All or nothing?
63. We have already discussed the possibility that
the project might be scrapped entirely but it might be that, even
if the project as a whole were not economically-viable, a smaller-scale
system could represent good value for money. Ms Duthie explained
that a smaller number of satellites, perhaps 12-16, could make
a significant impact and achieve some of the projected economic
benefits, particularly at consumer level.[100]
The Galileo-specific services such as the Public Regulated Service
(PRS), and the 'special use' services may well offer further additional
benefits, but it is not at all clear whether the additional investment
to provide them will provide good value for money, particularly
given a context of much greater market maturity and increased
competition in GNSS services by the time Galileo becomes operational
- at least five years down the line.
64. After the collapse of the PPP negotiations, the
Commission asked the European Parliament and Council to reaffirm
the strategic importance of Galileo. The Commission reminded Council
and Parliament that:
"Galileo has become a flagship project for
both its strategic value and its important contribution to the
Lisbon strategy, and incarnating the political, economic, and
technological dimensions of the European Union. This has been
emphasised on several occasions by the European Council […]"[101]
It further noted that Galileo was a pillar of "the
emerging European Space policy, and signifies Europe's ambitions
in space […]." Abandoning the project would increase
dependency on US, Russian and Chinese systems, and it would put
European industry at a disadvantage when it comes to reaping the
benefits from downstream applications.[102]
The subsequent document issued in September stated that failing
to proceed with Galileo as soon as possible would lead to "a
major loss of macro-economic opportunities for European manufacturing
and service companies."[103]
65. The 'middle option' of having a reduced system
instead of the full 30 satellite programme received short shrift
from the European Commission. It stated simply that further delay
and additional costs would result if the system had to be re-specified
and if development contracts had to be changed or re-tendered.
The Commission argued that:
"Such a scenario incites a combined effect of
a loss of the investment made so far in the project and a very
late entry-to-market of a system with degraded performances and
an undoubtedly low resistance in competition against new systems
like GPS-III. The forecast economic profitability of such a scenario
is very low."[104]
66. We have not so far seen hard evidence and analyses
of any rigour to support such conclusions. Indeed, the House of
Commons European Scrutiny Committee concluded that the documentation
produced by the European Commission as a basis for Council decision-making
in June constituted a "carefully constructed series of statements
which, albeit largely not properly substantiated, the Commission
wishes the Council to endorse so as to underpin an immediate decision
on its preferred option of public procurement of all 30 satellites."[105]
67. The Council of Transport Ministers re-affirmed
the value of Galileo as a key project of the European Union on
the basis of the Commission's paper.[106]
Neither the European Parliament nor the Council of Ministers has
pressed for a comprehensive re-assessment of the full range of
options and their costs or benefits. The Transport Council did
press for a cost-benefit analysis, but did not request that it
include the 'zero-option as well as the option of reducing the
scope of Galileo programme. In reflection of a strong Dutch and
UK preference for renewed efforts to establish a PPP, the UK and
the Netherlands put down a Minute Statement at the June Transport
Council, urging that cost-benefit comparisons of PPP, public procurement
and operating concession solutions should be undertaken, and that
they should be based on truly comparable data.
68. There is an alarming absence of rigorous and
unprejudiced appraisal of the costs and benefits of different
options for Galileo. Cost-benefit analyses undertaken years ago,
based on assumptions which no longer hold true, cannot be relied
upon to justify or rule out any particular course of action in
2007 or 2008. It is entirely conceivable that the best cost-benefit
solution at this stage might be to scrap the programme entirely,
and the Government should not resile from that conclusion, if
it is where the evidence leads. It might be, however, that a smaller-scale
project of some kind, such as one with fewer satellites, offers
the best way forward. We recommend that the UK Government press
for the necessary work to provide the information needed to make
sound judgements now to be undertaken urgently. In any case, neither
the project as originally conceived, nor any smaller-scale variants
should be proceeded with in the absence of a compelling cost-benefit
case.
69. We fear that Galileo's status as a flagship
grand projet is clouding the judgement of some in relation
to its true, realistic and proven merits. An atmosphere that does
not allow the continued rationale for the full Galileo programme
to be questioned appears to have enveloped Brussels. But no amount
of perceived prestige and status derived from competing in a civilian
space race and no amount of vague but euphoric anticipation of
enormous economic and employment benefits can make up for rigorous
and balanced analysis of costs and benefit. None of the three
key EU institutions has seen fit to cool the overheated atmosphere
by ensuring that proper comprehensive analyses and cost-benefit
evaluations are undertaken before any further decisions are made.
We recommend that the UK Government do all it can to ensure that
the decision is approached in a dispassionate and unprejudiced
way.
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