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European Standing Committee A Debates

Global Navigation Satellite System

European Standing Committee A

Thursday 2 December 2004

[Mr. Mike Hancock in the Chair]

Global Navigation Satellite System

[Relevant Document: Eighteenth Report from the Transport Committee, Session 2003-04, Galileo (HC1210).]

2 pm

The Chairman: I call the Minister to make his opening statement. I thank him on behalf of the Committee for the paper that he circulated to the Chairman of the Transport Committee, which I hope members of the Committee will find helpful. After the Minister's statement, we have approximately an hour for questions. I hope that hon. Members stick carefully to the rules that questions should be about what the Minister has had to say and that he will give fairly sharp answers so that we can move on as quickly as possible.

The Parliamentary Under-Secretary of State for Transport (Mr. David Jamieson): As always, it is a pleasure to sit in Committee under your careful eye, Mr. Hancock. I welcome the opportunity for further discussion on the Galileo programme. As I said when we debated the matter in June this year, the programme offers benefits for both Europe and the United Kingdom. I appreciated the opportunity of appearing before the Transport Committee and I have written to its Chairman, my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), to welcome its expeditious and helpful report, which will help to inform our discussions on 10 December at the Transport Council.

The Galileo programme is already good news for our industry, which has proved itself to be among the world leaders in such matters. It is also good news for the Government because of the opportunities that it could bring over the next 10 years to deliver some of our key transport priorities in new and cost-effective ways. It is a big project. It must be the biggest public-private partnership that has been conceived on a European scale. The programme has now reached an advanced stage in its development, with the first test satellites under construction and solid bids being evaluated for the public-private partnership operating concession.

I pay tribute to the many people in this country and throughout Europe who have been working hard to make Galileo a success. All the member states of the European Community, the European Space Agency and the other states that are co-operating with the project want it to succeed. Nevertheless, the Committee is right to highlight some areas of concern. I share many of them, but I believe that they can be
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resolved by negotiation and discussion. I understand the worries that have been expressed, however, because they are matters that we must continue to monitor and on which we must influence the programme before we make a final commitment, so that we achieve the best possible results and ensure the minimum of public expenditure.

I am convinced that Galileo has great potential for success. The timing needs to be firmed up and the costs and benefits need to be defined more robustly. The maximum public sector contribution within the PPP is now being defined. The negotiations on the PPP under the contract with the Galileo Supervisory Authority will provide us with the continuing opportunity to influence its final shape. Our focus over the coming months will be to work with our partners to get the details right.

The project is making good progress. There is sufficient momentum throughout Europe for it to be successful and to bring real benefits to the United Kingdom, especially if we can influence its development. In this country, we have more experience than most in achieving successful public-private partnerships to finance public projects. We need to be an active participant in the Galileo programme so that we can give our partners the benefit of that experience. We can shape the programme in a way that will strengthen it and ensure that there is an acceptable balance of risk sharing with the private sector, so that the PPP arrangements minimise the costs that will fall to the overall Community budget and the European Space Agency, and maximise the benefits to the United Kingdom.

I confirm that, in the Council's conclusions proposed for agreement at the Transport, Telecommunications and Energy Council next week, there will be a clear statement of the need for continuing member state oversight of the PPP concession process on the basis of an independent assessment. We intend to underline at the Council the importance that we place on the assessment of the costs and benefits.

We have also been in the lead in ensuring that Galileo remains a civil project. As a result, the Council will also agree conclusions that will provide a robust safeguard against military creep. Any challenge to the civil status of Galileo would fall under the terms of the EU treaty covering the common security and defence policy, where decision making is by unanimity. The United Kingdom will have a veto, which we are prepared to use in the appropriate circumstances.

I understand and share the Committee's concerns about the potential for increased public expenditure. That is why we and like-minded states have insisted that we cannot make any specific commitments before agreement on the Community-wide financial perspectives. It is inevitable that a programme such as Galileo, which requires large investment in infrastructure before it can start generating revenue, will need some public sector support in its initial stages.

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Some years ago, the cost-benefit study undertaken by PricewaterhouseCoopers suggested that the public sector contribution to the deployment and operation costs would be about 700 million, or £490 million. Following the further development of the project, the European Commission is planning to allow for up to 1 billion, or £700 million. That still represents good value for money. Allocation of that money cannot be confirmed before the final decision on budget ceilings in the next Community financial perspective.

We will be robust in insisting that the strategic decisions must precede the final commitment to the Galileo PPP. That has been our line throughout the discussions, we are supported by the majority of EU countries and the European Commission fully accepts that. It is also right that we give as clear a signal as possible to the prospective concessionnaire that its private sector investment will be supplemented by the public sector. We are talking about not an open-ended commitment, but the appropriate level of participation in what has always been accepted as a jointly funded project. In my opinion, we have reached an acceptable proposal for the Transport Council next week, a proposal allowing member states to consider the assessment of the project's costs and benefits later on.

We now have the challenge of working with the Galileo Joint Undertaking and the new Supervisory Authority to agree on a workable PPP, and to start the deployment phase in 2006. I believe that, with the commitment and dedication of all partners, that is achievable, and we will play our full part. That is the best way forward for Galileo and public expenditure in the long term, and we will be robust in pursuing our objectives.

Finally, I have placed great importance on keeping the Committee fully informed on progress in recent months. Apart from the continuing preparation of the Council conclusions, there has been little more to report since my letter of 16 November, but of course I am willing to answer questions, and look forward to doing so.

The Chairman: Thank you, Mr. McWilliam—I mean, Mr. Jamieson. [Interruption.] I was following your lead, Minister, in trying to find out who was chairing this meeting by looking at the papers. I thought that I would pay you back by getting your name wrong in the first instance.

We now move into question time. Members should ask single questions, so as to give the Minister a chance to answer. There will be plenty of opportunity for Members to ask several questions.

Mr. John McWilliam (Blaydon) (Lab): First, it is a delight to see that the Opposition spokesman is a member of the all-party group on space, which I have the honour to chair.

Is the Minister convinced that the financial agreement will finally be nailed down in the next economic cycle of the European Union?
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Mr. Jamieson: Much of the preparatory work has been done, but the Transport Council on 10 December will be critical. I hope that, by its meeting in spring, the Transport Council will have had sufficient work done to enable it to appoint one of the two bidders as concessionnaire. During that year, and until the end of 2005, we will enter into detailed negotiations with the concessionnaire to ensure that the bid is robust and stands our various financial tests. It is my hope and ambition—and, I think, the hope and ambition of all others involved in the discussions—that matters be pretty well concluded by this time next year.

Dr. Rudi Vis (Finchley and Golders Green) (Lab): It is an honour to serve under you, Mr. Hancock. I hope that there is no conflict of interest because, of course, the company that has most to do with the matter is Astrium, which operates in Portsmouth and Stevenage. I did not really feel like reading 273 pages, so I went to my hon. Friend the Member for Portsmouth, North (Syd Rapson), who knows an awful lot about the subject. He was happy that we have the Galileo project. The only question that he could not answer to my satisfaction related to Galileo being a civil programme under civil control—there is nothing wrong with that—but there is also political control, which may influence the profitability of the programme. How will that be sorted out?

Mr. Jamieson: The hon. Gentleman is right. The Council will appoint a Supervisory Authority, but ultimately the Council of Ministers will have responsibility. As I said to my hon. Friend the Member for Blaydon (Mr. McWilliam), we will want to strike a contract with the concessionnaire that will set out the responsibilities of both sides and the balance of risk for both the public and private sectors. Although we do not want to leave ourselves open in the public sector to extra unquantified expenditure, we do not want to fetter the private side. It is a matter of finding that balance during the discussions next year with the concessionnaire.

I assure my hon. Friend that Galileo will be under the political control of the 25 members, as it should be, with the involvement of some of the other non-European members, too. However, a Supervisory Authority and a board will consider more specific and technical matters, such as the operation of the public regulated service.

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Prepared 2 December 2004