Revised transcript of evidence taken before. The Select Committee on the European Union. Internal Market, Energy and Transport (Sub-Committee B)

Transcription

1 1 Revised transcript of evidence taken before The Select Committee on the European Union Internal Market, Energy and Transport (Sub-Committee B) Inquiry on LARGE PROJECT GOVERNANCE GALILEO AND ITER Evidence Session No. 1. Heard in Public. Questions 1 22 MONDAY 23 APRIL pm Witness: David Willetts MP Members present Baroness O Cathain (Chairman) Lord Bradshaw Lord Brooke of Alverthorpe Lord Fearn Lord Haskel Lord Rowe-Beddoe Lord Ryder of Wensum Baroness Valentine Lord Walpole Examination of Witness David Willetts MP, Minister of State for Universities and Science, Department for Business, Innovation and Skills. Q1 The Chairman: Minister, you are very welcome. Thank you very much for giving up your time, because I know that it is very busy at both ends of this building. You know our concerns about ITER and Galileo, and we would like to thank you for the letters we have just seen them that you have sent on both those issues, which you will probably refer to.

2 2 We have not discussed the letters, but we intend looking at them in greater depth once this witness session is over. I remind Members of the Committee to declare any relevant interests the first time that they speak. The session is on the record, is being webcast live and will be subsequently accessible via the parliamentary website. Mr Willetts, you will receive a transcript of the session to check and correct, which will become part of the public record in printed form and on the parliamentary website. Could you start the session by stating for the record your name and official title? David Willetts MP: My name is David Willetts. I am Minister for Universities and Science. The Chairman: And would you like to make an opening statement? David Willetts MP: No, I am happy to answer the Committee s questions to the best of my ability. Q2 Lord Fearn: Good afternoon, Minister. The Galileo proposal would introduce significant changes to how the project is organised and co-ordinated. Are you satisfied that these changes would tackle the problems that have dogged this project in the past? David Willetts MP: Well, I certainly realise that this project has indeed, as you say, had a lot of problems in the past. One is reluctant to state with complete confidence that suddenly we are into a different world where all those problems are consigned to history, but we do believe that the new structure is a lot better. We think that it at last has a coherent structure in which the Commission takes over overall responsibility from ESA 1 of course, the programme began with ESA and, underneath that, the specialist EU agency the GSA 2 will be responsible for delivering the project. ESA will have a continuing role on research and thinking about the future, but it will be subordinate to an overall Commission lead. We think that is the correct structure. We hope that it can be made to work it will depend on personalities and people s commitment but we think that it is a better and simpler governance structure and we welcome it. Q3 Lord Fearn: I have a supplementary to that. Your February letter to the Committee stressed the improvements made in the governance of the ITER project. Are there lessons to be learnt from those improvements for the administration of the Galileo project? David Willetts MP: Of course, there is not an exact parallel, because ITER is a global project where the EU element is less than half, whereas Galileo is specifically and solely an EU project; but in both cases having a clear sense that the Commission has overall responsibility for the programme, with a specialist agency underneath it to do the operational bit, is the right way of organising things. This is all now history, but I think that one of the things that went wrong with Galileo was the Commission getting itself into a position of having to run managerially a project, which is not really where its capabilities lie. In both cases, we now have a competent EU agency the GSA and F4E 3 and we hope that both of them can take operational responsibilities. Q4 Lord Haskel: Minister, are there any milestones by which we can judge how effectively this is being managed? 1 The European Space Agency 2 The European GNSS Agency 3 Fusion For Energy, which is the agency for the ITER project.

3 3 David Willetts MP: There is still an annual budgetary process for Galileo and there is also the Programme Committee, which enables individual member states to scrutinise and challenge what is happening, so, yes, there are opportunities for scrutiny. Q5 Lord Brooke of Alverthorpe: Why has it gone so wrong in the past, when those opportunities have been available to us? Those opportunities have existed, yet somehow it has gone wrong. How do we avoid having the same problem again in the future? David Willetts MP: Well, it is clearly a messy and unhappy history, and I have learnt about it really only at second hand. The view is that, as I said earlier, there was not a clear allocation of responsibilities and the Commission got itself into a position of running something because it did not have a proper competent agency to which it could hand over operational responsibilities. There were uncertainties about the handover between ESA and the Commission this began as an ESA project. There was also the whole episode of the attempt at having a privately financed programme, which then collapsed. It has been an unhappy history but, although no one can be 100% sure, we think that the structure now in place is better aligned to the needs of the project. Q6 The Chairman: Is the Commission now satisfied that it will be able to ensure that the governance and management structure that has been put in place is actually the right one? Do the people who are involved at the coalface in the management and the governance of this project report back to the Commission? If so, to whom do they report and how many times? Is there a regular exchange of views? Otherwise, this could be like a satellite, with everybody doing their own thing. David Willetts MP: I think that there is a general view among member states and in the Commission that, for Galileo, this is now a more logical structure than before. I think that we are all very wary of any further changes to it. In terms of monitoring, the responsibility lies with the Commission rather than with the member states, but we have the Programme Committee, which is a formal mechanism for challenge. When Vice-President Tajani was in London in February, I took the opportunity to discuss the issue with him and he is very aware of the concerns that the British Government have had about how the project is run. As an individual member state, we can also raise any specific questions at suitable opportunities. The Chairman: I hope that you will do so. There is so much else to do, too. Does anyone have any other questions on this particular issue? Q7 Lord Rowe-Beddoe: Minister, this particular project has exercised this Committee for perhaps four or five years, as you may know. It seems that we are almost there but not quite. In your letter of 23 April, you say that you would rather have something complete, but one significant remaining area is the Galileo Security Accreditation Board. I guess the decision on that will not happen before June. Is that correct? David Willetts MP: Yes, in my most recent letter to the Committee, I make this specific request. Because of the way that the parliamentary calendar is working out I know that some people on this Committee are experts on parliamentary calendars sadly, it looks like there will be a bit of a gap between this session of the Committee and its next session. In the interim period, there will be this Transport Council on 7 and 8 June, where we understand further discussion of Galileo will occur. That is why in the letter I ask for a negotiating mandate and a scrutiny waiver. In terms of this particular security question, yes we do need to do more. We have at least secured a French-British lead responsibility on

4 4 security issues we are the two member states that are most focused on that but there is more to do. Q8 Lord Haskel: The European GNSS Agency is at present mainly a marketing and analysis body, but under the updated Galileo proposals it would take on a significant administrative role. Are you satisfied that it will be ready and capable to take on this responsibility? David Willetts MP: You are absolutely correct that this is a big shift in its responsibilities; we have no illusions about that. It involves a big increase in its size. I think it is also physically being relocated from Brussels to Prague, so we realise that there is a challenge; but equally, given that you do not want to multiply indefinitely the number of bodies using the agency as the core one for taking operational responsibility, we thought that this was better than creating a new agency. We will keep a very close eye on its performance. We think that this change has the potential to improve programme management and cost control. Q9 Lord Haskel: Given what you have described, are you not concerned that the administration seems to be very much divorced from what I would call the business development for instance, plans to get the full benefit from the Galileo system to develop new businesses? After all, your own Technology Strategy Board says that satellite services will be a major growth area for the UK economy over the next decade and beyond. Are you sure that we are not going to miss out on the business possibilities by having this kind of administrative arrangement? David Willetts MP: That is a fair challenge. As I say, we are not complacent. Again, we will be trying as an individual member state, and working with fellow member states, to hold the Commission to account for that. At the moment the aim is to get the project competently delivered on time with its costs properly controlled. You are absolutely right that there are very significant commercial opportunities here. I hope that the agency will also think about those. However, I take note of that fair point. We believe that it should be able to do that but we will monitor it very closely. I am not giving a 100% guarantee of performance on this. It would go completely in the face of all previous historical evidence and be very rash if I did. Q10 Lord Haskel: For instance, would you consider asking for a Foresight exercise on this, bearing in mind that we are going to have a very big investment in this? David Willetts MP: I undertake to consider that and perhaps report back to this Committee. You are absolutely correct. If we take some steps back from the unhappy history of this project, it still has significant commercial potential for us partly because British companies are providing a lot of the equipment, partly because we have a particularly lively commercial space sector and companies that specialise in space applications so we ought to be able to ensure that there are significant commercial spin-offs from all that. How we best try to ensure that that happens is a real challenge for us. I would be happy to come back to the Committee on that. Q11 The Chairman: That would be very kind of you, Minister. I want to pick up on something you said: namely, that despite the fact that the agency is reorganising and has a completely new structure, probably involving more staff, it is contemplating moving from Brussels to Prague. Why on earth should that happen? Surely, that is just crazy. David Willetts MP: One could certainly describe it as a further complication.

5 5 The Chairman: Just on a practical level, somebody may say, I have a new job with Galileo. My children are being educated in Brussels and it is going to be fine. Then they end up going all the way to Prague not even to Amsterdam, but to Prague. Why was that done? Can you get your officials to tell us how many people are involved in all this and whether they are likely to move with it, or are you going to have the same problem trying to get new management stuck in there at a time when we need some progress? David Willetts MP: I can give the Committee the following figure. Currently, there are 35 staff and the expectation is that by there will be 170 staff, so a lot of the staff in the agency will be new recruits. I am sure that the background to the decision to move to Prague resulted from European negotiations, which were so subtle and so intricate that I would not claim to be able to understand them. If I did understand them, I would, of course, share my understanding with the Committee, but I do not know the background. Q12 The Chairman: The Commission has a very clear role as political leader of the project. Are member states properly represented in the new structure through the Programme Committee? David Willetts MP: The Programme Committee is the principal formal forum for member states. It is not a decision-taking body but it is a place where there is, for example, a discussion of the annual work programme, so that was why in response to the earlier question I was able to say that it is a basis for annual monitoring. All I can say is that we are active members of the programme committee. We have used it in the past to challenge aspects of the programme. I cannot claim any credit for this as I was not the Minister involved, but I am told that Britain, through its place on the Programme Committee, secured a fundamental rethink of the Safety of Life service, which the aviation sector did not want. Therefore, we have used the Programme Committee in the past to challenge aspects of the programme and we are willing to continue to do that. Q13 The Chairman: How many UK staff are monitoring that here, and where they do they come from? Do they come from the Space Agency, the aviation side or are they financial people from the Treasury? Who are they? David Willetts MP: The main responsibility now is with the UK Space Agency. With the creation of the UK Space Agency as a fully functioning agency 11 months ago, at the beginning of April last year, a lot of different departmental functions transferred to that. That has happened with the Galileo responsibilities, which have moved from the Department for Transport. The Treasury, of course, keeps a close interest in this as well. Lord Walpole: We have not decided to send that to Orkney, have we? David Willetts MP: Not yet, no. The Chairman: Hold your breath, Lord Walpole. Q14 Lord Walpole: On both Galileo and ITER, you have talked of the importance of getting the funding right, but you give no indication as to what you think the preferred sums are for each of them. How much should the spending be on these two programmes? If you cannot tell us, how soon will you know? David Willetts MP: I can report to the Committee that there is a Galileo budget of 7.9 billion for and there is an ITER budget of 6.6 billion up to Those are the figures currently set out by the Commission. There will, of course, be continuing negotiation of those within the MFF. We will be pressing for both of those figures to be reduced. We

6 6 think that there is a prospect of reducing the Galileo spend in particular. It is a fine judgment, of course, because you do not want to reduce it so low that it becomes incredible and then you get overspends again. You have to allow some scope for a contingency reserve. Therefore, we will be pressing for tight financial control. We have not made our internal assessments public I do not think that any member state has. We are now talking about a negotiation, but we will be going into the MFF negotiating very robustly on this and many other aspects of EU spending. Q15 Lord Walpole: My personal feeling about Galileo is: the Americans have done it; the Russians have done it; is it not time that we did it? I would have thought we would have done far better to have done it ourselves 40 years ago. We have 90% of what is needed to make it work. We do not have any particularly good rockets ourselves but we can always borrow them off the French as they have some quite good ones. I am not against Galileo as such, but I am absolutely horrified at where it has got to. Is there any point in throwing good money after bad? Should we continue to support it at all and, if so, why? David Willetts MP: I admire the spirit in which you ask that question as this week is the 50th anniversary of the launch of a British rocket with a British satellite on it. We were third in the space race behind only the USA and the then USSR. We are the only nation in the history of space to have had our own launch capacity and then to have renounced it. Indeed, the experts tell me there is quite a lot of British technology in Ariane. 4 Therefore, this is the right week for the Committee to pursue this matter. Despite all this incredibly unhappy history I understand the Committee s frustrations in that regard we believe that overall Galileo is a worthwhile project. It adds extra capability and enables people to locate themselves with extra precision. There comes a point when a diminishing margin of returns sets in I am a complete layman in this regard but the more satellites you have up there, the greater your chances of getting an accurate pinpointing of where you are. I am told that GPS on its own cannot do that for everyone, especially in cities and built-up areas with tall buildings where you need more satellites so that you have a greater chance of getting a direct line of sight to your satellite. Therefore, Galileo has made improvements to the service. British business has done very well in getting contracts for supplying satellites. Therefore, we still believe that overall Galileo is worth while a triumph of hope over experience. Q16 The Chairman: I have just asked our clerk to tell me exactly how much money we have spent on it and how much money this is all going to add up to. Although you say that it is worthwhile, do you think it represents value for money? David Willetts MP: It may have had its problems in the past but overall we still believe that the market opportunities and benefits to the British economy are considerable. I think it has been estimated to benefit the British economy by more than 1 billion a year. It was an understandable decision to add to the capability and not depend simply on GPS. It is very hard to make these calculations. However, America was restricting use of GPS until Galileo was announced, whereupon some of the terms on which you could access GPS improved. I believe in competition and it is good that there should not be a monopolist here, so there are arguments for it. The Chairman: But 16 billion is an awful lot of money to pay for a satellite situation to make sure that we know where we are. 4 The Ariane project is a family of European civilian rockets.

7 7 David Willetts MP: You say that it is about knowing where we are, but the system means that you will be able to land airplanes with great precision. A lot depends on the uncertainties of exactly how many new markets develop and how many new products emerge as a result of this enhanced capability for people in many more parts of the world to know exactly where they are. We will know that only in a decade s time. However, I remain an optimist. I think that there will be applications that nobody has yet thought of which will prove to be of value. The Chairman: Thank you for your optimism. Q17 Lord Brooke of Alverthorpe: I would like to follow through on this issue, which is going to be with us. What has happened has happened and we have to get on with it and make the best of it. We are looking at costing, as you described, but there is the other issue of the way in which the money is spent and who the beneficiaries are. You have just talked about the possibility of 1 billion coming the way of the UK. Is there any way in which we can assess how the money is disbursed after it has been doled out by the Commission? Who are the major beneficiaries? It is interesting that you cited Surrey Satellites 5 when you wrote to us on 14 March. I checked up on Surrey Satellite Technology Limited and discovered that it was first taken over by a Dutch company and has now ended up basically being owned by the French. It is interesting how the money goes round. I suppose one of the saving graces is that when the second body that is going to do the administration was moved it went to Prague rather than to the south of France, as was the case with ITER. Do you try to ensure as best you can, given the way in which tendering operates, that we maximise the opportunities for this country and that the money comes back to us, as that is certainly the line which some countries pursue very actively indeed? To my mind, that is equally as important as watching the budget. David Willetts MP: There are two main areas of economic benefits. The official estimate is of a potential benefit to the UK economy of 1.3 billion per annum for road, transport and location-based service industries to That was the figure of more than 1 billion that I was trying to remember earlier. That is an annual figure. As you rightly say, there is then the separate figure comprising the value of the contracts which have been won. So far we have won more than 550 million worth of contracts, which is 16% of the EU Galileo budget. That is rather higher than our pre-abatement financing cheque. Within the frameworks of the proprieties, I continue absolutely to make the case that we have an excellent space industry here in Britain. We have been very fortunate. We have done very well in the contracting rounds and I hope that we will continue to do so. I make that argument in Europe whenever there is a suitable opportunity. Q18 Lord Bradshaw: We are getting to the end now. ITER obviously differs from Galileo, in that it is a wider international project. We are concerned that the wider you make the project, the more difficult it is to control the expenditure. We seek your views on whether what has been done is legal. What response have you had from the other countries involved? I do not think that this matter concerns only the Commission. David Willetts MP: Where there is a shared feature with Galileo and ITER, we believe that it is wrong to have that outside the MFF. 6 We consistently oppose that. I wrote to the Commission, along with Ministers of other member states, back in November of last year 5 Surrey Satellite Technology Limited (SSTL) 6 Multi-Annual Financial Framework, the EU s programme (presently being negotiated) for spending between 2014 and 2020.

8 8 complaining that it was wrong that ITER and indeed GMES should be outside the MFF. Therefore, our view on that is clear. I apologise to the Committee that we have sent it mixed messages on the lawfulness of this issue. At one point there was a view that at least it was lawful. However, after further consideration and after taking a wider range of legal advice, the view was taken that it could well be unlawful for ITER to be financed in this way. That is another argument that we are deploying. The Chairman: That is ongoing? David Willetts MP: Yes, and all this is part of the wider budget negotiations that are under way. However, when participating in the budget negotiations, Ministers across the Government, but notably Treasury Ministers, who are in the lead, would argue that all this should be brought within the MFF. Q19 Lord Brooke of Alverthorpe: Are other states also unhappy about this being taken outside the MFF? David Willetts MP: Indeed, the letter of last November, to which I referred, was also signed by France, Italy, Spain and Germany. There are very strong feelings on that issue. Q20 Lord Bradshaw: Are countries outside Europe also involved in this matter? David Willetts MP: That is correct. The EU is five-elevenths of the ITER project. The issue is how that part of the budget is held. However, unlike with Galileo, there is the extra level of complication arising from the other six-elevenths. Q21 The Chairman: Are you going to continue to fight for this? David Willetts MP: The experiment with nuclear fusion is fundamentally worthwhile. We should not lose sight of the big picture. Both of these are worthwhile things; they are not fundamentally misconceived. I do not have the confidence to assess whether nuclear fusion will eventually be the world s energy source, but it could be. What we will be fighting for on ITER are, first, as I said, that the EU contribution should be properly accounted for within the MFF. Secondly, we had concerns about the management and cost control of the agency F4E that runs the EU part of ITER. I raised this with the Commission and others. I think there was a general acceptance that it had problems and there has been an attempt to strengthen the management of F4E as well. Those are the two main problems that we have tried to help tackle. The Chairman: We raised this issue when Galileo became a serious problem many months ago, but we were stonewalled and were told that it was perfectly all right. However, we felt that the management of the Galileo project had been so appalling that we did not want ITER to experience the same problems. I am still slightly concerned about that, but I do not know whether my fellow Committee Members feel the same way. Q22 The Chairman: Thank you very much. It has been a very good session for us. Finally, is there anything else that I should have asked you? You may have been hoping that I would not do so but it would be great if you could let us know about anything further. David Willetts MP: I think we have covered the main points. As I say, I think both projects are worthwhile, but both have unhappy histories and we are trying to work with fellow member states to get a grip on them.

9 The Chairman: Thank you very much and thank you also for your two letters; we will look at those. In the meantime, thank you very much for coming and giving up your time, as I know that it is an extremely busy time at your end of the corridor as well as here. 9