and particularly glass packaging. We have heard from hon. Members about the impact of electricity prices on the manufacture of glass and I will refer particularly to that used for bottles and jars. Manufacturers of cement and packaging have seen significant increases in the cost of energy. The British Glass Manufacturing Confederation has referred to a 14% increase in the past 12 months.

That increase has arisen partly as a consequence of the Government’s objectives on climate change and carbon dioxide emissions. Hon. Members on both sides of the Chamber today have recognised that the present and previous Administrations have gone too far and imposed an excessive burden on those manufacturers. The present Government have recognised that in their action to exempt the most energy intensive industries from that burden. The announcement by the Energy Minister in July this year was welcomed by many energy intensive industries as a start and a move in the right direction. I am sure, across the Chamber, that we hope the Minister will tell us that the Government will be able to go further. However, there are significant concerns that some industries have not benefited—cement and packaging fall into this category—because they are not eligible for the compensation that has been announced.

Both sectors have made representations that electricity costs in the UK are significantly higher than in other countries, and increasingly, manufacturers are multinational, with plant across the world. CEMEX, for instance, is a multinational producer, and it knows exactly what it costs to produce a kilo of cement at any location in the world. It is able to calculate where the most cost-efficient location is and a concern, which has again been expressed across the Chamber, is that if we are not able to provide additional forms of support in terms of energy costs, manufacturing will migrate to overseas plants rather than taking place in the UK. It will be an absolute tragedy if, as our economy recovers and turns the corner, our manufacturers are not able to take advantage of the growth in the economy and of the additional effect that that will have on UK employment.

That is particularly important in respect of the cement industry, because construction has been in a difficult place over the past five years. I am told that the supply chain is starting to see a renaissance and increased activity, and I very much hope that our UK-based manufacturers will benefit from that resurgence. I hope

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that the Minister will be able to provide reassurance today to Members across the Chamber about the work that the Government will do to support our energy intensive industries.

10.31 am

Nia Griffith (Llanelli) (Lab): I rise to speak as the secretary of the all-party parliamentary group for the steel and metal-related industry and because steel is an extremely important industry in my constituency, which has 19% of its employment in manufacturing—considerably higher than the UK average. Steel and a lot of related metal industries and the automotive industry are extremely important to me.

I congratulate my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) on securing the debate, and I would particularly like to congratulate my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) on her contribution. I shall try not to repeat her comments, given the shortage of time, but I would like to endorse everything she said.

Although huge efforts have been made over the years to improve energy efficiency, with steel production now being 40% more efficient than it was in 1975, it is becoming increasingly difficult to find additional savings. It becomes harder and harder, and one thing I have asked the Government before—and ask them again—is to take another look at such things as enhanced capital allowances and renewable heat incentives, to try to recognise and incentivise increased efficiency measures and better use of resources. In the long term, I think we also need to raise that issue as part of the EU emissions trading scheme, because when companies have really made a huge effort to make massive improvements, which is obviously helping us all globally to get emissions down, we need to try to recognise that.

Tata and many other steel manufacturers already recycle waste products in their factories and reuse a lot of the heat that they produce. Of course, metals are highly recyclable substances, and, again, those are the sorts of things that we should be supporting. However, it is a highly competitive world and we know that if we want to see UK-produced steel products and other products used in UK infrastructure, we have to get the price right.

On the use of UK products, I really would like the Government to move forward with the idea of targets for percentages of local content in big infrastructure projects and to look again at developing criteria on local economic benefits in assessing tenders for major projects. That has been done elsewhere in Europe, so it is not impossible to do it and still keep within European regulations. This is very important, and we could report how much local content was used, which would really flag up how much we think it matters that UK products are used in UK infrastructure. However, none of that can happen unless we get a competitive price. We must have a competitive price or we cannot even get out of the starting blocks on tendering for any UK infrastructure projects.

Energy is a major component cost, costing Tata Steel some £300 million last year. That is a huge bill. If we take a conservative estimate and say that energy costs are 60% more than in Germany—some colleagues have quoted 70%—the difference even then can amount to

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more than 10% of the product price. That is the difference between people being able to sell their product and not being able to. It makes a massive difference to competitiveness, and it is virtually impossible to offset that type of competitive disadvantage.

As we know, the carbon price floor is a unilateral tax. It was introduced in the UK and now we are in a muddle, trying to sort out the state aid rules in order to give help, whereas if it had not been imposed in the first place, we would not have to try and get the mitigation measure. The carbon price floor is a major disadvantage, putting us at a considerable competitive disadvantage as compared with places such as Germany and the Netherlands—we are not talking about cheap labour countries, but comparable countries in Europe.

Having said that, even if the state aid rules are sorted out, the rebate will only be 80%, so there is still an outstanding 20% that we will not be able to get. In addition, the renewables obligation is double what the Government’s mitigation measures will give back, so there is a real need to have a complete review of the whole green tax issue—of the complexity, as has been mentioned, and of the fact that the renewables obligation is what seems to be causing the most difficulty. I ask the Government to have a real look at the cost differential between the UK and elsewhere in Europe, which arises from the renewables obligation. As has been mentioned, the costs in other countries are something like 50 euro cents per megawatt-hour, whereas here we are looking at £10.50 per megawatt-hour. That sort of difference is creating a huge problem for our manufacturing industry.

I ask the Government to look at the whole issue—at the interplay of all these taxes. What we are saying today is that it is about the cumulative impact. It is about looking at the whole picture of all the different elements of the green taxes, not because the industries are against them but because the industries want a level playing field and for the system to work for everyone across Europe equally.

10.37 am

Julie Elliott (Sunderland Central) (Lab): As ever, it is a pleasure to serve under your chairmanship, Mr Robertson. I add my congratulations to my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) on securing this very important debate.

The Minister has been asked a number of questions, and a number of comments have been made to him by Members on both sides. Many have been from those who represent constituencies where these issues are very important, so I shall limit my contribution to give the Minister enough time to reply. There is no point in repeating all the arguments that have been made very well. Many key concerns are coming through regarding the tax system for energy intensive industries. I want to highlight one of the comments made by my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith): she called for clarity and pointed out that energy intensive industries support a well designed system of taxation and understand the need to decarbonise. I do not think the two things are contradictory, but one issue that most speakers have mentioned is the complex nature of the tax system and related issues. I would be very pleased if the Minister commented on those things.

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Robert Flello: I want to make a very brief point—I am sure you would pull me up if I did otherwise, Mr Robertson. Are we not missing some of the wider implications? Germany has been mentioned time and again, but the way in which Germany is operating its system, getting rid of the monopolies and concentrating on local, not-for-profit providers, is completely different. That is the issue, really. It is about a fundamental root-and-branch review of how we do things, so that we do not have the six monopolies, but actually have a different way of doing things.

Julie Elliott: We can always learn from how other countries do things, although one of the things about Germany that is not publicised much is that it imports much of its nuclear energy from the Czech Republic, which is what sometimes leads to its cheaper prices.

I would like to comment on some of the things that have been said about the importance of our manufacturing industry, because manufacturing is a key part of our coming out of recession and moving into economic growth. It is not only something that this country should be very proud of historically as, moving forward, we are at the cutting edge of some of the best manufacturing in the world. I personally feel very strongly about that and I am pleased that a number of hon. Members have talked about its importance to our economy.

There are concerns that the carbon floor price, which was introduced by the Chancellor of the Exchequer, imposes an additional burden on energy intensive industries and hampers our competitiveness. It is also on an upward trajectory: it is going up year on year. It was increased again in last year’s Finance Bill. The hon. Member for Tiverton and Honiton (Neil Parish) is no longer present, but he talked about the carbon floor price being a green tax. It is important to state on the record that the carbon floor price tax is entirely a revenue-raising tax; it goes to the Chancellor.

We cannot afford to end up in a situation in which the carbon floor price damages energy intensive industries while at the same time achieves a weak carbon-abatement effect. It is important to take a sector-by-sector approach. The issues inherent in and the support required by the ceramics industry, for example, may not be quite the same as those in the steel industry.

I am particularly pleased that the Minister of State, Department of Energy and Climate Change, the right hon. Member for Sevenoaks (Michael Fallon), will provide the response on behalf of the Government, because I am sure that he will be able to provide some clarity on where he stands on the carbon floor price. Earlier this year, before he became an Energy Minister, he called the carbon floor price

“a fairly absurd waste of your money”,

before going on incidentally to announce that it had been introduced by Labour, although as I have said, it was introduced by the present Government in 2011. I would be interested to know where the Minister stands now on that statement. How can he square it with his support for the carbon floor price?

It is vital that we keep British industry competitive, while decarbonising its activity. Much more work is needed, in conjunction with energy intensive industries, to develop a plan for how to achieve that.

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Tom Blenkinsop: I want to raise an important point in relation to the need for a plan. Today we have heard that Lotte at Wilton has announced that it is to close a plant, with the loss of 70 jobs, in the area next to my constituency. I remember when that plant went into administration in 2009 and NEPIC, the North East of England Process Industry Cluster, under the regional development agency, got Lotte, a South Korean company, in to purchase the plant and it got going again in April 2010. What we want, as my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) said, is a rounded—all-round—plan in relation to how regions function, what type of regional investment we have and what—

John Robertson (in the Chair): Order..

Julie Elliott: I thank my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) for his comments. He gives another example of how missed the regional development agency is in the north-east—in our region.

It is right that the Government are taking steps to help energy intensive industries that must adapt to the EU emissions trading system and the carbon floor price. We do not want to see the UK’s carbon emissions just shifted overseas. However, if we are to meet our emissions targets and avoid catastrophic climate change, we need to reduce those industries’ carbon emissions.

Energy intensive industries are an important part of our economy, accounting for 4% of gross value added, and 125,000 people are employed by them directly or in their supply chains. Many energy intensive industries are at the forefront of the low-carbon economy, producing the mechanisms that we need to develop our low-carbon industries. That was set out in great detail by my hon. Friend the Member for Penistone and Stocksbridge. However, like all sectors of our economy, this one must decarbonise if we are to meet our crucial emissions targets. The transition to low-carbon power generation will keep energy prices down in the long run. The alternative is to remain at the whim of unpredictable yet ever rising gas and electricity prices.

As the EEF, which was formerly the Engineering Employers Federation, has pointed out, if the Government were serious about the transition to a low-carbon economy, with innovation and green jobs at the centre of that transition, they would be supporting research and development. We question why research and development on energy as a percentage of Government R and D spending is comfortably less than the OECD average. However, the bigger problem is the Government’s counter-productive, counter-science and counter-business decision not to adopt a 2030 power sector decarbonisation target, which was supported by the EEF, which represents many companies in this area. That decision, or rather non-decision, is scaring away investment, costing green jobs and jeopardising our future energy security.

David Mowat: The hon. Lady mentions that the 2030 decarbonisation target was supported by many companies in this sector. Could she name the energy intensive companies in this sector that support that target?

Julie Elliott: Actually, I did not say that; I said that the target was supported by the EEF, which represents many companies in this sector.

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The Government need to be clearer on how they will provide support for energy intensive industries. In his autumn statement, in November 2011, the Chancellor announced that measures would be introduced to reduce the impact of the Government’s electricity market reform policies on energy intensive industries. My hon. Friend the Member for Scunthorpe (Nic Dakin) set out many of the issues in this area. That announcement was made almost two years ago, yet energy intensive industries still have very little detail on how that will work in practice. Perhaps the Minister can enlighten us on that today.

I understand that the Government concluded their consultation on the exemption eligibility for contracts for difference costs in August. What progress has been made since that time? Exemption costs for contracts for difference will be collected through the supplier obligation. Can the Minister provide some more detail on that obligation?

I would not dream of asking the Minister to pre-empt what might be revealed in the autumn statement, but if it is the Government’s intention to introduce further compensation, could he provide an update on the Government’s negotiations with the European Commission, when he or his officials last met representatives of the Commission to discuss this matter, when he expects to receive a final decision, and whether there is a plan B in the event that state aid is not granted?

To conclude, I hope that the Minister understands the difficulties that many energy intensive industries are facing with the current tax regime and that he will listen to the concerns raised by hon. Members. I am sure that he will be acting to make changes in the near future. I also hope that he would agree with me that the single best way to reduce energy costs for intensive users is to give further support to low-carbon technologies, which provide the best solution to keeping costs down in the long run.

10.47 am

The Minister of State, Department of Energy and Climate Change (Michael Fallon): I am very grateful to the hon. Member for Sunderland Central (Julie Elliott) for giving me a little extra time to enable me to try to respond to some of the very good points made in the debate. I hope that, if I do not respond to them all, hon. Members will allow me to write to them on the points that I have missed out.

This has been a good debate. It has not just been a good-natured debate. I think that it has been a reasonably constructive debate and it is certainly a very important one. I congratulate the hon. Member for Newcastle-under-Lyme (Paul Farrelly) on instigating it and attracting such a good attendance on both sides of the House. He raised a number of points. He asked about our engagement with the industry. He will know that last month I met Staffordshire Members with the British Ceramic Confederation. I have also met representatives of BASF, which he specifically mentioned, to hear their particular concerns. We are always ready in the Department to continue to meet representatives of those industries that are most affected.

The hon. Gentleman raised the issue of gas storage. I know that he disagrees with our decision not to subsidise large-scale storage reservoirs, but there are fast-cycle

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gas storage plants being completed. Two have been completed already. Two more are due to be completed next year. That will double our gas deliverability. I do not accept that the decision not to subsidise gas storage makes any major contribution to that debate.

The hon. Gentleman asked about the position of refractory ceramics. My officials have visited some of those electricity intensive sites, and we are considering the case for including them within the carbon price floor compensation. He tempted me to speculate, in advance of the autumn statement, on the carbon price floor. I simply cannot do that. The carbon price floor is a matter for the Treasury, as he knows. What I can say is that, obviously, the Department for Business, Innovation and Skills is very much aware of concerns across industry about the level and the trajectory of the carbon price floor, and we certainly ensure that our views are known in the Treasury.

The hon. Member for Penistone and Stocksbridge (Angela Smith) made several points. She compared prices with those in France, but I ask her to reflect on the fact that France enjoys a huge amount of base load nuclear power. I hope that she will welcome the decision to replace our nuclear fleet and to invest in such base load nuclear power, a decision that was too long delayed. She also made some important points about simplifying the schemes. I am completely with her on that, and I will refer in a moment to what we have done in that regard.

My hon. Friend the Member for Warrington South (David Mowat) reminded us of the need to be competitive, and he spoke of the success of shale in the United States. I reassure him that we are encouraging the search for shale in the United Kingdom. A dozen companies are prospecting, and more applications to drill are coming in. I expect the search for shale to accelerate over the next few months. He usefully reminded us that we all bear responsibility for the way in which we vote in this House, and several of us have voted in favour of climate change objectives. Indeed, we have the opportunity this afternoon to vote down an amendment that would increase energy prices for industry and business.

The hon. Member for Scunthorpe (Nic Dakin) asked me about the working of the ETS compensation scheme, which has paid out some £18 million to 29 companies, including Tata Steel, in respect of several plants in the constituencies of hon. Members who are present: the hon. Members for Middlesbrough South and East Cleveland (Tom Blenkinsop), for Scunthorpe, for Central Ayrshire (Mr Donohoe), for Rutherglen and Hamilton West (Tom Greatrex), for Llanelli (Nia Griffith) and for Penistone and Stocksbridge, and my hon. Friend the Member for Warrington South. Those payments are flowing. They are backdated to January, and they will be made quarterly from now on. I will say a little more about the working of the scheme in a moment.

My hon. Friend the Member for Rugby (Mark Pawsey) championed the cement industry in his constituency, as I would expect him to. We recognise the pressures that that industry faces, which is why we have announced the exemption for mineralogical and metallurgical processes from the climate change levy. We are examining the case for the inclusion of cement and some ceramics—those that have come forward with evidence—in carbon floor price compensation.

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The hon. Member for Llanelli spoke about energy efficiency, which is extremely important, and she also made an important point about local content. It is our intention to require, under contracts for difference, supply chain plans in respect of major contracts. Not only will that make those involved examine how they can drive up local content, but it will enable us to see more clearly where the local content is. I hope that she will welcome that measure.

The hon. Member for Sunderland Central suggested that the failure to set a decarbonisation target was somehow delaying investment. The House voted down the setting of a decarbonisation target in June, since when we have seen a wave of investment: not only the signing of the first new nuclear station in a generation but the introduction of a series of projects under our intermediate final investment decision enabling regime. She asked me what we were doing in respect of the Commission. My right hon. Friend the Secretary of State has regular discussions with the Commissioner. My right hon. Friend and I regularly go to Brussels to pursue cases such as CPF compensation, and we try to build support among other member states.

The hon. Member for Penistone and Stocksbridge made one of the most important points of all, namely, that there is a balance to be struck between green taxes, which the House has generally supported under successive Governments and which some of us have voted for, and ensuring the competitiveness of our industries. That can be a difficult balance to strike, and we are tackling it in two principal ways. We are helping to incentivise energy efficiency in industry and households, which several hon. Members described as important, and we are helping to relieve some of the short-term pressures on industry.

Joan Walley: Does the Minister agree that climate change agreements are an important way to incentivise clean power and meet decarbonisation targets?

Michael Fallon: I agree with that, and I will come on to climate change agreements later. The Government cannot control the volatility of global fossil fuel prices, but we can help industry to exploit energy efficiency potential, which will reduce the impact of rising prices. Some of our incentives are financial ones. The climate change levy is a tax on business energy use, and the EU emissions trading system is a cap-and-trade mechanism based on the emissions of energy intensive industries. The scheme is forecast to save the equivalent of 3,100 megatonnes of CO2 by 2020. To complement the EU ETS, we have a domestic scheme, the carbon reduction commitment energy efficiency scheme, which targets

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large non-energy intensive organisations. That is predicted to save the equivalent of 4,800 gigawatt-hours per year, which is greater than the annual energy use of all households in Manchester.

In addition to those financial incentives, we are working to incentivise industry through several other mechanisms. Climate change agreements, which the hon. Member for Stoke-on-Trent North (Joan Walley) referred to, are aimed specifically at energy intensive industries. They provide a discount on the climate change levy of 90% for electricity and 65% for gas, in exchange for commitments to achieve energy efficiency. She is right to remind us that they are a good example of an area in which Government and industry can work together to agree achievable objectives. More than 50 energy intensive sectors have negotiated agreements under the latest phase of the scheme, which are expected to result in an 11% energy efficiency improvement across participating sectors by 2020. Looking ahead, we have recently consulted on the new energy savings opportunity scheme, which will help larger businesses to identify energy efficiency measures that will result in average bill savings of £50,000 to £60,000 per year. Subject to legislation, the first audits under the scheme will be undertaken by December 2015.

The second leg of our reforms is the recognition of the competitiveness problems faced by some industries as a result of their energy costs, which lies at the heart of today’s debate. Rising electricity prices are a real concern for many businesses, which see them as a barrier to growth. The commitments to tackling climate change that the House has voted through have contributed to increases in those bills. That is why we have set aside up to £400 million to offset some of the costs of energy and climate change policies for the most energy intensive industries.

As we move to a low-carbon economy, it is vital to ensure that the more energy intensive industries are not placed at a competitive disadvantage in Europe or across the world, and they are not forced to consider relocating to other countries. Not only would that have a negative impact on our economy, but it might result in our exporting emissions to countries that are not strongly committed to cutting carbon emissions. Many energy intensive businesses are located in areas that have been hit hard by the economic downturn, so we have to ensure that we give them the best support available.

I have spoken about the energy contingency scheme. We continue to engage closely with the Commission on the carbon floor price, to obtain the necessary state clearance. Both packages are aimed specifically at the electro-intensive industries. It is important to highlight—

John Robertson (in the Chair): Order. We must move on to the next debate.

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Podiatry Services

11 am

Andy Sawford (Corby) (Lab/Co-op): It is a pleasure to serve under your chairmanship, Mr Robertson. I am pleased to have secured the opportunity to speak about podiatry services. I hope the Minister will forgive me if I speak a little briskly, but there are a number of issues that I want to cover. I am delighted that other hon. Members also wish to contribute.

In my constituency, which covers Corby and east Northamptonshire, podiatry services are delivered through Northamptonshire Healthcare NHS Foundation Trust. In May this year, the Nene clinical commissioning group and the Corby CCG initiated a public consultation on their proposal to make changes to the delivery of podiatry services, based on categorising the needs of patients as high, medium or low risk. I received letters from constituents and had constituents attend my surgery. For MPs, multiple contacts from constituents is sometimes a warning sign that there might be a problem. My constituents were concerned about the consultation, first, because they regarded it as ineffective, as it failed to communicate or engage with the users of podiatry services to any reasonable degree, and secondly because they thought it token. We know that the public are at times sceptical about consultation exercises, and with reason. It does not help when they see them as being more about selling a solution—a predetermined decision—than about genuinely engaging people in finding the best way forward.

We all recognise that services need to change for all sorts of reasons, not least due to our ageing population and the financial challenges that our local health care providers face. We MPs want to engage in consultations in which the public are genuinely involved and in which we feel that there has been rounded discussion about how best to work together, across the public sector and the different parts of the health system, to find the best way forward.

Jim Shannon (Strangford) (DUP): Podiatry is important for everyone, and those who need treatment in particular. The optician will diagnose things that other people might not see; the podiatrist, too, can diagnose things that are wrong with someone’s body—for example, he can spot the onset of diabetes and other health issues, including in elderly people who do not know they have them. Does the hon. Gentleman agree that podiatry is vital in checking for ailments that someone does not know they have?

Andy Sawford: The hon. Gentleman is absolutely right, and I shall turn to that point in describing the consequences of some of the changes in my area. There is a pattern across the country. I am sure that he, too, will be concerned to ensure that services are available in his area.

On 30 July this year, the clinical commissioning groups announced that their governing bodies would approve the cessation of “low risk” podiatry. They have been unable to explain to me what the standard assessment process will be for categorising patients in that way. They qualified the announcement by stating that the decision would not apply to children or vulnerable

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groups, which was a response to the strong feedback that the public and I, and perhaps other hon. Members, gave. I challenged the Nene CCG on the definition of “vulnerable groups”, and it told me that the term refers to

“The frail elderly and people who are likely to neglect foot-care for financial reasons”.

That is good to hear, but it is not clear who will make that assessment, and on what basis. We must ensure that the most vulnerable can access care.

Mr Philip Hollobone (Kettering) (Con): I congratulate the hon. Gentleman on securing the debate. He is serving his constituents extremely well on this issue. I had an e-mail from a constituent who says:

“I have an appointment this morning, where I am expecting to be told that I shall not be receiving any more services from”

the podiatrist.

“I have Psoriatic Arthritis in my hand and feet and other joints”,


“insoles made to help me walk. ‘I am unable to reach down to do my feet myself’ I told the podiatrist, to which he replied, It can’t be helped. He then said I would have to get my husband to do my feet.”

She goes on to say that her husband

“has issues himself, I cannot ask him to do yet another task for me.”

That is an example of a vulnerable person who clearly does not feel that she has been included in the exemptions that the hon. Gentleman describes.

Andy Sawford: I thank the hon. Gentleman for his intervention. I welcome his support for the debate. He is assiduous in working on local health matters; indeed, we have worked together on some issues. I welcome him raising his constituent’s concern. It illustrates the worry about the impact of the changes and the reality of people already being advised that services will be withdrawn—even those who the hon. Gentleman and I would hope would fall under the definition of “frail” or “vulnerable”, including those who may not be able to afford care.

Access is part of the problem. At the same time when the consultation exercise was carried out, the foundation trust reviewed its estates and facilities to make savings. It closed some podiatry clinics and relocated some services, making them more difficult to access. We are talking about people who may not have transport or who may have mobility issues, so difficulty in accessing services is a further problem.

In Northamptonshire, 107 private podiatrists are registered with the Society of Chiropodists and Podiatrists. I am grateful to the society for its helpful briefing for today’s debate. Those private podiatrists are expected to provide care to low-risk patients. Costs vary across the area, so will the Minister comment on how we can safeguard our constituents’ interests by ensuring that costs are affordable where people are told that they must meet costs themselves and that as many people as possible are not charged at all where there is a clear need, in accordance with the CCG’s stated wish to include the frail and vulnerable?

I have received letters from Northamptonshire Healthcare NHS Foundation Trust podiatry staff, who told me that their jobs were being put at risk. There have been

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16 whole-time equivalent podiatry posts lost, including leadership posts and the posts of musculoskeletal and diabetes specialists. That is inconsistent with the Government’s stated aim of maintaining high-quality clinical services. The reductions will create a high level of clinical risk by putting patients at an increased risk of falls, ulceration and amputation. We all want to ensure that our local hospital services, for example, can meet growing needs. We do not want more people presenting at accident and emergency or needing hospital admissions because they were not effectively treated through podiatry services.

The staff in the local podiatry service down-banded to bands 5 and 6 will be expected to carry out the same role that they currently deliver at bands 6 and 7. The view of the Society of Chiropodists and Podiatrists is that that is a deskilling or de-professionalisation of the service. I am concerned about that. Podiatry is not the most glamorous or attractive part of medicine. Not everybody wants to deal with people’s feet, for reasons we can all understand, but such work is incredibly important. Those who do it are proud of their professional skills, and we do not want them diminished, or want people not to be paid at the right level for their qualifications, because in the end that will lead to a recruitment problem

I understand the importance of the quality, innovation, productivity and prevention challenge to the national NHS strategy. I met the chief executive of the Northamptonshire Healthcare NHS Foundation Trust on Friday to discuss the issues. She talked to me about the rationale behind the changes, but she also said that there had been “learnings”. What I am learning is that the term “learnings” in health care usually means, “We recognise that we didn’t go about this in the right way. We perhaps rushed too quickly.”

Does the Minister accept that if people cannot access services where they are needed, the changes in Northamptonshire, and perhaps other areas, could create long-term problems and prove to be a false economy? I hope she agrees with that. Will she look at the staffing changes in Northamptonshire? I was asked on BBC Radio Northampton this morning what an Adjournment debate achieves, and I said that one thing is that the Minister will take an interest in what is happening in my area. I hope that one outcome of today’s debate will be that she will look at the changes in Northamptonshire, if she has not had a chance to do so already.

I do not want the Minister to override the proper role of local decision makers in deciding on the best pattern of services in our area, but a sense check on the Government’s intentions around the shift to prevention and the best use of resources, and how short-term decisions are made locally to find savings, may be a counter to that.

There seems to be a contradiction between the Department of Health’s vulnerable older people’s plan and policies that put older people at higher risk through the downgrading of incredibly important and much valued services. Along with the demographic time bomb that the NHS is facing, there is also a diabetes challenge; 2.9 million people, or 4% of those in the UK, have been diagnosed with diabetes.

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Nick Smith (Blaenau Gwent) (Lab): I congratulate my hon. Friend on securing this debate. I recently visited the foot clinic at the Aneurin Bevan hospital in Ebbw Vale in my constituency about a fortnight ago, and I spoke to the fantastic podiatrists there. They told me about the huge and growing demands on their services because of diabetes. Does he agree that raising awareness of diabetes and the effect that it can have, particularly on people’s feet, is really important?

Andy Sawford: I thank my hon. Friend for his supportive intervention. He is absolutely right that diabetes can cause problems for people’s feet. Also, by examining people’s feet, the podiatrist can diagnose cases of diabetes and ensure that people get the treatment, help and support that they need. I am concerned that some of the estimated 850,000 people who are undiagnosed might continue to go undiagnosed if podiatrists are not able to provide proper, professional attention to people’s feet when they come into contact with them.

The National Institute for Health and Care Excellence clinical guidance on the prevention and management of diabetic foot complications sets out a foot care management plan to reduce the risk of problems occurring in those with diabetes. It is the clear view of the Society of Chiropodists and Podiatrists that there are not enough podiatrists to comply with the NICE clinical guidelines. We might expect the society to make that argument, but it chimes with my concerns locally that we have lost 16 podiatrists in our area. At a time of increasing diabetes, a reduction in podiatrists gives me real cause for concern, because the society’s view might be right.

Some 500,000 hospital beds in England each year are occupied by people with diabetic foot ulceration—more than all other diabetes complications combined. Only breast and prostate cancer have a higher mortality rate than diabetic foot ulceration. The number of amputations in England has risen from 5,700 in 2009-10 to more than 6,000 in 2010-11. It is reported that, given the increasing incidence of diabetes, more than 7,000 amputations will be performed on people with diabetes in England alone by 2014-15, unless urgent action is taken. If we look at our acute hospital budgets and compare the costs of a bed and of performing an operation and amputation—not to mention the impact on the individual concerned—we see that an increase in amputations in our area could prove far more expensive than continuing to provide the podiatry services that people have come to expect.

Does the Minister accept that the prevention and management of foot disease in people with diabetes is an essential component of every commissioned diabetes pathway, and does she share my concern that 80% of amputations each week are preventable? That is a stark figure. Can she give me an undertaking that clinical outcomes for vulnerable older people, including those with diabetes, will not worsen in Northamptonshire?

I wish to mention briefly some other issues in the short time I have left. By standardising best practice in the work of podiatrists in the UK, there is the potential to make net savings and reduce the number of accident and emergency admissions and amputations. NICE clinical guideline 119 looks at best practice. I hope that the Minister will consider how we can make sure that that guideline is followed in Northamptonshire with the resources available.

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Finally, there needs to be greater parliamentary and public attention to podiatry issues. I very much welcome hon. Members’ attendance at this brief debate, and their interest and support. The subject is not particularly glamorous. Toenails, amputations and ulcerations are not things we want to think about over our breakfast, but they are important issues, particularly for some of the most frail and vulnerable people.

11.15 am

The Parliamentary Under-Secretary of State for Health (Jane Ellison): It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate the hon. Member for Corby (Andy Sawford) on securing this important debate. He is right to say that podiatry might not be at the more glamorous end of the health service, but of course it is important. I had a very good meeting with Diabetes UK within the first few weeks of taking on my new job as the Public Health Minister. Many of the points that he has raised were stressed, particularly the link with diabetes and with unnecessary and avoidable amputations. Being unglamorous does not mean that it is not important. I think we can agree about that.

The Government know that receiving personal care that is responsive to people’s needs is absolutely essential, and the service that podiatrists provide to local communities is vital in helping people to maintain their mobility, independence and well-being. We know that many other good things flow from maintaining mobility and independence.

Healthy feet allow people to be active and to exercise, which, as we know, has numerous benefits: maintaining better weight, improving muscle and bone strength, and keeping people’s emotional and mental health in a good place. There has been a lot of discussion about the isolation and loneliness of some older people, and the more active they can be, the less likely it is that they will be isolated and lonely.

With the elderly being the fastest-growing age group in Britain, increasing pressure is being put on health care, which will be reflected in the demand for podiatry care. Ensuring people have got healthy feet, preventing falls in older people, and proper and regular foot care can alert us to the early signs of other, more serious health issues, which is obviously important in people with diabetes.

Diabetes, arthritis and blood circulation problems are of particular concern, and they are big priorities for all parts of the NHS. Sometimes people are concerned that individual services or conditions are not always specifically named, but NHS England has very clear direction, through the NHS mandate, about looking after long-term conditions and older people, and podiatry is a key component of that mandate.

Jim Shannon: Will the Minister ensure that podiatry home visits continue for people—probably those in rural locations—who are unable to access the surgeries?

Jane Ellison: Access is an important factor. The hon. Gentleman is right to highlight the fact that improving and maintaining access is important.

Sometimes education is about making sure that people understand when to seek help and what the warning signs are. Podiatry is an important component of early

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alert work, as well as an important provision for older people and for people with long-term conditions. In situations in which services need to be changed, the NHS commitment is to make sure decisions are made in a clear and transparent way, so that patients and the public can understand how services are planned and delivered.

Through the mandate, NHS England is responsible for services and for working with local clinical commissioning groups to ensure that their services are based on the needs of the local population within the resources available—the hon. Member for Corby acknowledged the constraints—and there has to be evidenced-based best practice.

An important part of the reforms was to establish CCGs at the level at which commissioning decisions are informed. They are closer to their local communities and can respond to local needs, but they have access to good advice through NHS England, clinical senates and local professional networks. That commissioning process also takes into account the local authority’s views, with regard to the joint strategic needs assessment and, of course, the local health and well-being strategy, so these decisions do not exist in a vacuum: they are taken within a framework, all of which is geared towards local services responding to the needs of local people.

Of course, a big part of that—it is something I am always keen to stress—is the engagement with local democratically elected representatives. I am really pleased that the hon. Gentleman is so engaged with this issue. Whenever I have the chance to talk to people from any part of the health service in the course of my work, I stress the need to keep local councillors and local MPs closely informed and to work with them in making these key decisions, because I know that we are often the early warning signal when people have concerns. Like the hon. Gentleman, I have had people come to my surgery about these issues and that has been an early alert about when people might have concerns. It also allows us to respond to concerns that perhaps arise sometimes when a misunderstanding of a decision is causing undue alarm.

Andy Sawford: On the point about misunderstandings, the Minister is right. I do not want to alarm people across my area about services that they may still be able to access, but will she look at this issue in relation to Northamptonshire? If she has any opportunity to talk to the local CCGs or Northamptonshire Healthcare NHS Foundation Trust, will she ask them to make clearer what guidance there is and what assessment process there will be to ensure that people who can still access these services know that they can do so and are assessed as being in the group that can still access them?

Jane Ellison: The CCGs and NHS England are obviously aware of the debates that we have here in Parliament; I always undertake to draw to the attention of the correct parts of the NHS the debates that we have here. It is obviously not for me to tell CCGs what to do or what to commission. However, this is the whole point such debates —to highlight Members’ concerns, to give Ministers a chance to respond to them, and to explore how more could be done to allay those concerns and respond to them—so I am very happy that we are getting this discussion on the record.

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The hon. Gentleman raised the issue of the education and training of podiatrists. Health Education England is working to ensure that there is an appropriate balance between supply and demand. We have already talked about the likelihood—indeed, the certainty—that demand for podiatry services will grow, because of our ageing population. HEE looks at the number of training places being commissioned. In collaboration with HEE, employers are also obviously keen to ensure that there are sufficient podiatrists to deliver the services that are needed. HEE will publish the national work force plan for England in early December—so, any time now. This year, providers have forecast their future work force requirements, which are obviously based on local service demand and which local education and training boards have moderated, to make adjustments for their education and training commissions. That piece of work is being gauged sensitively to look at local demand and the need for service provision. The assessment will be available in the published plan, which will show the position right across England.

Obviously, that process looks to the future, but we already know that the number of podiatrists working in the NHS has increased during the last 10 years, from 2,916 full-time equivalents in 2002 to 3,067 full-time equivalents in 2012, which is an increase of about 5% during that time. We are also continuing to develop the profession. The hon. Gentleman rightly highlighted that this is an area in which we need growing expertise. We introduced legislation that came into force on 20 August 2013 that enables podiatrists and physiotherapists to prescribe independently, following recommendations from the Commission on Human Medicines. Therefore, podiatrists who successfully complete education programmes approved by the Health and Care Professions Council, including conversion courses to allow existing supplementary prescribers to become independent prescribers, can begin to prescribe independently in 2014. That is a helpful step forward. Extending prescribing in this way will also help to support the key role that podiatrists play in shifting care into the community and improving the patient experience. It will benefit patients by making it more convenient for them to get treatment, as well as hopefully freeing up some valuable GP time.

We recognise that some of the people accessing podiatry services will be vulnerable; we have talked about that issue and the hon. Gentleman expressed his concern about it in his speech. We are reviewing how primary care, urgent and emergency care, and social care services can all work together as part of the integrated out-of-hospital response, looking at the whole person and considering the essential point that the hon. Gentleman made about how we can keep people out of hospital when they do not need to be there, by doing the good early alert work and ensuring that things do not progress to a point where we have the unnecessary amputations that he described.

To support that vision, the Government are working with NHS England on an out-of-hospital care plan for vulnerable older people. In doing so, we are engaged with patients, carers, and health and social care staff—all those important groups—to test those proposals and implement them. The final plan will be published later. I think that the hon. Gentleman will realise from recent

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announcements that my right hon. Friend the Secretary of State for Health has put enormous emphasis on the need for joined-up thinking about supporting people, particularly the frail elderly, and that is a clear priority that we have talked about a lot. All the things that the hon. Gentleman mentioned in his speech this morning are part of that process, to ensure that people understand that they have a named GP who can support them and to ensure that we spot signs of problems early. That personalised, proactive primary care is essential.

Andy Sawford: I see the Minister looking at the clock and I sense that she has a little more to say, but can she just say whether GPs will be able to refer people to podiatrists, in such a way that the service is free? Can GPs be a helpful way of ensuring that people in Northamptonshire who really need this service can get it?

Jane Ellison: Right across the country I would absolutely expect GPs, when they see the warning signs of problems, to alert people to the need for further care. That is one of the advantages of having a named GP; hopefully, they will spot the signs of problems early and recommend whatever the appropriate services are. That is very much part of the system that we envisage.

However, we also need multi-disciplinary teamworking; we need people to be joined up in their thinking. Obviously podiatry services are part of that. The hon. Gentleman has eloquently raised the concerns of his constituents and his own concerns this morning. One of the things that he focused on was the question of who are low-risk patients and how is someone assessed as low-risk. I understand that the CCGs involved modified their recommendations for future service provision in response to feedback received during the consultation, so children and vulnerable patients will still be able to access community podiatry services. However, I sense that his concern is that further work might be needed to flesh that plan out, and I know that the CCGs will have heard him express that concern; he has put it on the record today, saying that he is still concerned that those recommendations might still not be fully understood and that he would like to see more work done in that regard. I believe that the analysis carried out by the CCGs showed that only 1% of low-risk patients move into the medium or high- risk categories, but I know that he will want to have ongoing discussions about the nature of that assessment and about that figure.

I also believe that the CCGs involved took into consideration the number of local independent podiatrists who are registered with their professional body, with regard to the low-level community-based care. They are also rightly exploring the potential of developing a broader range of low-level foot care and podiatry services via the third sector and social enterprises, as part of their emerging health and well-being strategy. That is the right thing to do. Some of these services do not need to be delivered by a clinician of any sort; sometimes they might be delivered more appropriately in another setting. I believe that one of the advantages of an increasing emphasis on local planning and integrated service planning at a local level is that people can think outside the box about where certain services—particularly these important early alert services and low-risk services that can prevent people from becoming a higher risk—can be delivered.

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The hon. Gentleman has put his concerns on the record; it is right that MPs have the chance to do that. The local CCGs will have heard the concerns that he and other Members who have intervened in this debate have raised, and I am sure that they will be looking to respond to and allay them. However, some of those concerns were based on speculation about what might happen if this piece of work is not got right, and it is important that we find the balance between having due concern about what might happen if services are not got right and if the commissioning of them is not right, and at the same time sending a very clear signal to those people who have medical concerns, such as diabetes or the early onset of other problems, that they must seek help and that they will receive that help. They must not be put off seeking help because of concerns about the future commissioning of services.

It was useful to put all these issues on the record, and I am sure that the hon. Gentleman’s local CCGs and other CCGs will be looking to respond further to the concerns that he and other hon. Members have outlined today.

11.29 am

Sitting suspended.

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Dermatology Funding

[Mr Andrew Turner in the Chair]

2.30 pm

Sir Edward Leigh (Gainsborough) (Con): It is a pleasure to serve under your chairmanship, Mr Turner. I am grateful for this opportunity to debate issues relating to the provision of dermatology in the NHS. This area has received little parliamentary attention over the years, given the considerable morbidity and mortality for which skin disease is responsible. Indeed, I think I am right in saying that this is the first debate in the House of Commons in several years on dermatology and how it is treated in the NHS.

I should declare an interest, because we are always supposed to. I have a skin condition called rosacea. It is not that serious; I take antibiotics every day and it is controllable, but it has, of course, led me to take an interest in this subject.

In preparing for this debate, I consulted widely among the different interests in skin disease, and I am grateful for the insights that I was given. It is noteworthy that the same themes emerged from all quarters. Skin disease is extensive and has a great impact. It results in profound psychological consequences for many, especially for those with severe variants of conditions. It is under-treated in the NHS, and there are commissioning issues that relate partly to dermatology’s continuing to be something of a Cinderella disease. Talking to people, I heard the expression “Cinderella disease” time and again.

Most crucially, there is wholly inadequate training, notably among general practitioners, to enable doctors to handle the dermatology cases that will come their way in day-to-day practice. Why is this? There is a view that dermatology does not matter and that it does not kill. This is both complacent and wrong. Many skin diseases have horrendous effects, even when they are not fatal. Skin cancer is a major killer, and there would be benefits from renewed focus on this disease, both to help people avoid it in the first place and to identify and treat it quickly where it occurs.

The statistics on the burden of skin disease are eye-popping. Some 54% of the United Kingdom population experience a skin condition in any 12-month period. Of those, 14% seek medical advice, usually from a doctor or nurse in the community. Some skin conditions will be trivial, but many are not. Skin conditions are the most frequent reason for people to consult their GP with a new problem. Some 24% of the population visit their GP with a skin problem each year.

Mrs Cheryl Gillan (Chesham and Amersham) (Con): I congratulate my hon. Friend on obtaining a debate on a subject that has not been discussed for a long time. I have looked at facts and figures on dermatology services in my constituency. Would it surprise him to hear that, in the first six months of the year, the trust’s dermatology department had 501 day cases, 4,160 new out-patient appointments and 7,951 follow-up out-patient appointments, and undertook more than 3,292 out-patient procedures? Does not that show the demand in the system for dermatological services?

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Sir Edward Leigh: I am not surprised. I found similar figures in Lincolnshire. I should think that the same sort of problem will be found anywhere in the England.

The most common reasons for people visiting their GP are skin infections and eczema. Nearly a fifth of all GP consultations relate to a skin disease. Atopic eczema is the most common form of eczema. All my children have had it, and one of my boys suffered badly. Some children suffer grievously from it. It can affect people of all ages, but is primarily seen in children and affects up to 20% of children by the age of seven. Most people grow out of it, but a number of adults continue to show symptoms at a later age, some having the condition for life.

Eczema is typically characterised by red, sore and itchy patches of skin. For those who have it or those, such as parents, who have to care for a child with it, eczema can be highly debilitating. Sleep deprivation is common in children with eczema and, therefore, of course, in their parents. It causes major disruption to family life, not least because of the application of endless amounts of ointment. I know all about that.

Psoriasis, from which my brother and my mother suffered, has serious effects. It affects only 2% to 3% of the population, but often has devastating consequences for those who have it. Its onset is typically at 15 to 24 years, which is such a crucial stage in a person’s development. It is an immune condition that triggers excess replacement skin cells, which can lead to raised plaques on the skin that can be flaky, sore and itchy. It is a serious problem.

Then there is acne—I know all about that, too—a condition most commonly associated with adolescent teenagers. Although the condition is thought to be linked with hormonal changes during puberty, some 80% of young people above the age of 11 will have a degree of it at some point. It can affect people well into their adult lives, and it can be severe. Acne scarring is permanent. About 5% of women and 1% of men have acne over the age of 25. In a not inconsiderable number of cases, acne is widespread and ever-present, producing feelings of shame, despair and even, I am sorry to say, suicide in some cases. Acne is particularly tricky, psychologically, because it is often at its worst when the young emerging adult is feeling at their most self-conscious.

Other common conditions seen by specialists include vitiligo, urticaria, rosacea, herpes simplex, shingles, vascular lesions, benign skin tumours, benign moles, solar keratosis, viral warts, non-malignant skin cancers—I know all about that, too—and malignant melanomas. The list is almost endless, running as it does to a couple of thousand different conditions, each of which can have profound effects on the lives of those who have them. People who suffer from these diseases often do not want to speak about them. I am attempting, in this small debate, to give these people a voice.

It is worth saying that serious psychological effects are sparked by skin disease. We live in a society where we are subjected daily to images of perfection, selling everything from make-up, fashion and holidays to ice-cream. Skin conditions are sometimes very visible, and some people are highly prejudiced against those who have them, and make little attempt to hide that. That can lead to stress, depression, anxiety, and other related problems.

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There is a beautiful picture in the Louvre of a child reaching out to an old man, probably their grandfather. The child is beautiful and the old man, who obviously suffers from rosacea, is deformed and hideous. The point of the painting is that beauty lies inside, not on the skin, but that is not often the view of modern society, so skin conditions lead to psychological stress.

Many of these facts—I could go on, but I will not—are set out in detail in the recent report on the psychological effects of skin disease published by the all-party group on skin. I pay tribute to my hon. Friend the Member for Mole Valley (Sir Paul Beresford) who chairs that group and does it well.

Despite the fact that skin disorders are both serious and the most likely reason for someone to go to their GP, training and knowledge of dermatology among primary care health professionals is generally very limited. Perhaps “very” is wrong, but it is certainly limited. Astonishingly, there is no compulsory requirement for dermatology training in undergraduate or postgraduate medical programmes of study. Dermatology is still not included in all undergraduate medical school curriculums; it is optional in some, and untested in others. In five to six years of medical training to become a doctor, the average medical school offers—I found this incredible— less than a fortnight of teaching in dermatology. This is often combined with another so-called minor field of medicine. I am told that many miss this teaching altogether, not regarding it as important, and joke about taking a “dermaholiday”. That is like the NHS employing an army of plumbers who are highly knowledgeable about boilers and blocked drains but who do not know how to trace a leak or mend a pipe. By failing to provide adequate education in dermatology, which is an important field of medicine, we are badly failing to meet the needs of patients.

Nic Dakin (Scunthorpe) (Lab): I congratulate the hon. Gentleman on securing this important debate. He is setting out his stall extremely well. According to the consultant dermatologist at Scunthorpe general hospital who contacted me, 15% of patients presenting to GPs have a skin disorder of one kind or another, which underlines the hon. Gentleman’s point on the importance of including dermatology in GP training.

Sir Edward Leigh: In a moment, I will address the fact that skin diseases can have fatal consequences. As GPs often do not have adequate training, they are not able to spot conditions that can be very dangerous.

Training is important. In a 2008 survey of final-year medical students, only 52% of 449 respondents said that they felt they had the necessary skills to manage skin conditions. A lack of education and training may lead to fatal errors, and I stress that point because skin disease is not only about psychological damage. Skin lesions mistakenly taken to be benign can lead to cancer. Conversely, inappropriate referrals to secondary care can be costly and are blocking up big parts of secondary care. As awareness of litigation increases in the NHS, GPs are, unsurprisingly, less and less willing to take risks, so they refer more and more patients to secondary care. I understand that the general hospital in Lincolnshire—this echoes the point raised by my right hon. Friend the Member for Chesham and Amersham

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(Mrs Gillan)—has seen a 26% rise in dermatology referrals for secondary care in the past year, and it is not alone.

The exploding incidence of skin cancer, an ageing population and side effects from new potent drugs are all driving referral rates. It has been guesstimated that there are 100,000 cases of skin cancer a year in the UK, but the number is not known for sure because the NHS does not collect figures for cancers that are not melanomas. Work this year suggests that the number may be nearer to 700,000; that is what dermatologists tell me, because they are dealing with such a volume of cases, day by day.

Studies show that the skill of GPs in diagnosing skin lesions needs improvement, and other studies raise concerns about the standard of skin surgery offered in primary care. In 2012, the Royal College of General Practitioners updated its curriculum statement on the care of people with skin problems. The statement goes a long way towards recognising dermatology as a key component of a GP’s training. The statement sets out a number of expected key competences within the field, but crucially, dermatology remains an optional component. For undergraduates, the British Association of Dermatologists recommends a two-week full-time attachment to a dermatology unit, with a realistic assessment at the end of the course. The association thinks that dermatology should also be taught when undergraduates work with general practitioners in the community. When trainee GPs are undertaking their two-year hospital placement, a six-month post in dermatology alone, in a combined post such as dermatology and general medicine, or in a combined minor specialty rotation would go a long way towards helping trainee GPs to take a special interest in dermatology, which is what we need.

The GP training period is likely to be lengthened by 12 months. I urge all interested parties—Health Education England, the royal colleges, the General Medical Council and the ultimate employer, NHS England—to use half or all of that extra time on a proper dermatology rotation, which would ensure that the GPs of the future are properly equipped to address their future work load. If that is to happen, funding must be made available to ensure that there is adequate consultant time to train budding GPs and to pay their salary while they undergo the hospital training.

Mrs Gillan: My hon. Friend is making a powerful argument. Does he agree that there is a worrying lack of provision for the psychosocial aspects of skin conditions? Is he familiar with Changing Faces, which, among other things, provides skin camouflage clinics? It sent me an e-mail when I was preparing for this debate saying that the King’s Fund has stated that there are only 3.7 posts across the country providing support for the psychosocial aspects of skin conditions, and the funding for those posts is under threat. Does he propose that funding should be found to try to support that vital work?

Sir Edward Leigh: I entirely agree. I talked to a doctor recently who said that one of his patients had not dared to go out for 20 years without wearing enormous amounts of special make-up because she was so worried about her condition. We should take that very seriously, because it affects hundreds of thousands of our fellow citizens and their feeling of self-worth.

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The lack of dermatology education applies not only to GPs but to nurses and pharmacists, who also play a key role in the management of patients with skin disease. High and ever increasing sales of over-the-counter skin products suggest that people buy many products from pharmacies, yet training of pharmacists in the management of skin problems is limited, and evidence that they are providing appropriate advice is lacking.

There is considerable potential for improving self-care through the provision of high-quality patient information and the development of the knowledge and skills of community pharmacists in skin diseases. That would save the NHS money, as well as improve patient care, and it is a nettle waiting to be grasped.

The General Medical Council, working with the Royal College of General Practitioners, the British Association of Dermatologists, the Royal College of Nursing and the Royal Pharmaceutical Society, plus Health Education England and NHS England, has a duty to ensure that urgent priority is given to the provision of proper dermatological training for all GPs, nurses and pharmacists. That training should surely emphasise that most inflammatory skin diseases are long-term conditions and are likely to need ongoing care, often throughout a patient’s life. Similarly, the psychological effects of skin disease should be considered an integral part of any dermatological training course; I echo my right hon. Friend’s important point on that issue. There is good evidence for the effectiveness of general practitioners with a special interest in dermatology working within appropriate accreditation frameworks. More needs to be done to expand that group of clinicians, which is still all too small.

In addition to poor training at primary care level, there is also an issue with the number of consultant dermatologists. I pay tribute to my consultant, Professor Chris Bunker, who is well known in the field and is president of the British Association of Dermatologists. Compared with mainland Europe, the ratio of consultant dermatologists to the general population remains low in the UK, at 1:130,000. It is estimated that there is a 20% shortfall in consultant numbers in the UK.

Furthermore, there are significant issues related to vacancies in dermatology consultant posts—there were some 180 consultant vacancies at the last count. That is due both to an inability to attract people to posts in remote areas and to the widespread problem of funding being available for a post but the relevant deanery refusing to provide a training number that allows the post to be filled by a trainee.

As well as being unpleasant and demoralising for patients, some skin conditions kill; that must be emphasised. Skin conditions are not just a psychological problem. There were nearly 4,000 deaths due to skin disease in 2005, of which 1,817 were due to malignant melanoma, which is now the UK’s most common cancer. That is against a background of 13,000 malignant melanomas each year, a level that has increased 50% in little more than a decade. Those figures continue to rise, driven by the wide availability of cheap holidays in the sun, the continued fashion for using sunbeds and the inadequate resourcing of awareness campaigns. We must do more about that; improved public funding for awareness campaigns, better training and stronger regulation of the use of sunbeds are some of the most obvious answers to the problem, yet very little, if anything, ever happens. Despite skin disease being very common, the

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direct cost to the NHS of providing skin care is relatively modest. The overall direct cost to the NHS in England and Wales was some £1.82 billion at the last estimate, in 2006.

As of October 2013, there is no policy lead for dermatology in the Department of Health or NHS England; I put that point directly to the Minister. The majority of dermatology services are commissioned by clinical commissioning groups, but national oversight is necessary to co-ordinate care across the country and to drive the agenda. Prior to the April 2013 switchover, primary care trusts were responsible for commissioning dermatology services, but the Department did at least have a policy lead on overseeing service provision. No similar post now exists in NHS England, so no one—I hope the Minister can reassure us on this—champions this area, spots good practice, or drives change.

Earl Howe recently stated in the other place that dermatology would be spread across the five domains of NHS England, and that it would not, as was previously thought, sit primarily under long-term conditions in domain 2. That surely only heightens the need for a director to co-ordinate policy across the five domains. Even if only a junior post were to be created, patients and health professionals would be given a clear line of accountability and a person to whom they could appeal who was above their local CCG lead for commissioning. Given the prevalence of skin disease, a national clinical director for dermatology, which is what I am calling for, would not look out of place among the long list of such posts at NHS England. I urge it to consider such an appointment.

There is a lack of sources of peer-group, independent advice for people with skin conditions. Patient support organisations are mainly charitable institutions that rely, for the most part, on donations from individuals and pharmaceutical companies. People with skin disease place great value on the information and help provided by dermatology patient support groups. Skin disease is not a well-resourced area, and such groups struggle to make ends meet. There is no group at all, for example, to provide support to people with acne, the previous group having run out of funds some years ago. Given that such charities are almost certainly a cost-effective way to provide what might be life-saving support to patients, perhaps the NHS should consider being a little more generous in its funding.

I thank all those who have helped me to prepare this speech, particularly the British Association of Dermatologists. It is clear that a small number of important steps would make the greatest difference in this area of disease, including the appointment of a national clinical director to co-ordinate learning around the NHS and to drive uptake of new ideas and change. More important, however, is persuading the relevant bodies that I have mentioned to ensure that undergraduates emerge from medical school with a reasonable grasp of dermatology and that newly appointed GPs can recognise a malignant melanoma, which is probably the most important point of all. Those changes alone would have far-reaching, positive consequences for dermatology and for those with skin disease, and I urge the Minister to consider what can be done to make them a reality. I hope that this debate will make some difference.

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2.53 pm

Sir Paul Beresford (Mole Valley) (Con): I congratulate my hon. Friend the Member for Gainsborough (Sir Edward Leigh) on obtaining this debate. I have tried quite often and failed, so he obviously gets on better with Mr Speaker than I do or has better luck in the ballot system. I also congratulate him on producing many of the statistics and conclusions that the all-party parliamentary group on skin has come up with, which has two advantages: the Minister has heard them, and I do not have to repeat many.

This is an important and reclusive area in the national health service, but I must start by making some declarations of interest, as we are supposed to do. First, as part of clinical practice, I have seen and referred patients with a number of skin conditions. The treatment of some has been urgent—my hon. Friend mentioned melanomas—and some semi-urgent, such as basal cell carcinomas. Such carcinomas are commonly called rodent ulcers and are just chopped out, but when I was in Palermo a few years ago I saw one that had been left on the side of a gentleman’s face and that looked something like a small, underdone McDonald’s hamburger. We do not see such things here, so whatever we say about the condition of dermatology in this country, that has gone—thank goodness. There are a number of common and disfiguring conditions. My hon. Friend touched on acne and a number of other chronic diseases, such as psoriasis, all of which some people do nothing about, but for which help is available if they look for it.

Secondly, I am chairman of the all-party parliamentary group on skin. I must admit that, shortly after the election, I was pressurised, bullied, pushed and dragged, kicking and screaming, to accept the post. One problem with many things that we do in this House is that, once close to something, it is hard not to get drawn in. It is a fascinating and complex area with a definite recognition problem. It is just not seen and accepted. My hon. Friend talked about funding but also touched on his family’s clinical problems; I shall resist doing so as my sons would never allow me. The area could do with more money, but more could be done more effectively with what we have. Much improvement can be made through education, which my hon. Friend touched on, a change in service approach and, most of all, a recognition of need.

One of the first really quite shocking points that was made to me as chairman of the APPG was that, while skin conditions account for the greatest proportion of patient visits to GPs, undergraduate education in such conditions for doctors, including those who will become GPs, is minuscule. I risk repeating my hon. Friend’s point, but it is worthy of repetition. Many student doctors spend a few weeks, possibly only one week, studying skin diseases and conditions. I am not sure whether it still applies, but I believe that education in skin conditions is optional in some medical schools. If someone wants to become a GP and opts not to learn about such conditions, they are in for one heck of a shock or run the risk of doing their patients a disservice. It is quite staggering considering that dermatologists are expected to manage over 2,000 different diseases of the skin, hair and nails.

Reputedly, as has been mentioned, 54% of the population are affected by skin disease each year, and, as my hon. Friend said, some 4,000 deaths are attributed to skin

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disease annually in the UK. Generally, the horrendous malignant melanoma is the main cause. The incidence of melanomas has increased by 50% over the past 13 years. The hot spots are many and varied and include Glasgow and areas of Surrey. I do not know why that is and I am not sure that anyone does. Skin cancer is the most common cancer and is the second most common cancer causing deaths in young adults. Prevalence of basal cell carcinoma equals that of all other cancers combined and increased by 133% between 1980 and 2000. Hand eczema is one of the most common reasons for disablement benefit in the United Kingdom, yet skin disease hardly ranks in the education that goes towards the basic medical degree.

As has been mentioned, we have 780 funded posts for consultant dermatologists in the United Kingdom, which is a positive. That would be impressive, but, as has also been mentioned, 180 to 200 vacancies need to be filled. To add to the difficulties, many of the posts are filled by locums who are not fully accredited dermatologists. Even more concerning is that there are few specialist facilities, which are not ordinary hospital facilities but those that provide specialist dermatological treatment, including dedicated dermatology psychology practitioners. It is little recognised that many skin diseases are always present or threatening to be present and can cause devastating effects on a person’s physical well-being and can lead to serious psychological problems.

The all-party parliamentary group on skin has produced evidence that highlights the extensive impact that skin disease can have on all aspects of patients’ lives, such as school, work or personal relationships and, as a result, self-esteem. Such conditions often affect career choices and even such basic things as where an individual can go on holiday. Who would want to sit on a beautiful beach or to go swimming from it when hit by eczema, psoriasis or any of the various pigment conditions? It just does not bear thinking about. Some conditions can obliterate what many of us would expect to be normal social, sexual or leisure activities. According to the British Skin Foundation, approximately 50% of people who suffer from skin conditions have been victims of verbal abuse—we can imagine a child with psoriasis in a school. One in six has self-harmed and 17% have contemplated or attempted suicide.

If I have one major ask of the Minister, it is that she go to one of the few—but top—skin clinics, particularly one that includes psychological treatment as a norm. She should talk to some of the patients with psoriasis or a number of other such disfiguring diseases. They are not necessarily death-causing, but they totally obliterate normal life. She can see how they are handling their conditions, as well as how modern medicine can improve their lives, in particular if they get psychiatric help. Most can be helped to keep their conditions at bay, but part of the package should require psychological help—we have an APPG paper on this. I ask the Minister to meet those patients, who range from the very young—babies—right through to the very old, and watch and listen to how they cope. That should encourage a national rethink on how the NHS treats this massive and often unrecognised area of medicine.

When the Minister visits new clinical commissioning groups, which she does, I hope that following our debate and in particular the point made by my hon. Friend the Member for Gainsborough, she will ask some pertinent

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questions about how commissioners draw up local service specifications for the bidding process for dermatological services. The parameters of dermatology bids need to be drawn up with expertise and experience, which many CCGs do not have. I hope that the Minister can encourage, bully, push and cajole those CCGs to buy in, pull in and seek expertise when drawing up the specifications. The British Association of Dermatologists recommends that, before carrying out a service tender, commissioners should undertake a health care needs assessment and a review of the current service provision and, most importantly, consult service users and local clinicians, especially those who know something about the conditions.

Mrs Gillan: I pay tribute to my hon. Friend as chairman of the all-party group on skin—however reluctantly he took the post, he does a good job and I am pleased to be a member of the group. Is he familiar with the teledermatology service pilot in Buckinghamshire where a short history and photos of a patient are sent to consultants who can then provide advice to GPs? If he is not aware of it, would he like to know more? If he is aware of it, will he recommend that the Minister look at it while examining what we do in this area? It could be a valuable addition to the tools available to help people with dermatological conditions.

Sir Paul Beresford: I thank my right hon. Friend. In answer to her first question, which was whether I was aware of the pilot, the answer is no. Would I be interested? The answer is yes. As for the Minister, I saw that she was writing the details down, so I do not think I need to repeat them.

The greatest change necessary is to encourage education. That has already been touched on at some length. The lack of knowledge among practitioners and clinicians is the problem. We need better education in the under- graduate curriculum and further improvement in post- graduate training, perhaps with a continuing professional development requirement. Training is also required to produce more consultants, more doctors and psychologists with a professional interest in dermatology and more specialist nurses. That is not a big ask, considering the size of the problem.

This is an area where investing more on education at every level, with better provision of specialist clinics should, in due course, ease some of the costs and pressures, in particular on primary care. There would therefore be a positive payback. I reiterate, however, the importance of the Minister seeing things first hand. I would be delighted to arrange an appropriate visit and join her if she is willing.

3.4 pm

Jim Shannon (Strangford) (DUP): I apologise for ducking in and out of the Chamber. I am trying to make arrangements to meet a couple of people, so I apologise to the hon. Member for Gainsborough (Sir Edward Leigh) and to other Members for not being here for the entirety of his speech.

I congratulate the hon. Gentleman on bringing the matter to the House for consideration. He expounded the importance of this matter to him personally. For others in and outside the Chamber, it is something that perhaps members of their families have and that they can relate to.