To be published as HC 25 3-i i i

House of COMMONS








Evidence heard in Public Questions 117 - 187



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Oral Evidence

Taken before the Science and Technology Committee

on Wednesday 10 July 2013

Members present:

Andrew Miller (Chair)

Jim Dowd

Stephen Metcalfe

Stephen Mosley

Pamela Nash

Sarah Newton

David Tredinnick

Roger Williams


Examination of Witnesses

Witnesses: David Parker, Chief Executive, UK Space Agency, Catherine Mealing-Jones, Director Growth, Applications & EU Programmes, UK Space Agency, and Rob Douglas, Chair, UK Space Agency Steering Board, gave evidence.

Q117Chair: Can I welcome you to this hearing? This is the last morning of evidence in this inquiry. We are particularly grateful to you for coming this morning. It would be helpful if you could start by introducing yourselves.

David Parker: My name is David Parker, and I am chief executive of the UK Space Agency. My background is about 25 years in research in the space sector, working in industry and also the public sector.

Catherine Mealing-Jones: My name is Catherine Mealing-Jones. I am a director at the UK Space Agency responsible for growth, applications and EU programmes. I am on loan to the agency from the Home Office.

Rob Douglas: My name is Rob Douglas. I am a non-executive chairman of the steering board of the UK Space Agency.

Q118Chair: First, can I ask you your views about the agency’s main achievements since it was established, and what you see as the main challenges over, say, the next five years?

David Parker: Just to recall how the agency was created, it has been in existence for only a couple of years. It came out of the 2010 space innovation and growth strategy, which set out a number of proposals in order to develop the UK space sector. The agency was created to do three things: bring coherence and leadership to space activities in the UK from the government side; promote growth and opportunities in the sector itself to stimulate its development; and, because of the excitement of space, to use space as a tool to inspire and excite people. Therefore, we have been advancing in the past few years in all of those areas. We are delivering policy advice to Ministers, delivering programmes and also undertaking regulatory responsibilities. To take an example on the policy side, last year, the key thing was the issuing of the UK civil space strategy, which set out the long-term vision for the space sector, and a major piece of work to develop and prepare for the European Space Agency ministerial that happened last year.

On the programme side, there are a couple of examples. We have undertaken the national space technology programme, a new programme to stimulate commercial technologies for space. On the scientific side, we delivered the first instrument for NASA’s James Webb space telescope, the largest mission NASA has ever undertaken, and a lot of regulatory work as well.

Looking forward, what are we doing? It is about taking the policy and strategy thinking and turning it into delivery, taking forward the goals to expand the space sector and, hopefully, get to a much bigger sector in a few years’ time, so it is delivering tangible benefits for science, economic growth and the citizen.

Rob Douglas: One of the challenges over the next five years is to develop our leadership capability of the sector, given that the economic growth and the results we are looking for are going to be delivered largely from the private sector. Our role is to nudge, cajole, influence and do a bit of pump-priming, and developing that skill, which we have worked on in the last two years, will be a key part of it.

Q119Chair: Do you see your responsibility as helping to develop those skills in, say, the SME sector as well?

David Parker: Yes, certainly. The SME sector is particularly significant. We will probably talk about the upstream and downstream in the space sector in minutes to come. Manufacturing is mainly about large companies but also equipment manufacturers. A lot of the downstream growth is likely to come from SMEs who are going to take space data and start to use it, so some of our programmes are aimed at SMEs and some of the activities of the European Space Agency are reserved for SMEs, so they are an important part of the story.

Q120Chair: How do you think we should look at value for money when one considers the funds allocated through the national space technology programme? What metrics ought we to be looking at to determine whether you are spending public money wisely?

David Parker: The national space technology programme was another of the recommendations of the space IGS. It recognised that, in order both to stimulate commercial activities in space and prepare effectively for ESA programmes, there was a need for pump-priming on the UK side. For the first phase of the NSTP, we secured £10 million of new funding. We have already achieved some metrics out of that. The £10 million has become a programme of about £27 million of activity because of matching with industry money and working with other government organisations: research councils, the Technology Strategy Board and the Defence Science and Technology Laboratory. One metric is the size of the programme that has been created. Another is the potential benefits that will come out of the technology developed. It is not a monolithic programme; there are different scales of activity, but there is a flagship programme devoted to the next generation of telecommunication satellites. That was designed to prepare industry for participating in the European part of that programme, so £2 million there is going to turn into sales of telecommunication satellites in a few years’ time of maybe £500 million a year, so potentially there are quite large multiplier effects. We are going to do some review work on the first phase of the NSTP to see how effective it was before we go on to the next phases.

Q121Chair: When is that work going to be completed?

David Parker: The plan is to do it this financial year, so at present we are writing the terms of reference for that.

Q122Roger Williams: We have heard about some of the things that the UK Space Agency is doing. It is nevertheless small compared with other European countries, particularly Germany, Italy and France. What do you think we miss out on by not having a more substantial financial contribution to the UK Space Agency?

David Parker: I am not sure that we are missing out a great deal. If you look at the activities in space that we are doing, it is now pretty broad ranging. The national space technology programme has grown significantly in the past few years. NSTP is one element which did not exist before, so it is completely new. We have also been able to invest in the NovaSAR programme, which is a new type of satellite for the export market, so it is growing quickly. The national programme has grown. We have made substantial investments in the European Space Agency programme. We are now a growing and much more prominent player in ESA as a result of decisions at the ministerial meeting last year. The Government have been making investments in things like the catapult centre at Harwell. That money may not be coming through the UK Space Agency, but it is nevertheless fresh investment. It is pretty joined up at the national level.

The one area where maybe we could do more is the international stage, working in bilateral relationships with space agencies across the world. We have a couple of ongoing programmes with NASA and the Japanese space agency. There is perhaps more we could do there, but, even where we do not have financial investments, we can do an awful lot. Take the example of signing MOUs with countries like Kazakhstan. We signed an MOU in March and a UK company secured a contract with that country last week, so we can do a lot at the agency-to-agency level.

Q123Roger Williams: You have covered the ground, but it has been suggested to us that we do not have so much ability to enter into bilateral arrangements because of lack of funds. You have pointed out the clever way in which you do that, but could it not be done more easily and directly if more funds were available?

David Parker: You can always do more with more money but, even with the resources we have had, we have been able to identify a couple of opportunities to work with NASA. We have funded two new projects in the past year. There is a very exciting mission to measure seismic activity on Mars. We are working with NASA on that. There is another space weather mission. We are funding a couple of universities to provide instruments for a mission called Sunjammer. We have to be very smart with the resources we have and develop international relationships.

Q124Roger Williams: Could the agency do more to engage with EU stakeholders? Is the agency a recognised major player in Brussels?

David Parker: We do a lot of work with European Union programmes. We are doing three things, basically, with the EU. We are negotiating hard on behalf of the UK when the socalled regulations or legal basis of EU space programmes are being put together. We are often pushing for transparency, and on the security agenda. We are supporting industry and going for the commercial opportunities that come out of it. If you look at the numbers, UK industry has done pretty well out of the Galileo programme. Every single navigation payload under the EU Galileo programme was built in the UK. The third thing is to prepare for the use of all of this EU-funded space infrastructure back in the UK. There are some national investments, of which catapult is a part. There are investments in preparing to use some of the PRS signal from Galileo nationally. I am going to Brussels. We have eyes and ears over there with permanent representation in the Commission by way of UKREP, and lots of informal meetings and discussions go on. There are literally dozens of trips to Brussels every year made by my team and myself. I think we are pretty engaged with the Commission.

Catherine Mealing-Jones: They recognise that, in order to make their programmes successful, they have to hit users in Europe and beyond, and they look to us for a lead in that. They have seen what we are doing at Harwell with the establishment of the facilities there. They partnered with us back in December of last year with the first European space solutions conference, which was about exploiting European programmes. The UK was able for the first time to get a European conference focused on real user communities, rather than a more traditional style of conference where they talk just about progress with satellite building, and so on. This was a breakthrough and a model that they then have taken forward. We are seen as leaders in that sort of thing. They look to us for programme management expertise, our focus on value for money in programmes and so on. We do punch above our weight in European programmes generally.

Q125Stephen Metcalfe: The UK space sector has set the objective of capturing 10% of the global space market by 2020. That is worth about £40 billion, as opposed to £10 billion in 2010-11. That is quite an ambitious target. Are we on track to deliver on that target?

David Parker: I think the answer is: so far, so good. The trends are positive. As hinted at earlier, this is very much a partnership between the public and private sectors. Most of that turnover is not going to be public sector funds going through the system; it is about commercial activity. The innovation and growth strategy was a starting point in setting out a whole set of recommendations about actions where industry felt, if government did this, it would be able to deliver. If you look back at those actions, the vast majority have now been implemented on the government side. Therefore, in the partnership view, it is turning to industry delivery. We need industry to step up in engagement in export opportunities. Some are really good at that, but we need more of them to do that.

Most of the growth is going to come in the downstream sector. The manufacturing of satellites will certainly grow, but the big growth has got to come from the use of space data in everyday life. It is happening now. The Met Office say that already 70% of the accuracy of weather forecasts comes from satellite data. That is a public service. Therefore, it is satellite information going into weather forecasts, but weather forecast data are used by, for example, supermarkets to determine their stock. If it is a sunny day, you eat ice cream; you don’t want ice cream when it is raining. That can help the economy and increase supermarkets’ profits, for example, but there are many new applications of space data that have not even been thought of today that will become possible, and that is the particular emphasis on the UK strategy to invest in things like the catapult at Harwell, to focus on that downstream sector. That partnership has to go forward and start to deliver in the future.

Rob Douglas: This takes us back to your comment about SMEs and their role in this. While we have a number of big players who will drive a lot of that growth and engagement with the SME community, it is important that those local enterprise partnerships that have space activities in their area, of which there about 11, bring those out and we try to promote, steer and help those LEPs develop their strategies around space. We had one meeting, about a year ago, with the LEPs which had a space interest. Trying to maintain that momentum is important.

David Parker: One of the other elements at Harwell is the business incubator, which is a joint activity between STFC and the European Space Agency. It has already created a couple of dozen businesses: micro-businesses at the moment, but hopefully they will grow in the future. That is a great model and it works, but if we are to create the number of businesses we want, we need perhaps to think about space business incubators spread around the country in Northern Ireland, Scotland, Wales, Cornwall, or wherever, linked back to Harwell to use the facilities and know-how created there, but we want the businesses all round the country.

Q126Stephen Metcalfe: You said industry needed to step up, which makes it sound as if perhaps it is not quite doing that at the moment. The other thing that came out of what you said was that the majority will come from downstream and it will be use of the data. How do you make it known to potential businesses that that data is available? It may not be the traditional industries that can find a use for this. I think you are saying that people outside the space industry might think, "I know what I can do with that data; I can do this or that application," and they would then come into the space sector. How do you make it known to the wider business community that these data are available and they can use them?

David Parker: You are absolutely right, because the worst thing is to go in and say, "We are a space company and we are going to help solve your problem." It is going into those communities and reaching out, getting into the environment where the energy industry, maritime sector, fisheries, agriculture, or wherever, meet and engaging with them through that route. That is very much what the International Space Innovation Centre, which has become the catapult, is setting out to do. The agency does not have the resources to do that itself as far as the broader economy is concerned.

Where we are particularly trying to do that is by way of government within government. If you think about the use of space data in government-the smarter government growth path that we have in our strategy-we are working on something called the national space applications programme to reach out across government sideways and engage in conversation with users. We already work with Defra because they are the policy lead in the use of GMES Copernicus data. They are already driving the requirements and thinking about how to use Copernicus. We have invested in satellites for broadband internet from space, so the availability of satellite broadband is there today as a result of investment on the agency side. We have got to work with all the right groups and other Departments to ensure that is understood and that the opportunity to use satellite broadband is taken up, because it is there now.

Q127Chair: You talked about Departments in your response. Does that apply equally to the whole spectrum of research councils?

David Parker: We already have a very close relationship with research councils. I come from a research council background: the STFC. We have colleagues who were formerly with NERC as well. With the research councils, we have a formalised relationship, so-called service level agreements in some cases for the delivery of activities, and also MOUs to work together. As to STFC and NERC, we see the heads of the research councils regularly and work very closely with them. It works. For decision making on scientific programmes, we have a so-called dual-key mechanism whereby, if we are thinking about investing in a satellite, or science instrument, we seek advice from the research councils as to whether it is a scientific priority before going ahead. We don’t want to get into a situation where we have invested in an instrument that is not a scientific priority.

Rob Douglas: Catherine mentioned the EU solutions conference. That was a very good example of new people involving space data being there. There was a fascinating session about the insurance sector. One particular insurance company and broker was really using this. Several other insurance companies who were there said they did not realise that. You are getting the involvement of new sectors and then it goes by word of mouth. There is always somebody who leads it, and then it spreads.

Catherine Mealing-Jones: There is the satellite applications catapult, but because it is part of a network of catapults you have a ready access point to people trying to do similar things in different sectors, whether it is advanced manufacturing, offshore renewable energy and so on, all of which have satellite applications. They can help put those links together.

The other big piece of work going on is a series of consultations over the summer. We call it, for shorthand, a restack of the innovation and growth strategy. That is part of industry stepping up. It is a recognition that, if phase one was about putting the fundamental infrastructure in place-the foundation of the agency and the other recommendations-this is much more about getting to grips in a quite forensic way with what the markets are, what the ecosystems that support those markets are, what the supply chains are, how we can bring supply chains into the UK, and fundamentally how we start to talk to these sectors, which we don’t talk to at the moment. We all recognise, and industry recognises, that we cannot stay in the community we are in; we have to reach out to the broader marketplace. There is almost a paradigm shift taking place at the moment.

Q128Stephen Metcalfe: That is quite important, because we have no idea where the next big thing could come from. It could be being developed right now in a bedroom across town, and suddenly it is another Facebook but using space data. Obviously, we have to keep an eye on that. How would you measure progress in getting this message out and getting towards the £40 billion figure? What metrics do you look at?

David Parker: The ultimate metrics are the turnover numbers, so we do a so-called size and health survey every couple of years on the space sector. That has revealed a gentle growth in the manufacturing sector and a strong growth in the downstream sector. Then it will be the number of new businesses coming out of the incubators, and the impact when you talk to the maritime and energy sectors and see them using the space data. When missions, particularly those like the Copernicus programme, come on stream, there will be huge amounts of new data available for use. I can give you a metric already. One of the investments the agency has made already at Harwell is in a cloud computing facility called CEMS. It does not matter what it stands for, but from a standing start its capacity has already been fully used by users of the data that have been made available. We are now having to think about how we invest further to expand capacity. That is a kind of marker that tells you something is happening.

Q129Stephen Metcalfe: How dependent is all of this on continuing and future government support beyond the usual four to five-year window?

David Parker: Space is long term, and there is no question but that one has to be in this game for a long period. You can do short-term investments and see short-term returns, but some of the real growth is going to come, for example, from translating fundamental science, let’s say climate science or understanding the sun, into a climate or space weather service. Yes, you have to be in it for the long term. You see returns coming from scientific activities undertaken many years ago in commercial value now. People have forgotten how that technology was created. Consistency of support for fundamental science is absolutely valuable, but the message that has been transmitted is that the UK has a long-term vision. We have heard from the managing director of a company abroad looking to set up in the UK who said, "Look, the UK has set out this long-term vision. We haven’t heard this anywhere else in Europe." I think that is an excellent message.

Rob Douglas: It did benefit the space agency and the sector hugely that there was continuity of policy at the change of administration. That gave the sort of message David is describing. As a non-executive chairman, I would say that having that continuity going forward will be very important because it is such a long-term game.

Q130Pamela Nash: Catherine, you mentioned working with the catapult and other catapults. Is there a formal structure there? Have you seen evidence yet of the catapults working together? We have a UK space conference in Glasgow next week, which is fantastic. Is there a relationship with the other Assemblies and Governments within the UK? Is that a good relationship, and are they supportive of the space agency?

Catherine Mealing-Jones: The catapults were formally launched in April of this year, so they are quite new. It is a very exciting process. The agency was closely involved in the setting up of the catapults in shadow form the year before. There is evidence of them working together. The catapults view themselves very much in a collegiate structure. The chair people are very close; they have regular get-togethers and so on. Although these catapults are independent, the TSB fosters close working relationships. At the moment, they are working on what their success metrics are going to be, and almost certainly they will build something in which is about a success metric being operating with other catapults to come up with solutions.

All the catapults have an advisory group structure beneath the main board. We have a representative on that advisory group. Based on the priorities in the catapults-security, transport, an internet of things and energy and climate change-they are actively looking to get somebody who is a representative of the catapult with the closest link to that. I think they are looking at offshore renewable energy as the main link. I am confident that they will make those links and will thrive as a network of centres.

Rob Douglas: A concrete example of the initiatives is the future cities catapult. By the very nature of what future cities may need to draw on, that will bring in the satellite applications and also the digital information catapult. They are almost bound to work together because they are so interwoven in the disciplines and skills that they have.

Catherine Mealing-Jones: The chair of the connected digital economy catapult is Andy Green, president of UK Space, so there is healthy collaboration going on there.

David Parker: To take the point about the different parts of the UK, we already have a good relationship with Scotland. I take the example of the UKube satellite, which went through its first flight acceptance review a couple of weeks ago. That is the first spacecraft built in Scotland. That has been partially funded by the UK Space Agency, yes, but also by Scottish Enterprise folks. as a joint effort. We are talking to Invest Northern Ireland about some opportunities there. There are exciting possibilities of specific developments around the propulsion part of the space sector in Northern Ireland. We have been talking to them about that, and so on.

Q131Stephen Mosley: I would like to talk about the European Commission’s paper COM(2012)671 which suggests bringing the ESA essentially under the wing of the EU. Do you think that is a good idea?

David Parker: The Commission communication on the subject was a very interesting document and put forward a number of arguments for why this was necessary. How do I view this? From a philosophical point of view, ESA works with a number of different communities, basically three. It is to some extent a science-driven organisation, so it works with the science community to deliver, and that is all about peer-reviewed excellence. It is just like CERN, the European Southern Observatory or any of these other organisations, and that relationship between the science community and ESA is well understood and works well, so I don’t think there is anything that fundamentally needs addressing there. ESA has a relationship with the industrial community, so it is co-funding on commercial technologies and activities with the commercial sector. Is there anything fundamental that needs addressing there? I don’t see it.

You then address the third community, which is ESA as an agent delivering space technology for operational users, for example in the area of weather forecasting. EUMETSAT, the European met satellite organisation, is a customer of ESA’s ability to develop spacecraft.

What does the European Union do in space? It now has competence in space policy, but that is alongside national governments. National governments choose to pool that through the European Space Agency. The European Commission has decided that it has a need for space infrastructure in the case of GMES delivering long-term earth observation data. In that case, it needs to set the requirements. Why and what are the requirements of that system? It then needs to hand those to an R and D organisation that is able to develop space hardware, which is ESA.

Does all of that add up to transferring ESA into the European Union? Our judgment from the UK side is no, because the issues that need to be addressed about the relationship between ESA and the EU are more at the bureaucratic level and whose rules you are using. Are you using the juste retour rules of ESA? Are you using straightforward open competition rules in the EU? Those can be sorted, but that does not lead to transferring ESA under the EU. The European Space Agency was set up and managed by Ministers through the Council of Ministers of ESA, which meets every few years and only Ministers can eventually decide the future fate of ESA.

Q132Stephen Mosley: At one point you said, "Does this add up to transferring it to the EU?" By that do you mean what has been proposed is actually transferring it to the EU, or that it shows a need for it?

David Parker: I am saying that the Commission put forward a number of options, some of which are changes in the relationship between ESA and the EU, but one of the options is to absorb ESA as an agency of the European Union. That is one of the suggestions they have made, and in the view of the UK that is not justified.

Q133Stephen Mosley: In terms of the UK, how would it affect our interests in space if they went ahead with this?

David Parker: The point I am making is that, because the European Space Agency is an intergovernmental organisation and belongs to member states, it is not in the power of the European Union simply to acquire it. Unless member states choose to do this, the issue does not arise.

Q134Stephen Mosley: I can see that, but we have a choice. The Commission has put forward proposals. Do we as a nation state go along with them? A choice has to be made there. What choice should we make?

David Parker: Exactly. I am saying that we have not seen the rationale for why there would be any benefits in transferring the European Space Agency lock, stock and barrel to the European Union. ESA has a very effective relationship with the science community; it works, so there is nothing particularly to be improved there. It has an effective working relationship with industry in developing commercial technology, so we don’t see there is anything to be gained. Where the European Union can really make a contribution is at the high political and policy level of supporting relationships in space activities between Europe and, for example, free trade discussions, perhaps with the United States, and also investing in space infrastructure where they support European Union policies. Those are the directions in which we would like to see the European Union’s involvement in space head off.

Q135Chair: There could be some confusion. Essentially, are you saying you see the EU as having competence in things like telecom regulations, and you would like some harmonisation around that, but when it comes to the science, you and the science community are better placed to do that than the machine in Brussels?

David Parker: I am saying that there are high-level political, policy and regulatory issues where doing things at the European Union level can be tremendously helpful, but the level of the interaction between ESA and the science community works very effectively. The science community understands how to work with ESA. Demonstrably, world-class science is delivered through the European Space Agency.

Q136Chair: One point you did not raise is that ESA has members and associate members who are not members of the EU.

David Parker: One of the issues raised by the Commission is the asymmetry of membership. Norway and Switzerland are members of the European Space Agency. If you look at Norway, for EU space programmes like Galileo and Copernicus, it put in additional money to contribute to those programmes, alongside EU member states.

Q137David Tredinnick: What is your vision for Harwell over the next 10 years? Where is it going, and what is that going to do for the UK space industry?

David Parker: Harwell is one of the new weapons in our armoury to try to develop the UK space sector. It is not the only one, but it is an exciting new one that has attracted attention across Europe. It is about creating a visible internationally competitive and relevant hub of space activity by combining existing capability, particularly the Rutherford Appleton Laboratory space science group: RAL Space. They have been involved in hundreds of missions over 50 years and have fantastic ability in science and technology in space. I mentioned earlier the business incubator, which is trying to suck out know-how from the space sector and turn it into new businesses.

The third element has been the catapult, which has focused on the downstream sector, and finally something in which I have been involved for five years: the involvement of the European Space Agency at Harwell. Having the European Space Agency on UK soil for the first time anchors the UK in ESA and ESA in the UK. It gives access to the know-how and capability of ESA, and ESA is able to take advantage of everything that is already happening in the campus at Harwell.

What is the vision? The vision is for this capability to grow. Maybe there will be 500 people in a few years’ time and 1,000 by the end of the decade, but the number of people at Harwell is not really the point; it is what Harwell can do for the rest of the space sector by being a centre of know-how and capability, skills and facilities that everyone else can use. If you are an SME, where do you get cloud computing facilities? You cannot afford it yourself, but it is there. Where do you find somebody who knows how to use data from Galileo? You don’t know, but there are people there, so it is creating that hub of capability.

Q138David Tredinnick: That is how it would work with SMEs. What about the EU space programme? How do you see that interface? You talked a bit about it earlier. As we move forward, what mechanisms have you got in place to make sure the innovation from Harwell reaches the European Union space programme?

David Parker: Quite directly. One of the investments we have made is a terminal sitting on the roundabout at Harwell which will directly receive data from the Copernicus satellites via the new European data relay satellites. The data will come straight down from the European satellites into Harwell and will be made available, for example in the cloud computing facility I was talking about. It is our aspiration potentially to offer the capabilities of Harwell to EU space programmes. We need to encourage the European Commission to think harder about the downstream applications of all the infrastructure that has been built that it is paying for, and we have something to offer there. Perhaps alongside ESA that is now there we can see an involvement by the European Commission in the future.

Q139David Tredinnick: Do you think it is fair to say that the Government effectively bought the ESA presence at Harwell, and it is as good an illustration as any that money talks?

David Parker: It is a demonstration of a really stronger engagement with the European Space Agency setting out what we wanted to achieve, and that we have a space policy focused on practical and real-world applications of space rather than, for example, investment in launcher technology. By transmitting the message that we want to step up in the area of telecommunications and applications in space, we were able to negotiate hard to secure the growth of ESA in Harwell. It is an example of the much stronger influence that the UK now has in the European space community, and that message of stronger influence has gone out globally and is causing international space companies to call us up and say, "Can we come and talk about a stronger presence in the UK?"

Q140David Tredinnick: In one of your earlier remarks, you focused on the fact that a contract had been won in Kazakhstan. Is that linked in any way to an aspiration to get closer to the Baikonur cosmodrome?

David Parker: The Baikonur cosmodrome is in Kazakhstan and is run by the Russian space agency, so there is no particular or direct linkage there. We use the Russian launch capability for some of our satellites, but there is no direct link I can think of.

Q141David Tredinnick: In response to Stephen Metcalfe’s earlier question, you talked about hopefully having business incubators round the country. How on earth is that going to be funded? Is there not a resistance the further you get away from London to setting up centres as alternatives to somewhere like Harwell, because those of us who represent the midlands and beyond do not like the length of travel up the country, as it were?

David Parker: I don’t think there is resistance; it is more enthusiasm to get involved in the growth of the space sector. There is already a business incubator in GRACE in the east midlands. The incubator at Harwell is already working with the incubator in the east midlands. We have to establish appropriate funding routes, but we have several in mind that could take us forward on that side. We have to find a way, if we are to achieve these growth targets. We have an ambition and we will have to find solutions to achieve it.

Rob Douglas: We are talking perhaps about formal incubators here, but there are other clusters of activity that link into space, like Daresbury in the north-west or round Guildford where you have Surrey Satellite Technology and the Surrey Space Centre. They are already encouraging businesses round them that we look to for the SME type of growth.

David Parker: As to that model, for a space incubator to be successful it needs to be embedded in fertile ground, by which I mean maybe a top-class university, an area with an industrial capability or a business enterprise capability that is there and can be taken advantage of as a natural hub that will grow strongly. We can foresee several of those.

Q142Chair: Stemming from that, one of the enthusiastic presentations we had at Harwell was by Miguel Bello Mora, who explained why his first investment outside the Iberian peninsula was in the UK. Do you think that has got more to do with the cluster, the broad strategy or the UK’s approach to science?

David Parker: The answer is: probably a bit of all of those. The clear long-term vision and commitment is the first thing. As that gentleman said, it was the fact that the Minister was standing up and saying the UK had a long-term space policy, the fact that it has built on the space policy of previous Administrations, so the continuity and time it takes to develop space is important. It is something about the entrepreneurial spirit of the UK perhaps being noticeably different from the more top-down, government-driven space approaches of some other European countries. Clearly, if someone like that is looking where to locate, Harwell is the first fertile place to come and see.

Q143Jim Dowd: Most of these questions seem to be going to you, Mr Parker. Mine are no different. I want to go back, hopefully not over ground you have already covered, to the EU and ESA. How much time, effort and resource does the agency devote to EU-facing issues, and how does that compare with the amount of funding you derive from the EU?

David Parker: A lot of resource is devoted to the EU, hence Catherine and her team are pretty significant in this. Several new staff who have joined in the past year are devoted to EU space activities. If you look at the financial investment going from the Treasury to the EU, and into space programme, it is not as much as through ESA but it is getting to the same order of magnitude. One of the things we are doing in the agency is step back and say we do not think about there being a national programme, an ESA programme and EU programme; rather we have an overall space endeavour and we are doing things in technology, and some of that happens through all three routes. As to navigation, some of that is through ESA, some through the European Union and some of it nationally. Rather than thank about it in terms of the categories of ESA, EU and nationally, we think about it more in terms of what we are trying to achieve in telecoms, earth observation and so forth.

Catherine Mealing-Jones: We certainly put resource into things as they have come up. The EU came forward with a space industrial policy, which we saw as a significant development, so we recruited a resource to deal with that.

We are a small agency, but we do use expertise all around government. We work very closely with colleagues in the MOD, FCO and more technical colleagues in DSTL and others who come to meetings with us. Either they partner with us so we have a policy person and a technical expert or they go to the more technical meetings on our behalf. We have some very strong coordination mechanisms across government to make sure we get the right presence.

The number of meetings in the EU is very significant. We spend a lot of time in Brussels. As David has already said, we also rely on our colleagues in UKREP who have built a very strong space expertise to represent us as well. You could put a lot more resource into European work, but we have beefed up what we are doing over the last 18 months or so as the EU itself has stepped forward with new proposals on space.

Q144Jim Dowd: I am astonished to learn that there are an awful lot of meetings in Brussels-it’s a revelation. Mr Parker, you mentioned earlier that ESA with its presence at Harwell-whether it is because of the incentives or bribes David mentioned earlier, which I’ll put to one side-had anchored the relationship between ESA and the UK. Would that not be further strengthened if there was a UK director at ESA?

David Parker: There are a dozen directors in ESA. We have had UK directors in the past but we do not at present. I would argue, separately, that our involvement, strength and influence in ESA is strong at the moment, so there is not necessarily a direct correlation between the two pieces of information. My predecessor chief executive of the agency was chair of ESA’s governing council, which is the key interface between the executive of ESA and the delegates; a very influential place to have been in for the past few years. I have just been elected as vice-chair of the council which will put me in some of the same meetings and discussions. We are very influential at that level. This year, my team and I will attend 64 different programme board meetings of the European Space Agency where we are influencing and all the time battling for the UK position.

In terms of directors, the process is a short list. We have to have good candidates coming from the UK. Those candidates ideally should combine an industrial background and experience of working in government. The candidates are interviewed by the chair of council before they are recommended to the director general, so the process is an open one. It is advertised and people should apply. ESA have pointed out that it gets fewer candidates from the UK than from other member states. Maybe we have to do more work on the UK side to get good candidates going forward. There will be opportunities when the next round happens in a couple of years’ time, but do we need to have a director just to have influence? No. Would it be a good thing? Yes, of course.

Q145Jim Dowd: You say that the council is an alternative avenue of influence.

David Parker: Very much so.

Q146Jim Dowd: Telespazio Vega has said that one of the reasons there is no UK director is that the quality of candidates from the UK is inferior to that of others.

David Parker: The candidates generally come from industry, so we have to work more strongly with industry to develop its ability to go for those interviews and be successful. The opportunities are certainly there.

Q147Jim Dowd: How does the agency ensure that ESA’s programme matches, as far as it can, the priorities for the UK, and how does that compare with, say, other members of ESA?

David Parker: I think we are very effective. The mechanics of it, if you like, are the different programme boards. We send a couple of people to each of these boards-science, earth observation and telecoms-and they take along priorities which have been established not simply out of their own heads but through a consultation process with the UK community. We have an advisory committee for telecoms and navigation, science and earth observation. You will find around the table people from industry and the science community gathering information and feeding it to the delegates, our delegates who go off to those meetings. There is the formal process and an awful lot of informal stuff that goes on as well with e-mails and conversations going backward and forwards all the time.

Does it work? Yes. If you look at just the earth observation science programme, UK scientists are leading three of those missions, which is above the fair share. If you look at the space science programme, we are principal investigators on many different instruments and scientific activities. Overall, looking purely from an industrial point of view, we get back our fair share of contracts. Our so-called geo return is near enough one, which is a better situation than it was a few years ago. Engagement with ESA is very strong. It starts with the very positive relationship between our Minister and the head of ESA and works downwards.

Q148Sarah Newton: In the last few remaining moments, I would like to take us back from the EU to the UK and look at the UK’s civil space strategy. Six pathways were identified to help growth of the sector in the UK. Which ones do you think were the most and least successful pathways?

David Parker: I would like to answer that in two ways. First, they are all important. They are an indivisible set of activities that support each another. I do not believe you can take one away and still be successful. Secondly, as an engineer would say, the time function of these different pathways varies. What do I mean? If you invest in a commercially oriented programme, whether that be through ESA or nationally, you can see a return quite quickly. We have invested in an all-weather satellite programme called NovaSAR at national level that is happening now. I would expect to see export orders within the next year or two. Likewise, with some of the ESA programmes we invested in at the ministerial last November, I would expect to see contracts coming out of that this year and next year, and that opening up the growth opportunities that flow from it quite quickly, whereas investment in science is necessarily longer term. You are investing in the science and knowledge that you gain, which might turn earth science into an understanding of climate in five or 10 years’ time, but that may deliver services on the back of that.

The science programme also trains young people, so postgrads and postdocs, who will become leaders in the space sector in a few years’ time, but you need always to be investing in the future. Sometimes in the science programme, you can get a return very quickly. I can think of examples coming out of a Mars programme. What is the relevance of that to the everyday economy? There is technology flowing already into the oil industry, manufacturing and medical science. As to the time function of that, you get the benefits even before you have launched the mission to Mars because the technology is created.

The really long-term stuff is inspiration. If you think about Tim Peake’s flight to the space station in a couple of years’ time, hopefully that will have an Olympic effect in inspiring people to think, "I could get involved in science and technology. Maybe I won’t become an astronaut, but maybes I will be inspired." That may influence those people’s career choices in five years’ time and they will join the industry in 10 years’ time. The influence of these different pathways will be over different periods of time, but you need to do all of it in a joined-up way.

Q149Sarah Newton: Can we talk a bit about the idea of incubators once you get outside of London or Harwell? Representing Cornwall, with Goonhilly, I have an obvious interest in this area. It has been talked about for some time. Other members of the Committee represent other remote rural areas. Could you talk us through how you see this happening? You said you were enthusiastic about the possibility of spreading incubators all around the UK. Practically, how do you see that happening, and over what period of time?

David Parker: We have just started to think about it, so it is not going to happen tomorrow. The roots are to understand what makes the existing space business incubator successful. As I hinted earlier, it is about a particular model that the European Space Agency has, of being able to put a little investment directly into the hands of the entrepreneur, combined with a fertile environment of business advice and connection to finance. There is something called the London Satellite Finance Network, in which Catherine has been involved. That is building up an expertise in the financial community that understands space and is open to investment in space, as you need the finance alongside funding for the entrepreneur. Then you need access to the space know-how. In the ESA environment that is clear, so the question is: how do we replicate that round the regions so that somebody sitting in Cornwall, for example in an incubator at Goonhilly, can access the know-how of ESA? The answer is: a lot easier now that they are in the UK and not somewhere on the continent.

We also have to think about communications links. Is it putting in a fibre connection between the two? Can we use satellite broadband to connect? Fantastic downlink capabilities at the Goonhilly centre are starting to be used for satellite communications. Maybe that is an existing piece of infrastructure that could be built on for an incubator. Then it will need funding to make it happen. Perhaps regional funding from the EU might be accessible. That involves working with the LEPs to explain why this might be an opportunity. The LEPs have to see this as an opportunity and put it on their shopping list of priorities for EU regional funds. Those are the kinds of admittedly nascent ideas we are thinking about.

Rob Douglas: The LEPs are critical in this. They are just developing their strategies during the course of this year. We need to try to influence those that have some space activity, or a university which is interested in space, and plug in these thoughts. There are already lots of types of incubators and high-tech incubators, and this is just a version of that.

David Parker: It is a flavour.

Rob Douglas: It is not something brand new, conceptually.

Q150Sarah Newton: You are just starting work on it.

David Parker: Exactly.

Sarah Newton: So it will be in a couple of years’ time.

David Parker: Yes.

Q151Chair: I want to explore a little further the work you do with SMEs. Does that include, for example, helping them through some of the bureaucratic morass of how to get licences and so on?

David Parker: Are you talking about space licensing?

Chair: Yes.

David Parker: Yes, indeed. The regulatory environment and role of the agency is very important because it has a responsibility to implement obligations that the UK has taken on under the Outer Space Treaty. That means our obligations are implemented through the socalled Outer Space Act 1986. We take that very seriously in terms of issuing licences for operators and people who are going to launch things and use things in space. The dangers of a failure of a space system are very great with potential damage to the space environment. We take the regulatory responsibilities very seriously and assess all people who are looking to put things into space. Where there are start-up organisations-I will not name names-we take companies through the process and help them, because it comes as a surprise that they need to provide technical information but also financial evidence of their strength before I sign the licence on behalf of the Secretary of State. The required commitments are all very serious in that sense.

In the ESA environment, SMEs are supported quite actively. Under the bidding process of the European Space Agency, there are certain types of activities reserved for SMEs, and there are some where SMEs are given preference. The industrial policy of ESA has a conscious effort to encourage SMEs. There is no doubt that, if you have not bid to ESA before, the processes are quite complicated, again because ESA has to be very careful. It is spending public money and does not want to give money to an organisation that is not financially secure or does not have a strong technical background. Those processes are there, but through our industrial policy committee delegate we work with ESA to try to improve that over time.

Q152Chair: Space licences clearly are a special category, but at a basic level, many SMEs in my own area find it very difficult to work their way through just export licence arrangements. Do you help at that level?

David Parker: Yes. We can often intervene to help with export licences and act as an interlocutor between the space community and the export licensing folks, who are in another department of government. Quite often, the export people may be unfamiliar with the specific nature of space technology. Of course, for some aspects we have to consider the security implications, and there are also links into the domain of the MOD in terms of defence exports. It is a necessarily complicated process, but you only have to look at the success of companies like Surrey Satellites, which is selling spacecraft all round the world to know that it can be done.

Chair: Can I thank you all very much for your attendance this morning? It has been a very enlightening session.

Examination of Witnesses

Witnesses: Rt Hon David Willetts MP, Minister of State for Universities and Science, Department for Business, Innovation and Skills, and David Parker, Chief Executive, UK Space Agency, gave evidence.

Q153Chair: Good morning, Minister, thank you for coming to join us, and welcome again, Mr Parker. Minister, when we were visiting Harwell, I was asked a question to which I did not know the answer. I said I would ask the Minister because he would know. What is the postcode of the international space station?

Mr Willetts: I don’t know the postcode of the international space station. I saw these emails. What is the answer, David?

David Parker: It was a joke; it was a sarcastic comment from an organisation that perhaps had struggled with the export licensing organisation. Nevertheless, we were able to unblock that through the good offices of the Department.

Q154Chair: The point being made, inside a light-hearted remark, was that sometimes-we have just touched on this with the previous panel-small companies find it really difficult to deal with the bureaucracy of things like export licences. As Mr Parker says, this particular case has been resolved, but-allegedly-bureaucracy was saying, "You haven’t filled in the section for the postcode." That may be an apocryphal story, but you and I would agree it is vitally important that we make it easier for SMEs to get into this sector, and other advanced sectors. Can you have a close look at the bureaucratic processes and make sure your Department understands the needs of SMEs?

Mr Willetts: That is a very fair point, which I accept, and it is a reasonable request. Now we are on track. You threw me with your question about the space station postcode. Often, these products are very high-tech and there are legitimate security questions, but we need to give clearer and more authoritative guidance. Certainly, the system for approvals needs to work more smoothly, so I am happy to undertake to look at that.

Q155Chair: You identified space and satellites as one of your eight great technologies. Are we a world leader in satellites, or the analysis of satellite data? How far are we from being a world leader?

Mr Willetts: We have some distinctive strengths, obviously small satellites and the ability almost to sprinkle satellites either over an area which has had a natural disaster or perhaps an area of conflict. That is going to be increasingly seen in the future. We make 40% of the world’s small satellites at Guildford at Surrey Satellites. That is something of which we can be very proud. There are also companies like CloudSpace in Glasgow, which I have visited several times. We do have a world lead.

When it comes to analysing data, we have distinctive strengths. We are trying at the catapult centre to build up a British position as a place where satellite data can be analysed, but one of our jobs, which is not yet finished, is to raise the level of awareness, both in the commercial sector and across government, of the value of satellite data for completely standard, day-to-day activities which people might not have previously thought of as depending on space: agricultural uses or disaster monitoring. Both the commercial and the public sector could do more of that.

Q156Chair: I think you are enthusiastically pursuing your commitment to the space sector and developing what you inherited. How are you going to ensure that there is a continuing legacy so there is a long-term commitment to space in the UK?

Mr Willetts: We have invested in some technologies whose significance will become apparent only in years to come. I would identify several. For example, NovoSAR was a £21 million investment with the aim of us being the world leaders in synthetic aperture radar. I hope to see significant export orders from that. Most recently, there was the announcement of the backing of reaction engines. We have been able to back some very significant technologies that, regardless of the outcome of the next election, will I hope be generating revenues for Britain for years to come.

Q157Chair: Going back to your comment "regardless of the outcome of the next election", when neither of us may be in our current seats, do you think there is a sufficiently strong buy-in within Parliament and government and across parties to convince the outside world that Britain is a place in which to invest?

Mr Willetts: When I arrived in office in May 2010, the previous Labour Government, in its final years, had set up the Space Leadership Council, which I have found a very useful body, and had commissioned work on an innovation and growth strategy for space. That was also very useful to inherit and draw upon. I make no bones about the fact that the last thing I wanted to do was arrive, tear up everything and start again. We did not do that. We built on what was there when we arrived, and I think we have added to it in various ways. It is for other parties to comment, but I hope that, if there were a change of government, this is not a matter of massive party-political disagreement and other parties in government would have a similar approach in 2015, if there were any change.

Q158Chair: We are talking about an industry that is targeting a £40 billion value by 2030. Is that achievable? What do you see as the main challenges in getting there?

Mr Willetts: It is quite an ambitious target. It is a double target based on the model that shows the industry growing a lot globally and the UK getting a 10% share of it. It is tough but achievable. It is very early days, but so far we believe that the growth of the sector means we are on track to achieve the target. To achieve it, we have to be absolutely clear that we need very substantial private investment alongside public investment. As you implied in your earlier questions, we need a very strong sense that there is cross-party support for the space sector, which I think is the case; and we need to carry on making difficult but important choices when technologies come along, to back them. We will sometimes make mistakes. We have to accept that in a world of rapidly moving technology there may be particular technology programmes or initiatives we back which in 10 years’ time have not necessarily delivered what was promised. People have to accept that we are working here with imperfect information in an imperfect world; there must be some understanding of that as well.

Q159Pamela Nash: I have to apologise to the previous panel. I should have declared my interest as being part of the space committee and European inter-parliamentary space conference. The are more details of that on the register. The other place where government can really make a difference is encouraging skills for the sectors we are trying to grow. Whenever I meet people from all over the space industry-I am sure you have had the same experience-I am depressed when they tell me they cannot fill the skilled jobs with British people, particularly in a country where most toddlers have drawn a picture of themselves as an astronaut at some point. Can you tell me what the Government are doing to try to fix that, and whether there are conversations with the devolved Administrations as well?

Mr Willetts: You are completely right that that is one of the big challenges. The good news is that applications for university courses in the crucial disciplines and physical sciences are rising. There are universities growing their departments in response to student demand, because part of our reforms is that funding goes with the students and university, so we are making progress. I hope that the Tim Peake mission will help a lot as well. In America, people still talk about the Apollo effect. I hope that the sheer excitement around that mission will interest lots of kids to study science at school and college and go on to do it at university.

Q160Stephen Metcalfe: I think that at the recent ministerial council you increased the amount of funding we were giving to ESA. Can you tell us, first, how much that increase was, and, secondly, where the money is coming from?

Mr Willetts: We increased our contribution. It is extra funding, not out of the science budget, and is about £160 million a year.

David Parker: It is about a 20% increase, depending on what you take as the starting point, but basically it is an average of £240 million a year for five years.

Mr Willetts: A lot of the spending is in years for which there is no overall budget. The Treasury was very good. We explained that this was a four or five-year negotiation, so we had to go beyond what was then a public spending profile that did not extend beyond 2014-15. It was extra money, in the sense it goes out beyond the normal public expenditure horizon.

As to why we did it, there were several reasons. One is the fact that a lot of European space activity happens via the European Space Agency, and the industrial case for it is that if you put more in up front in a kind of prototype, so you have a big role in making the first satellite of a series-the ESA development stage-you are very likely to earn a significant industrial return as more versions of that satellite are produced commercially. I bought the argument that there was an important industrial return for Britain. Secondly, a lot of space science cannot be done on your own; it is a collaborative activity, and there are worthwhile research projects in space that we can do via ESA. Thirdly-this was partly dependent on how the negotiations panned out-we were able, through our membership of ESA, to get a role in the international space station, hence the value of Tim Peake’s flight, setting aside all the scientific and technical benefits, in signalling to younger people the excitement of science. We got that for a very modest contribution via ESA of €20 million, or £16 million, into a $100 billion space facility. I think it has worked out to Britain’s advantage.

Q161Stephen Metcalfe: For clarity, you said £240 million a year, so that is £1.2 billion over the five-year window.

Mr Willetts: Yes.

Stephen Metcalfe: That is a significant increase in investment. I think you said right at the beginning of your remarks that that was new money and was not taken out of any other science budget. Is that correct?

Mr Willetts: We had a ring-fenced science budget of £4.6 billion-again, David Parker might be able to explain this in more detail-which, at the time of the last autumn ministerial, extended only as far as 2014-15. There were no public expenditure figures later than 2014-15.

David Parker: To clarify a point, the increase was not £240 million; the total is £240 million a year.

Q162Stephen Metcalfe: What was the increase?

David Parker: It was about 25%, so this year we would have been spending about £190 million; it is now £240 million.

Mr Willetts: Of that £1.2 billion, which is the first year of that budget?

David Parker: The financial year just started.

Mr Willetts: The bulk of that £1.2 billion is being spent in years later than 2014-15, so it runs out over five years, covering 2013-14, 2014-15 and three subsequent years. The Treasury provided me with two things: first, a modest amount of extra funding on top of the ring-fenced science budget in the two years for which there was already a budget; and, secondly, we explained that there was an international negotiation going five years ahead that needed funding that went beyond the current public spending envelope. We also had the negotiating flexibility for those three extra years. Because they do not like Departments making commitments beyond the public expenditure round, that was equally valuable.

Stephen Metcalfe: I think that would be considered a successful outcome.

Q163Chair: If I may move off that particular point to the relevance of this inquiry which is all about work, you mentioned the ring-fence arrangement. Can you confirm that the ring fence is as defined in the previous spending round and nothing has been allowed to slide out of it, or, indeed, is there anything coming into it?

Mr Willetts: There are sometimes very fine points around the edges, but basically we are trying to roll forward the ring fence for one more year. The reason I am being cautious is that there are always specific issues about the National Measurement Office, or the exactly which bits of the UK Space Agency, but the basic concept rolling forward is the same.

Q164Stephen Metcalfe: That must be considered a success because it is new money that will add to that. Anyone who suggests that other parts of the science budget would miss out would be misleading us.

Mr Willetts: Yes. We have not done this at the expense of other parts of science. The Chancellor has been very good in understanding the value of science in general and space in particular. This was extra funding, extending further ahead. Some of what is done is very useful science; it is genuinely worthwhile and very innovative science work that is done partly with this.

Q165Stephen Metcalfe: The UK does not have a director of ESA. First, is that important? Does it matter that we don’t? Secondly, why do you think we don’t?

Mr Willetts: I would rather we did have a director. It is hard to judge exactly how important it is, and we try to have an influence in ESA. David and his team attend lots of the official meetings, but I would prefer us to have one of the senior directors there. In the past, we were seen perhaps as semi-detached from ESA and that probably had an effect on our influence. The fact that in the negotiations last autumn we showed we were heavily engaged with it has increased our clout and ability, and I hope we will get a director in the future. In Westminster terms, the next reshuffle in ESA will be when the director, Jean-Jacques Dordain, retires in 2015. That is when the new overall head may look around for a new team around him or her, and I hope we will be able to take that opportunity to get a director.

Q166David Tredinnick: How much influence do you think the UK has in ESA?

Mr Willetts: David might like to comment. He is involved with it on almost a week-by-week basis in a way I am not. I try to have a good working relationship with Jean-Jacques Dordain, and I find him someone with whom one can deal. He will be with me at our big space conference in Glasgow next week. We have secured successes like ESA moving over 100 of their technical staff dealing with telecommunications to Harwell. I think we do have a good relationship.

David Parker: I commented on this earlier. Our influence has ramped up over the past few years because of the positive messages and actions we have taken towards ESA. We were the chair of the governing council, which is a key place. I am now vice-chair of the governing council. I chair one of the programme boards where one of the main programmes is managed, so it is quite a strong influence.

Q167David Tredinnick: How do we persuade ESA to take on projects that we think are particularly in our national interest? Can we do that?

David Parker: Yes, indeed. The mechanism in preparing for an ESA ministerial is that possible ideas are put on the table by ESA and there is a process of discussion backward and forwards when member states say, "We are really interested in this one and we would like to lead it." Leadership means taking a major stake, usually above your nominal geographical return share. There is a programme called integrated applications. That is one of the real downstream-driven programmes where the UK is by far the largest contributor. As a consequence, that programme is driven by UK thinking and ideals that go into that. Likewise, on the Mars exploration programme, we are the second largest contributor. We have a major influence in designing how that programme goes forward and ensuring that we get the kind of technological work and scientific work, whatever it is, that we want. ESA is a genius because it has a small mandatory programme to which you have to contribute, but the vast majority are optional programmes and, depending on where you put your money, you have influence.

Q168David Tredinnick: I understand that. I was going to ask you a question about the two types of programmes in a minute. Minister, looking at our funding commitment to ESA, you described it as strong but select. What exactly is the focus? What are we trying to do here?

Mr Willetts: "Select" means not doing launches, and a significant part of the ESA budget is concerned with that.

Q169David Tredinnick: Ariane.

Mr Willetts: Yes. After that, based on expert advice, the UK Space Agency and the wider community, our aim is to participate in the programmes where we can make a really good scientific contribution, our scientific researchers are interested in it, or there is a great commercial opportunity for our industry.

The negotiation last autumn was an extraordinary event. I had not quite seen ministerial negotiation in this form before. It is almost a matter of passing round the cap. They identify a programme, go round the table and every country says how much they will put into it. There has been some preparation, but it goes round and €1 million, €10 million and €20 million is offered, and, at the end of the day, they find out if they have enough money for it to go ahead, and also what the relative weights are; that is, how the British contribution is relative to the French or German. Sometimes, it does not quite add up and you go round a second time; at other times it does. Then they work out which are the programmes, but it is a genuinely intergovernmental scheme. If we all put in enough money to make a programme viable, it happens. Unlike the EU principles, it is on a kind of juste retour basis, so, if you have ended up making a 25% contribution, you are likely to get 25% of the work coming to your country, and that is just for the prototype. It is not an EU institution but an intergovernmental one functioning in that way, so those are the criteria we use.

Q170David Tredinnick: When you are at the table in the bidding process what happens if, when you get to the last country, there is not 100%? Do you go round again and try to get more money, or do you say, "We don’t want to do this project. We’ll move to the next one to see if anybody wants to back that"?

Mr Willetts: Obviously, at the ministerial it is only the tricky issues that come up. A lot of preparation has been done, but absolutely. David will correct me if I am wrong, but if there is not enough support and people are not putting in sufficient money from their pockets to support a particular programme, it does not happen.

David Parker: The ministerial is the final stage of it, but I can tell you that council meetings happen at the delegate level beforehand. Literally, just before the ministerial ESA realised there were one, two or three programmes that people were not going to support and they withdrew them, so they never went in front of Ministers.

Q171David Tredinnick: On the balance between mandatory and optional programmes, someone wrote somewhere that, if you just do the mandatory and do not take up a lot of the optional projects, it is like joining a club and not playing on the pitch, turf or wherever it is. Is that right?

Mr Willetts: Yes. The image is one where you are able to afford the membership fee of the club but not a round of drinks at the bar. It has been like that. There were times when Britain just about maintained mandatory membership but we were not joining in the round of drinks. It is at the point where you join in the round of drinks that you start to get the benefits. You leverage up beyond the mandatory programmes, and you strategically choose. We had discussions in the space leadership council and other areas, and there was a consultation exercise through much of last year when we asked scientists, "Which are the areas where you think there is a really interesting science programme you want to join in?" and the business community, "What satellites do you want to be building or participating in?" That was the optional stuff, where the real value arises.

Q172Roger Williams: On the mandatory and optional payments, David Parker said that it is a small mandatory payment, but that is in proportion to the size of the nation state, is it not? We make quite a large mandatory payment. What is the ratio between mandatory and optional at the moment?

David Parker: It is roughly 50:50. You are quite correct that we are the second largest contributor to the mandatory programme in percentage terms. From memory, it is about 60%. That buys us the space science programme; basic technology and infrastructure; the education programmes of ESA; and communications work. On top of that, we are in the optional programmes. As a result of the decisions taken in Naples, we are now the largest contributor to the telecoms programme; the second largest contributor to the technology programme for navigation satellites; and in several others we are a major player now. We are still not contributing to the launches programme, which is a very large part of ESA’s activities, and we are a very small part of the space station programme, which is colossal, if you’re German. There is a very large investment on the German side, for example.

Q173Jim Dowd: It’s not something I’ve ever done-joining a golf club-but I’m led to believe that some people do it solely to use the bar. There is a degree of tension, as you will be aware, Minister, between the EU and ESA at the moment. Can you give us a broad outline of where you think the balance of UK’s interests is between the national programme, what ESA should do and what the EU should do? Do you think effort should be put into attempting a reconciliation of some kind between EU and ESA?

Mr Willetts: Your analysis is correct. Sadly, there is some tension at the moment, which I regret. I think it can be resolved; I see a way forward. By and large, ESA is a well-run intergovernmental organisation. We have just been discussing how it functions. I think it functions not perfectly but pretty well. Separately, the EU in the Lisbon treaty got a competence in space which it had not really had before. The EU can use ESA to deliver EU programmes and be a downstream customer, building up the use of ESA technology. There may be agricultural applications of services developed from ESA which the CAP could help fund. That is speculative. We do not want to see the EU in some sense taking over ESA. It is not necessary; it has its own treaty and intergovernmental structure; and it includes people who are not full members of the EU, like Norway and Switzerland. We just need a sensible way in which they interconnect. There is a significant amount of ESA activity which is done as a result of bids from members of ESA that does not have an EU angle. Some of the criticisms and anxieties about accountability and such like which the EU Commission put in one of their papers about ESA were misplaced. I think they were trying to invent problems that were not there.

Q174Jim Dowd: That leads neatly to my next question. Do you think any of those criticisms are valid?

Mr Willetts: By and large, not. If it ain’t broke, don’t fix it. We recognise that the EU has now got its own treaty framework in which it has competence in space and has money that it spends. When the EU is looking at how to spend its money on its space projects, the obvious thing to do is to procure them from ESA and use ESA as its arm. Therefore, one body, the EU, using a different body, ESA, to deliver its programmes requires a memorandum of understanding and framework, and that can be clarified and improved.

David Parker: I agree. We have not spotted one of their obstacles that is really fundamental. We think they are over-egged red herrings.

Q175Jim Dowd: If the EU Commission were determined to subjugate ESA under the provisions of the Treaty of Lisbon, is there anything to be done to prevent that?

Mr Willetts: One argument might be considered, which it is only fair to bring to the surface. ESA is a juste retour structure. The EU, at least officially, does not operate on a juste retour basis. One seductive argument that people sometimes put to me is, "Hang on. If you have EU contracting rules, not ESA contracting rules, and you are so confident about the great qualities of British space technology, you might do better than juste retour on EU rules." That argument is around. That is why, on some of the procurement for Galileo-David will correct me if I am wrong-we have done better under the EU rules because we have ended up with a British role in building all those satellites so far because it has been an EU procurement.

But now the framework for going forward is that we agreed at the ESA ministerial that ESA would work constructively on how it saw the relationship with the EU. That may be one of the items on the agenda for the next ESA ministerial; and in the competitiveness council of the EU, we have had discussions of how, wearing that hat, we should deal better with ESA. We are making progress in trying to get negotiations with our wearing these two different hats.

Q176Jim Dowd: You mentioned Galileo in passing and how well this country comparatively has done out of it. What role, if any, do you have in ensuring the efficiency and value for money of projects like Galileo, or Copernicus?

David Parker: The answer is: through negotiating hard on the regulation, leads and structure of these programmes and, at each decision point, pushing the Commission to be efficient and take the right management decisions. A lot of it is about the bureaucracy between ESA and the EU, getting in place the right decision making process. When I said there were no fundamental obstacles between the two, the practical stuff is about clearly defining who is responsible for what. If you are a customer with an industrial company trying to negotiate scheduling costs and technical issues, you need to be able to do that together, not have to check with the paymasters whether they agree with the decision you have just taken and go back to the industry and change it again. Getting those interfaces sorted is what really needs to be done on programmes like Galileo and Copernicus.

Q177Sarah Newton: I would like to come closer to home. We understand from written evidence that, later this year, a policy document on UK space strategy is going to be published which aims to bring together civil and national space security policy. Are you expecting any significant changes to our national space policy as a result of the publication of this document?

Mr Willetts: We have a civil space policy out there, which is the crucial thing. We are going to put alongside it the space security policy which is focusing on particular issues affecting this important part of our national infrastructure, for example vulnerability to space debris or space weather, or indeed-it has to be part of it-circumstances where there is a hostile attack on the capabilities of your satellites. We hope to produce that document very soon.

On top of it, there is an overall document which will be relatively straightforward and simple, and will refer to the two other documents, both of which will be in existence. The combination of what we have done at ESA at the ministerial and what we have produced in the civil strategy is the bulk of our space strategy.

David Parker: The capping document is intended to clarify roles and responsibilities across government.

Q178Sarah Newton: It is not a real change of policy; it just gives an overarching narrative and policy that links various parts together.

Mr Willetts: It has taken longer than we would have hoped. The areas we have been thinking about a bit are, for example, in space security, how vulnerable our satellites are to space weather and increases in solar activity every 11 or 12 years. We have had detailed conversations with the industry about that. As to the space debris problem, which is currently monitored by the Americans and us at Fylingdales, which is also very closely linked to the US, do we need to do more to monitor it? That is now quite a significant cost, using fuel to move satellites around because you are warned that they might encounter space debris. Those are the kinds of angles we are covering, but I would not expect a massive change in our overall strategy.

Q179Chair: Is there a mechanism inside government for liaison between you and your opposite numbers in the Ministry of Defence where there is an overlap in interest between space weather, increasing concerns about EMP weapons and so on?

Mr Willetts: We have had a small Cabinet committee on space security, which I chaired but which also had Ministers from the MOD and Foreign Office. That has been supervising the work on space security policy. In Whitehall terms, when the policy is in place, the ultimate custodians would be the Cabinet Office, because they are in the lead on the critical national infrastructure. In many ways, the space security policy is about treating space as part of the infrastructure and showing that the responsible Departments are discharging that responsibility. It is on a long list from the Cabinet Office, so they can say, "Right, so you’ve got in place a plan for this bit of national infrastructure."

Q180Chair: When we see space weather given an extremely high priority on the risk register, we can assume that there is a coordinated approach to that across Government Departments. I appreciate that some of this cannot be published.

Mr Willetts: Yes. The ultimate custodian will be the Cabinet Office, which will be responsible for checking that space weather as a threat to our national infrastructure is properly covered. The immediate operational body monitoring and reporting on it will be the Met Office, and between that some ministerial responsibility might well come through the UK Space Agency and myself.

Q181Sarah Newton: I was going to pursue that line as well. In the comprehensive spending review, there was an additional uplift for things in the MOD around cyber. We heard from David on the previous panel about satellite internet. You can see quite a lot of crossover, so it is reassuring that there is going to be coordination at Cabinet level. Sticking with policy, we have heard a lot of very good evidence about the success of Harwell. A lot of that has been because of funding coming from ESA. In the policy going forward, will we be looking at other ways of attracting funding to Harwell and other incubators based around the UK, or will we see the future growth of Harwell and other such centres being dependent on increased contributions to ESA?

Mr Willetts: You are right to make the case that it is not just Harwell. Harwell has its distinctive role, but there are a lot of other great centres like Portsmouth, Guildford and elsewhere. With the decisions we have already taken-the implementation of the space strategy and contributions to ESA-one thing I find very encouraging is the number of internationally mobile businesses that now say they want to be active in the UK. A string of people come to see me and David Parker and say they want to locate some of their space technology work in the UK as a result. For them, what we have already done is reason enough for locating here. The more we can keep on ratcheting it up, the better we will do, but they assure me that they are not just into the tourism business of trying to get some of the ESA budgets. They have taken the view that Britain is now a good place to locate space technology activities, and Harwell is one of the places they want to come to but elsewhere in the UK as well.

Q182Sarah Newton: Do you think that is as much to do with the deal you managed to strike with the Treasury, the certainty of funding, the future direction and the clear commitment, as it is with the absolute sums of money?

Mr Willetts: You are absolutely right; and the fact we have been working steadily through a strategy. Continuity and long termism is something they do value, and they are right to do so.

Q183Roger Williams: I think we would all agree that space is a very good example of how cutting edge research can be translated into technology. Recently, extra money has been secured for the small business research initiative. Will some of that money be dedicated to developing space technology SMEs at Harwell?

David Parker: In terms of the SBRI, not necessarily specifically at Harwell, but we are using an SBRI mechanism for some technology work, particularly the Galileo spacecraft system where we are going to provide new signals. One of the really exciting commercial opportunities is related to the high dependability and high security signal. We are working with the Technology Strategy Board on an SBRI model to develop technologies to exploit that in the UK.

Q184Roger Williams: Minister, have you encouraged Government Departments to make use of research that might come out of the business incubation centre at Harwell?

Mr Willetts: Yes. I push to the limit my colleagues’ tolerance of my saying to them, "Have you thought about a space application to help with your problem?" reminding them that you can get broadband services in remote areas via satellite and use satellites to get information about the performance of agriculture literally field by field. The space applications centre at Harwell, what is now the catapult centre, is a great place to get lay people from Whitehall and business, who don’t think of themselves as being involved in space at all, to come along and see at first hand how data from space could help them run their businesses or departments. I believe this Committee has seen it; if not, I suggest it does so. As a layman, it is a great way of seeing how satellite data can help.

Q185Roger Williams: We have been told that the facilities there will enable research to be accessed by businesses. Will Harwell be reaching out to all parts of the UK, or will the businesses have to migrate there? You can understand that for some of us who live on the periphery of the United Kingdom it is important to maintain our economic activity there as well as having access to technology.

Chair: Can you deliver Roger his broadband?

Mr Willetts: It is a very fair point. You can argue that we have a range of centres stretching from the Clyde to Goonhilly, so it cannot all be concentrated on Harwell.

Q186Roger Williams: Have you made any assessment about what you anticipate to be the return or economic growth from the investment at Harwell in the satellite applications catapult?

Mr Willetts: In general, all the assessments-I think there was a big economic assessment by London Economics in 2010-showed very good rates of return of five or six to one from investment in space technologies. I don’t know whether we can offer any more detail than that.

David Parker: I am sure the catapult has specific business targets. I am afraid I don’t know offhand what they are. I am happy to provide a note.

Roger Williams: Perhaps you could let us have that.

Q187David Tredinnick: I just want to probe a security matter. We have talked about weather, and whether we are prepared for severe space weather events. You touched on a Cabinet sub-committee. Which is the lead Department for space security policies? Did you touch on that? I am not sure you gave us that answer. You said the MOD and Foreign Office were there.

Mr Willetts: If you think of it as critical national infrastructure, I would say the Cabinet Office are the overall custodians with responsibility for ensuring that we have arrangements in place, so they are ultimately responsible.

Chair: Minister and Mr Parker, thank you very much indeed.

Prepared 15th July 2013