TUESDAY 9 MAY 2000

THE LORD SAINSBURY OF TURVILLE, DR COLIN HICKS AND DR DAVID LEADBEATER

  320. But does it not seem odd that potentially we should be creating competition for a British company in the export market, unnecessarily?
  (Lord Sainsbury) We might well be, but, after all, this is all about British companies, and it is about supporting British companies to take advantage of this market, and the company that you are talking about, I would have thought, is one of the clear not only UK leaders but one of the world leaders in this technology. And it was with that in mind and our excellence in this field that we have developed this programme, because this is clearly a growth area and we want to make certain that British companies, and remember this is for British companies, are in a position rapidly to take advantage of that growth market.

  321. But, presumably, what you are saying is that one of your criteria for grant-awarding would be that it would not be to go directly in competition with another British company that was already a market leader in that field?
  (Lord Sainsbury) I think, if you have a competition, there are people who win it. On the first stage of this, and I do not think this is confidential information, I think 18 companies applied with projects. We will come down probably to three or four that take advantage from that, and that, obviously, would have an advantage in strengthening those particular companies, which is what the aim of it is, it is about encouraging the development of the technology. It is not about giving them some grant, or something, it is about development of technology and ideas, and, as I say, it is about making certain that that group of companies, who are world leaders, are able to exploit that, and we think that the best way to do that is with projects like this, which enable them to develop new market needs and technology.
  (Dr Leadbeater) I think the other important part is that what we are trying to do with the MOSAIC programme is to provide opportunities to users who have not yet used the small satellite solution, to apply small satellites in market areas, whether it is in telecommunications, Earth Observation, in a disaster relief sense, or whatever, so there is an opportunity not to develop new platforms but actually to apply these platforms that exist, and not just Surrey's, in such solutions. So this is a good opportunity to take the technology that has already been developed and apply it in new areas, to expand the market possibilities, and the company that you have visited is an enthusiastic bidder into the programme. Now there are always risks that somebody else might win, but no win, no pain, no gain.

  322. That is fair enough, in terms of Surrey Satellites, but, quite frankly, it is not fair enough in terms of the British economy, is it; presumably, one of the criteria for selecting, in terms of awarding funding, is going to be that it is not going to undermine British development already, that it is not going to create artificial competition internally?
  (Dr Leadbeater) There is, in the programme, from the point of view of the existing bids, the bids are based primarily on existing platform capability, or fairly modest development of existing capability; and the University of Surrey is not the only supplier of small satellites. There is no intention to create further competitors, really we are looking to try to exploit the capability that exists in these new market areas, to do exactly what I suggested earlier on, which is to provide the opportunity to exploit that in some of the market areas, but the solutions traditionally have been very expensive.
  (Lord Sainsbury) Just to make a general point, I think it is true of all these programmes, and of quite a large number of DTI programmes, which have a challenge basis to them, or for which people can apply to do technology development, that the companies that win them are given some advantage, there would be no point in doing them if they did not; and the companies who do not win them, or frequently do not apply, would be put at some disadvantage. If you take the SMART scheme for small companies, clearly, that should benefit the development of their strategy, or their productivity, and the companies who get those awards will be given some advantage over those companies that do not apply or do not get them; so I think it is inherent in quite a lot of the work we do in the DTI where there is a competition or a challenge award.

  323. But is it not ironic that, you say that one of the objectives is to enable new uses to be made of this small satellite technology by the use of grant money coming from your Department, when we heard, when we visited there, that, the Ministry of Defence, with all the taxpayers' money that they have, they have totally ignored the opportunities provided by the small satellite technology at Surrey University, and indeed we heard that some of their biggest clients are foreign Governments, including the United States Department of Defense, and they have been totally ignored by that other branch of joined-up Government, the Ministry of Defence? So why do you not concentrate on getting better value for the taxpayers' money already going into the Ministry of Defence, rather than putting an indiscriminate subsidy into this particular programme, which, I agree with my colleagues, can only be designed to have the effect of undermining Surrey Satellites?
  (Lord Sainsbury) To be quite clear, first of all, it is not indiscriminate, it is a very carefully targeted programme. Secondly, I can see no reason why Surrey Satellite Technology Ltd, which, as I say, is an excellent company, should not actually benefit from this programme. And, thirdly, this is not a situation where you have to say that every Government, regardless of whether it wants it or not, should have the use of small satellites, they have very particular and specific uses, and it is a question of whether a particular Government, or Department, has a real use for this. For example, one of the things that Surrey's satellite technology does brilliantly is working with Governments, like the Chinese Government, in the use of small satellites for disaster observations, and for a number of countries this kind of small satellite is very appropriate; it does not mean that it is appropriate for all countries, or all defence needs. Having said that, we do have a programme, which is called the GIFTSS programme, which is about going to all Government Departments and working with them, trying to see where there are opportunities for them to use satellite technology.

  324. Have you been surprised at how slow the Ministry of Defence have been to take advantage of the technology and expertise of Surrey Satellites?
  (Lord Sainsbury) David, with his Defence background, can probably answer that better. I would have thought these are very specific uses in particular areas, and I think the Ministry of Defence has considerable knowledge in this particular field.
  (Dr Leadbeater) When I was talking before about the capability in the small satellite area in the UK, there are two companies that have state-of-the-art capability, Surrey is one, associated with the University, there is another company that is fully commercial. We have a capability at DERA which has flown small satellites, primarily for defence purposes, but has also flown payloads for ESA, so that is a commercial and military, dual-use capability where the Ministry of Defence has certainly fully used small satellite technology. With the MOSAIC programme, one of its strengths is that it has brought together, within the bids, defence, civil industry, research laboratories, together, in making proposals, and there is evidence in those bids of a strong Ministry of Defence interest. My answer before to the question from Lindsay Hoyle, I think, is perhaps the more important one to this issue; there are some important questions that relate to the UK's defence posture, which this Committee is looking at, which clearly have an impact on space, but I do not think that it is an issue within the MOSAIC programme, which is open to civil and military technology.

  325. Can I switch, to ask you a question about Earth Observation and the effectiveness of the BNSC spending to promote Earth Observation; has that ever been evaluated?
  (Lord Sainsbury) I think that will be one of the areas, clearly, which will be evaluated, and I think it is an area where it will be very interesting to have a look at the results of that. I think, in terms of the scientific side of this, the work as a whole has been very good. I think there was a view, two to three years ago, that this was a situation where the market for Earth Observation data would increase fairly rapidly, and the reality is it has not increased as rapidly as we would like, I think mainly because so much of it, essentially, is tied up with the public sector, and that is why we have slightly reined back on the enthusiasm for the commercial markets for Earth Observation, though we are trying still to encourage them to take place.

  326. You think, essentially, it is tied up with the public sector, and that is the reason why it is growing more slowly. Can you expand upon that point?
  (Lord Sainsbury) It is an area where the main user is the public sector. Government is the body that wants to know about the monitoring of the environment, and it expects to get this information, essentially, from its own branches of Government, free, not to buy it commercially in the market. It is therefore very difficult to create markets where you can sell this information into a commercial market which will pay you for it.

  327. So do you think there is anything more that BNSC could do to increase the market, or to train potential users of Earth Observation data?
  (Lord Sainsbury) Colin, would you like to comment on that; we are doing some work, I think, now, which is directed at exactly this question.
  (Dr Hicks) There are a number of things which we are engaged in at the moment, some of which have already been mentioned, the GIFTSS programme, where we have on secondment into BNSC from industry an individual who is now working with a number of Government Departments, trying to bring to the users the appreciation of the value that existing Earth Observation data will have for them and which developments in Earth Observation data in future will have for them. We have been doing a study initially within the DETR, but we are now in discussion with other Government Departments as well. In parallel with that, as has already been mentioned, there is the Global Monitoring for Environment and Security initiative, which has been developed within the European Commission, and we have seconded an individual into the European Commission who is working with them on the development of that particular initiative; and I am going to be going to a meeting next week, at which I will be contributing, with Heads of other European Space Agencies, to the direction that that particular initiative is likely to take. We have been, of course, also doing things to try to bring to the general public, and through the general public, an appreciation in the private sector more generally of the value of Earth Observation data, and you may have seen that a couple of years ago we issued a CD-ROM, which was produced in large number on the cover of a particular newspaper, and just a few weeks ago we produced another CD-ROM; the first one was of world photographs and the last one was photographs of the United Kingdom. And what we have found is that, even in the few weeks since we produced that CD-ROM, the awareness of the value of such data seems to have risen. We have had a number of approaches from the media, a number of approaches from companies, trying to find out about this. So, if you like, there are very specifically targeted initiatives, and then a very broad initiative. But, having said all of that, we did make the assessment, a couple of years ago, that the market was not growing as fast as we had originally expected when we increased our spending. We took the decision that we would actually reduce the proportion of our spending that went on Earth Observation, and that is a change that we are in the middle of doing. And that is because we see the potential much more in the integration, in the communications and the navigation sector, which tie much more closely into the dynamics of the knowledge-driven economy, e-commerce, and so on, where a large number of strands are coming together and driving markets forward very fast.

  328. Are there problems with joint data from the UK and NASA projects, the data where NASA can make the data freely available, and perhaps we want to charge for it commercially?
  (Lord Sainsbury) I do not know of any particular problem, unless, David, you know of any problems with it? This is NASA data where we get it—

  329. Where we have got joint projects?
  (Lord Sainsbury) Colin, do you know?
  (Dr Hicks) It is a general policy of the US Government that, when data is produced using public funds, this has been their long-run policy, that should be made publicly available, and it is the belief of the United States Government that that is the best way to advance the exploitation of data. The policy that we have adopted is that people do not actually value data and that it is much better if it is done like that, it is much better to try to develop the commercial markets. So we have tended to take a line which says that if we can create commercial markets, provide people with a profit motive and incentive for selling that data, then that will develop the markets much more rapidly and much better; it will also feed back into the way in which that data is generated, so you become more efficient and focussed in the use of that data, and you get the market pull and the market push working together. Now you can see that contrast quite clearly in the difference, where the UK Government, at the end of the eighties, took initiatives to privatise and to set up the NRSC as a body which was going to develop commercial markets for remote sensing data, whereas the US Government policy is different. I do not know that there are problems, as such, but where the problems come it would be at the intersect between those two attitudes towards how do you generate markets for data.

  330. If there are joint projects, does not the problem become obvious, if they are saying the data should be publicly available and we are saying—
  (Dr Hicks) Yes, your question about joint projects, then you need to address what happens to such data in joint projects, because if one partner is giving away and the other one is trying to sell then that clearly has got a market asymmetry, which just is not going to work.
  (Lord Sainsbury) But if there are cases where this appears to be a problem, if you could perhaps let us know and we would have a look at that and come back to you.

  Ms Perham: Thank you.

  331. We have had some evidence, Lord Sainsbury, that the UK is losing out because we are not involved in launchers, and, I must confess, I am not clear, from the evidence that we have had so far, precisely what the Space Centre's policy, or the Government's policy, on launchers is, and I wonder if you could comment on the allegation that we are losing out because we are not involved in the whole area?
  (Lord Sainsbury) I think you have to start with the question of what the objectives of space policy are, and we believe that there are two very clear objectives for space policy, one is the scientific objectives and the other is commercial objectives, and it is very important to be clear which of these objectives you are following in any one particular situation. As obviously you know, we came out of the launcher market some time ago, and we have been out of it for some time. Clearly, the situation has arisen, well it arose with the Future Launchers Technology Programme; any time we could go back, I suppose, and try to take a part of, say, the Ariane programme, but we have not judged that this is a commercial target that we would want to spend money on, we think there are better commercial targets. But it did come up again in the context of the Future Launchers Technology Programme, and here we did take a very careful look at whether we should do anything on this. Let me just answer your basic question, the answer is we do not see the launchers market as a commercial opportunity, and therefore we think it is of far less importance against the other areas where we see real commercial opportunities, which is satellite, global navigation, multimedia, and so on. We did take a look at, as I said, the Future Launchers Technology Programme; the reason for doing that is that the argument was put forward that the development of a reusable launcher could be important for the airline market, i.e. it could feed across into the commercial airline market, where, of course, we have huge interests, and on that basis I asked that we should take a further look at whether we might make a modest involvement in that ESA programme so that we would be aware of developments taking place in that technology. We looked at this very carefully, and, I have to say, at the end of the day, it did not seem to make any commercial sense at all. First of all, there was no commercial person who was prepared to invest alongside us in this, which I think was significant. The programme which our European partners are putting together is not, in fact, for a reusable launcher, it is, in fact, for a semi-reusable launcher, and so we are looking at a very long timescale for actually looking at a reusable launcher. It is a very expensive programme, we would start with, I think, 10 per cent of 40 MEuro, then 400 MEuro, then 4 billion MEuro, in the three chunks of this programme. And, I must say, I took the view that to get involved in this kind of programme, unless you are really committed to staying with it, is usually the quickest way to throw money away. It is not a very attractive market commercially to get involved in, because it is not truly a commercial market, because of the very large American interests in this, which are not commercial interests. It is not growing very fast, and I think it is going to be very difficult for people to make money in this market, and on that basis we do not think it is a market we should go into from a commercial point of view.

  332. Does that mean that, if a UK company approaches BNSC with a project for an RLV project, they are automatically sent home, on the grounds that, if I might paraphrase, "We don't do launchers," or is their application judged on its merits, as something that should be examined, as you quite rightly say, Lord Sainsbury, for its commercial prospects, and, indeed, costs, whether it is an expensive project, whether the finance is quite modest? Are these applications judged on—
  (Lord Sainsbury) We would always look, if projects were brought forward, we would certainly look at them, always, and see whether we thought there was something that we should support. But I think you have always got to bear in mind that the sums involved in the development of launchers, particularly reusable launchers, are very substantial sums of money. I think NASA has been looking at the money it needs for the next five years, not for the development of its reusable launcher programmes, but actually just for the next five years of its Venture Star programme, and it is looking at $4.4 billion to continue over the next five years. I do not have that kind of money to lay my hands on, so there are certain propositions I could rather quickly say no to. But, again, as I say, if propositions come forward, we do not have any ideology that says "We're not in launchers," which is, indeed, why I asked again that the Future Launchers Technology Programme should be looked at on our participation.

  333. The reason I asked that question is that when we took both written and oral evidence from Pro-Launcher representatives, they had certainly got the impression, or certainly the Committee got the impression from them, that they understood the position to be that BNSC does not consider any proposal on the same basis as any other proposal. They gave the impression, I certainly got the impression, that the applications were rejected on the grounds that this was not consistent with UK space policy. But if you are saying that any application concerning RLVs would go through the normal procedure for evaluation then I think that clarifies the position.
  (Lord Sainsbury) We would certainly look at it with an open mind; but, as I say, you have got to consider the scale of these kinds of operations and what it means, and relate that to the kinds of resources that we have available.

  334. Is there a prospect for UK involvement in space tourism?
  (Lord Sainsbury) I think that the situation is that if you assume that you have developed your reusable launcher and you can be satisfied that you have considered the safety arguments here, and providing there is a substantial number of people who would pay £10,000 to go up for a few hours in space, then it is potentially a market to go for. I think those are two quite substantial assumptions you have to make. People will spend money, quite large sums of money on holidays, but whether they would spend, substantial numbers of people would spend £10,000 to go up for a few hours in space, I would be slightly sceptical, but I would not rule it out in the future. I think we must just be aware that it is based on two assumptions; one is that you have a reusable launcher which is already, essentially, written off for capital, so you are only talking about the operating costs, and, secondly, there is a substantial market for it. I think it is quite a dangerous assumption to make, that people who put investment into reusable launchers do not want any return on their capital.

  335. Can I perhaps just ask a slightly different question in this area, because it is one of the dividing lines, the fault lines, of the space debate, you might say, and we got sort of the impression that, perhaps, some of the evaluations which have been carried out, have they been carried out on an in-house basis, or have there been independent people producing the evaluations, and have the evaluations been circulated around the interested parties?
  (Lord Sainsbury) I think it is in the nature of the fact that BNSC is a relatively small organisation that we do make use of a lot of outside expertise, and in terms of putting together the two space plans which we have had in recent years, both had extensive consultation to them and in both of them the industry said very much the same thing about what their priorities were; it was not an industry view that the priorities should be given to the launchers market. I think there is a more important issue here, which is, I think, in some ways, the whole issue of funds for space has been bedevilled in the past by a sense that there were many projects of so-called national prestige which were developed and which did not have either a clear scientific basis to them or a clear commercial basis to them, and, in some sense, that prejudices people about putting large sums of money into this market. I think, at a time when my own judgement is there are very substantial commercial markets and extremely exciting ones then we should focus very clearly on those commercial opportunities, as companies want us to do, both because that is where we will create wealth for this county but also because I think that is the way we convince people that it is worth putting substantial extra sums into the space programmes, because that will develop these new markets.

  336. Speaking of projects of national prestige, can I ask you about the Beagle 2 project, and initially it seemed that the Government, for the reasons you have just said, was not going to support it, but it is now supporting it; why did the Government change its mind, and does the Government now have total support for the project?
  (Lord Sainsbury) Can I say, first of all, that the reason initially there were problems on funding of this project is because it came as a response to the failure of the 1996 Russian Mars programme, which failed, and then there was a move to put together Mars Express, and obviously Beagle was part of that. Because it came rather suddenly, PPARC, who would be the main funder of this because it is totally a scientific programme, did not have the funds available in the programme, it had already actually committed large sums to two programmes of great scientific importance, which are FIRST and Planck, and so its initial reaction was, "We simply haven't got the funds." It did seem to me that there was a strong case, both because this is scientifically very interesting and because, I think, if you are going to pick a project which has the ability to capture people's imagination about space then Beagle 2 is a pretty good candidate for that; and therefore we have really looked in every possible pocket to find money to support this project, we have put together £8 million to provide a third of this, and we are very supportive of this project within, obviously, the limited funds that we have. But we have actually taken a lot of action to give it a priority, when, in fact, it came rather late in the planning process.

  337. And PPARC still feel that there is a bit of a funding gap; do you have concerns about that?
  (Lord Sainsbury) I think there is still an issue of whether they can finally get the funds to do it, but I am pretty certain they will, there is a great deal of enthusiasm for this. It is interesting because it is both scientifically an extremely high-calibre project and it is also one which captures people's imagination, and I very much hope that we can make that work, one way or the other.

  338. There is one thing, however; on an issue like this, where it is within the umbrella of the Department, as it were, and it is kind of taking the view that PPARC moved at the speed of the slowest early on, would an Agency grabbing it perhaps have been a bit more ambitious? I am just wondering if this is the kind of area where perhaps an Agency approach, someone concerned with the prestige of Britain in maybe a more focussed way, do you think that would have made any difference?
  (Lord Sainsbury) I think it would do, but you might also have to accept nine other projects, which are of really quite dubious value, which were also assessed to be matters of national prestige, where you might take a rather more sceptical view of their value to the country. Clearly, if you give people large sums of money and say, "Go off and do things which you think are good," you will, in some cases, get a more enthusiastic, favourable response, but sometimes you will get one which is ill-judged, I think.

  339. Thank you. Just one last point, Lord Sainsbury. We have taken up a lot of your time this afternoon and you have been very frank with us. We stumbled over a particular case, which I think you have been given notice of; we seem to be, in this Committee, for ever returning to the question of export licences and the way in which the DTI handle them, or other Departments and the DTI do not handle them. Some of us visited Stevenage yesterday, to meet Matra Marconi (soon to become Astrium), and they told us about a delay in the granting of an export licence in respect of a study for a radar satellite to be used by China, using synthetic aperture radar. Now we understand this has had clearance from DESO, probably through a Form 680; it has taken three months for the DTI to decide that the licence was indeed required for one of the contracts. The application apparently was finally made in full at the end, despite Ministerial letters back and forth; nothing seems to have happened. The contracts are not huge, it has obvious potential for further work; there is an arms embargo on China, but we know that non-lethal equipment is freely exported. Can you maybe throw some light on this?
  (Lord Sainsbury) I can, to the extent, this is clearly the responsibility of the Parliamentary Secretary of State for Consumer and Corporate Affairs, Dr Howells. I have asked to be kept informed of this; this is being looked at. It is a difficult case, it comes exactly in this whole category of technology which has defence implications and to the extent which one is prepared to make that available to other countries. It is a difficult case, for various reasons, which have to do with whether it really does involve technology which has these dimensions to it, and I can only say I have been asked to keep informed on it, and we will make certain it is handled as quickly as possible; but it is simply a difficult case.

  340. The problem, I think, is that if it is not handled expeditiously it will become an academic exercise, because the contract will be lost. And the thing which a lot of us find, in dealing with the Department in areas for which I fully appreciate you have no responsibility, and you are probably as frustrated as we are, but you cannot say that; we can, however, that, issues of this nature, they get lost in this maze, somewhere in Victoria Street, or it is usually outside of Victoria Street, because other people see it.
  (Lord Sainsbury) I would hasten to add that the problem lies, that we do have to consult, clearly, with other people, and it is that process of consultation which needs to be handled as speedily as possible. I can only say I will make certain personally that this is given all due attention and that we push it through as quickly as possible.

  341. Good luck with your endeavours. That is, I think, from some experience of observing these matters, I think luck is about all we can wish you. But thank you for your help, and more important than that, because you have covered a lot of ground this afternoon, you have been very frank with us, we are greatly appreciative of the time you have taken, and we will be getting back to you if there are any matters which we still wish to deal with. We recognise that some of the areas we have covered will be the subject of evaluation studies over the autumn, but we thought that it was appropriate to move on this. And certainly I think we have found this a very interesting area, and we are very grateful for the responses we have had from organisations, and we may well return to it later in the year when the evaluation study emerges.

  (Lord Sainsbury) Can I thank you for your time, and say we much appreciate being able to put forward our views on this, because we do see this, space, as entering a particularly exciting phase now, in terms of both the science and the commercial opportunities. We think we have outstanding science in this area, and we want to make certain that we have really the opportunity fully to exploit this in the future. So thank you very much for your time, as well.

  Chairman: Thanks; and we will be publishing the note that you wanted to state. I discourage statements before the start of proceedings, on the very simple basis that if it has been read out it could be read by us in advance; and no discourtesy was intended, we treat equally all potential witnesses who want to do that. But thanks very much for your attendance.