Examination of Witnesses (Questions 60-79)
DEPARTMENT OF
TRADE AND
INDUSTRY, BRITISH
NATIONAL SPACE
CENTRE, THE
PARTICLE PHYSICS
AND ASTRONOMY
RESEARCH COUNCIL
AND THE
OPEN UNIVERSITY
24 NOVEMBER 2004
Q60 Mr Curry: I can see we have got it,
but it is a pretty dodgy concept for running a joint venture,
is it not? Is not every single joint venture, whether it is building
war ships or aircraft, plagued by this concept of a "juste
retour" where everybody has to get their bit of the action?
Does everything not end up costing a great deal more than it might
do if it is all being run on sensible commercial lines?
Sir Robin Young: Colin Hicks will
fill me in on this, but, to agree with the underlying thinking
behind your question, our part we play in ESA is to ensure that
does not happen, so when you look at what we do in the non-mandatory
schemes which are somewhere in this Report, page 10, the optional
schemes, you will see how careful we are to participate in only
those schemes where we think there is real value and when the
UK commercial sector benefits. We certainly try and make sure
that is the best possible—
Q61 Mr Curry: I can quite see that but
the point I am making is this. I have read the Report as well.
The juste retour was instituted so that small countries
might make sure they get something back out of the kitty. My observation
is simply that this might be necessary politically but if you
are running a business programme, it is not the best way to run
a business programme, is it, because you might well end up paying
more than you need to because you have a multiplicity of sub-contractors
where you might get by with fewer?
Sir Robin Young: In principle,
I agree with what you are saying. Dr Hicks is on the board of
this thing. Do you want to say how we avoid falling into that
trap?
Dr Hicks: Mr Curry, I share your
analysis. This is a risk. It is a risk of which we are very well
aware. The concept within ESA is that many countries subscribe
because they believe they are going to get money back. We subscribe
because we believe in the value of a project. The rules are agreed
on the basis of a juste retour. There is a margin for any
particular activity within which the juste retour is expected
to lie, that is, between 0.9 and 1.1. Every effort, with pressure
from us through what is called the Industrial Policy Committee,
is there to make sure that everything is done as far as possible
within the constraints applied by juste retour to get competition
and value for money.
Q62 Mr Curry: But the two might not necessarily
be synonymous in these circumstances.
Dr Hicks: There are very rare
examples . . .
Professor Halliday: Can I just
interject. In my patch, so to speak, we have the European Space
Agency, which has juste retour, and there is a certain
style interacting with industry. We also have CERN, which does
not have juste retour, and the UK high-tech industry does
not do wonderfully well in the competitive environment, so one
has to be slightly careful.
Q63 Mr Curry: That is a very interesting
remark. So in a competitive environment, we are not up to scratch?
Professor Halliday: I am just
saying in the CERN we are not getting juste retour.
Q64 Mr Curry: Having been seduced by
all the Chancellor's arguments about how wonderfully competitive
Britain is and how much better we are than anybody else, I naturally
assumed that in a competitive world we get a lot more than our
share, but you are saying the juste retour might actually
bail us out from getting less, as I understand it.
Professor Halliday: That is a
possible scenario.
Q65 Mr Curry: Thank you very much for
that. Could I move on. I am not going to continue Mr Bacon's anthropomorphic
investigation of Beagle. I am interested in the DTI's national
programme, which has come down to £8.4 million. There are
areas of London where you cannot buy a house for £8.4 million,
are there not? Sir Robin, you may own a house which is worth 25%
of the entire national space programme, for all I know. Having
been in government and knowing that you have gone through some
fairly grizzly public expenditure rounds, and knowing that it
is quite difficult nowadays to find anybody who actually thinks
the DTI should exist—I may be one of the few, for all I
know, but I am old-fashioned in all sorts of respects—would
I be right in thinking that when you get to a nasty public expenditure
round, the advice comes up to you that "This looks pretty
vulnerable, Sir Robin. We could knock this one on the head, the
national space programme."
Sir Robin Young: That is not the
discussion we have had.
Q66 Mr Curry: It could be though. If
you get down to £8.4 million, the temptation is to say "What
on earth are we buying for £8.4 million? What is the point
of carrying on?"
Sir Robin Young: Let me refer
you to page 30, which breaks down the national programmes of BNSC
as between DTI and the two research councils, and obviously we
have one research council here. The table 19 at the top left on
page 30 adds up to about 36, and the DTI programmes come to 7,
which is about a fifth.
Q67 Mr Curry: That is in the text. I
do not dispute that. But the fact is that once our contribution
to the European space programme went up, for a number of reasons,
of which currency factors was one, the Treasury's response was
actually to take it out of the domestic programme, was it not?
Sir Robin Young: Actually, it
was the DTI and Treasury response. To talk you through the cuts,
you are right. Paragraph 3.13 has it right. We had £2.5 million
cut per year as a result of spending round 2002, or whichever
spending round it was, which adds up to £7.5 million, that
is in paragraph 3.13, to which you add this other figure of £5.8
million, which was the increased subscription to ESA and, as you
say, currency fluctuation. That was the reason. We then had a
choice of as it were making up that, and we could not, because
of overall spending cuts. But I must make the point that BNSC
spend as a whole, as per table 19, is going up and will continue
to go up as the massive increase in the science budget comes through
to research councils. I remind you, the science budget has been
doubled in real terms, that is, between 1997 and 2007. It would
be amazing if the two research councils concerned did not get
some of that. So overall the BNSC budget will go up.
Q68 Mr Curry: So you are confident that
this 8.4 is a bottoming out?
Sir Robin Young: I am talking
about the overall BNSC, DTI . . .
Q69 Mr Curry: I am talking about the
8.4. Something called the DTI programme is crystallised out at
£8.4 million. So you think that is not vulnerable; you have
hit the bottom and you are on your way up again?
Sir Robin Young: It will depend
on the technology strategy and how much space comes out of the
technology strategy, but we are proud of the fact that we do not
have a separate space line. We say that business sponsorship should
be competitive.
Q70 Mr Curry: I shall refrain from exploiting
the verbal possibilities of a space line.
Sir Robin Young: I see what you
mean. I beg your pardon. I hope you will refrain from that. We
are proud of the fact that if you are looking, for example, at
help for the communication sector, you have to compare investment—
Q71 Mr Curry: You are confident then
that £8.4 million delivers a multiplier effect which makes
it pretty well fireproof against demand for cuts.
Sir Robin Young: We now have a
technology budget into which space firms have to compete with
other firms, so we are backing business and we are business-led.
So if, say, the communications sector puts in investment in broadband
ahead of investment in space, broadband might win. So we are user-led.
That is the point. That is the point of the partnership arrangement.
We are user-led. We do not have something called "space".
Q72 Mr Curry: I thought dear old BT was
doing all the investment in broadband and that sort of thing.
Sir Robin Young: BT is certainly
a key partner. I used broadband as an example. If a sector said
that it wanted to use space for a technological advance, that
is a powerful bid. If the same sector said it wanted to use some
other technology, nanotechnology for example, that would compete,
in my view rightly.
Q73 Mr Curry: Again, looking at value
for money, what is the value of the contracts won by British companies
which relate to the American space programme?
Sir Robin Young: I do not know
the answer to that question.
Dr Hicks: I am sorry. I do not
have that figure in my head.
Q74 Mr Curry: Would "substantial"
be a correct description of it?
Dr Hicks: I would say no, not
substantial.
Q75 Mr Curry: Take our contribution to
the European Space Agency. What would you think: would you say
the value of what we put into the American programme is comparable,
more, less?
Dr Hicks: If we are talking about
projects that are won from the European Space Agency, Surrey Satellites
has won some contracts from the American government for the development
of small demonstrator satellites. They have been very successful.
Q76 Mr Curry: Small satellites is one
of our strengths.
Dr Hicks: Small satellites is
one of our strengths. The majority of NASA funding though is going
to be reserved for American companies. They will only go abroad
for technology where it really is unobtainable there. There are
occasional contracts won by UK academics for participation, with
funding from the US, and quite often PPARC and NERC will be funding
UK academics to participate and get value out of American space
programmes. We can try to get you a figure, if you wish.
Q77 Mr Curry: What I am trying to do
is get an idea of where the real value for money lies in the investment.
We all assume that the Government promotes science in order to
that it may lead to British firms increasing their capability
of winning contracts and therefore providing jobs and providing
spin-offs to other sectors of the economy. I am just trying to
evaluate what we buy from ESA compared with what the marketplace
might buy from the Americans.
Dr Hicks: I can help on that broader
question because it is in the NAO Report on page 13, where we
have a graph which shows that for the upstream, the UK national
investment is multiplied up by contracts which are won by the
UK upstream industry to a factor of 1.5. If you include downstream,
there is a very much larger factor.[2]
Q78 Mr Curry: How much of the research
which is carried on under the auspices of ESA would then be relevant
to our ability to win contracts in other programmes like the American
programme or, for that matter, Boeing, the new Boeing airliner
or for that matter the Airbus?
Dr Hicks: It may not be from the
American programme as such, but winning contracts for communication
satellites which are being put on the open competitive market.
In the NAO Report at the back there are a number of examples of
how Astrium, using funding which came through the ARTES programme,
has succeeded in winning contracts, contracts for example of Inmarsat,
contracts for other communications satellites, and indeed, the
Skynet 5 contracts, which were won in competition by Paradigm
against American consortia. So there is a lot of evidence that
UK companies are able to win when things are on the open market.
Probably the difference—and the reason I was hesitating
was the nature of your question, which referred to the American
space programme—is that "the American space programme"
for the most part is not on the open market. We are very successful
in winning when it is on the open market, when it is companies
who are doing international procurement, but we do not usually
find NASA for example, one of the large programmes, looking out.
But the American Air Force, looking for innovative technologies,
is prepared to go anywhere in the world, and Surrey Satellites
has been successful in that arena.
Q79 Mr Curry: You are part of the management
of the European Space Agency programme.
Dr Hicks: I am the UK delegate
to the council. I would not say management.
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