Debate

(a) (i) Given the relative paucity of debate in the House in recent Years, we recommend a debate on this Report and the Government's Response.

(ii) We also recommend the Publication of an annual report to Parliament from British National Space Centre (BNSC) on its work, as a means of providing the material necessary for the proper exercise of accountability to parliament. This report should set out in comprehensible form what BNSC does and why (paragraph 4).  

(i) The Government would welcome the opportunity for a Parliamentary debate on what the Committee has recognised as an important area of policy.

(ii) BNSC is strongly committed to openness and accountability. Its Space Strategy, a published document, sets out clearly what BNSC is and its aims and objectives. The Strategy is available on the BNSC website along with action taken to date against each key action listed in the Strategy. This information is updated every six months. The website also contains clear information about BNSC, UK space policy, the UK space industry and recent news.

To respond to the Committee's recommendation, BNSC will revive annual publication of "UK Space Activities" to assist with public scrutiny. A copy will be placed in the House of Commons library. At present the proper lines of accountability to Parliament for expenditure by BNSC partners is through their own Departments.

UK funding

(b) We understand that the DTI is undertaking an evaluation of civil spending on Space programmes over the past decade. We trust that the results of this will be published. Unless it is suggested that funding has achieved an abnormally low rate of return, it is evident to us that if the UK is to play a significant role in global space activities, there will need to be an increase in the UK Government's expenditure on civil space over the next planning period (paragraph 12)

The evaluation will be completed later this year. It is intended that it should be published, in the normal way. Its conclusions and recommendations will be among the many factors which will influence decisions on future space funding by the BNSC partners. In particular, decisions have yet to be taken following the conclusion of the annual spending round.

European Space Agency

(c) Any withdrawal from ESA programmes would have serious detrimental consequences for the UK space industry. However if the UK Space budget is increased by a significant amount, careful consideration should be given as to whether this increase should redress the current balance of national as against ESA spend (paragraph 16).

The BNSC partners intend to give higher priority to national spend in the coming years. What is important, however, is to have a very clear statement of the objectives of any programme proposal and to seek the best value for money in achieving those objectives. In some cases, there may be choices to be made between ESA or national routes and it would not be appropriate to approach these choices with any prejudice for one or the other.

(d) We would be concerned if the obvious technical expertise and commitment to space science in ESA were to be diminished as a consequence of new ESA/Commission working arrangements. The UK must continue to participate fully and comprehensively in the strategy discussions and to ensure that the UK's interests in science, and its particular security concerns, are reflected in the outcome. We look forward to the publication of the joint space strategy by the end of the year (paragraph 18)

The Government has played a significant role in promoting much closer co-operation between the EU and the ESA, following its initiative during the UK EU Presidency in 1998 when both organisations adopted a common text resolution on the issue. It continues to seek to achieve closer alignment of their space-related objectives, particularly in the areas of satellite applications. To this end, BNSC has worked closely with the Commission and the ESA Director General in the development and of the European Strategy for Space, which was approved as a Commission Communication on 27 September. The Government agrees that the Strategy should enhance European space achievements generally without diminishing any specific sector. It also fully agrees with the Committee that the achievement of excellence in scientific research through the ESA must be maintained.

UK funding policy

(e) Whilst we appreciate that the Government is pursuing a policy of public private partnerships, we were concerned to discover that such decisions taken unilaterally in an international project had been to the detriment of UK companies. We hope that the lessons of funding the EGNOS project have been learnt and that the Government and BNSC will ensure that common ground rules for participation in such projects agreed amongst all participating countries at the earliest stage, and implemented in the UK (paragraph 21).

ESA is itself developing its own processes for handling partnerships. Partnership may take many forms and BNSC is working closely with the Agency with a view to ensuring that the processes adopted are enabling, rather than restrictive, and that they avoid discrimination between Member States. The Government would expect that any future partnership arrangements would be set up from the start as partnerships, with commitment of all participants to the particular form of partnership which is appropriate to the case. However, this will not undermine the Government's commitment to maintain focus and effectiveness in its space programmes through the early injection of private sector finance and disciplines.

'Juste retour'

(f) We detect a degree of hesitancy on the part of the Government in its policy of opposing 'juste retour', possibly based on the absence of any independent authoritative study. We recommend an independent study to ascertain the effects of ESA moving away from 'juste retour', particularly on UK SMEs (paragraph 24).

The position on juste retour is clear. Juste retour is an integral part of the ESA Convention to which the UK is a signatory and helps maintain the involvement of the European Space Agency's Member States and, in particular, the smaller countries. The problem in recent years has been the gradual increase in the cumulative level of juste retour from the 80 per cent set in the Convention up to 98 per cent in the three years to December 1999. This created many distortions to proper competitive bidding and removed the Agency's reasonable margin in which to operate open competitive bidding. BNSC consistently opposed the increasingly higher levels of juste retour.

The impact of juste retour was studied very thoroughly in the build up to the 1997 Ministerial Council meeting and the resulting Ministerial Resolution made significant changes to the way the Agency's industrial policy operated. In particular, the Agency's Optional Programmes, which account for over 80% of its total spend, are moving to a system where a nation's contribution to a programme will be adjusted at the margin to match the success of its companies in winning work under that programme rather than vice versa. Furthermore the Resolution agreed to the ending of the then current series of industrial return statistics, which had been cumulative since 1972, and had led to special measures to rectify the low return of some Member States. Thus at 1 January 2000 a completely new series of geographical return statistics were begun and UK's previous 6 per cent over-return was wiped clean. The new industrial policy includes measures to integrate SMEs more comprehensively into projects against the background of further major restructuring of the prime contractors (ASTRIUM and ALCATEL) and a more flexible position on juste retour. BNSC will work positively with ESA to evaluate the effectiveness of the latest changes and look to the next Ministerial in 2001 to implement any further necessary improvements. The Government does not therefore propose to commission a review at this stage .

Export controls

(g) (i) Given that DTI is responsible for the operation of the UK system of export controls, we expect joined­up Government within as well as between departments to ensure a smoother passage for space exports requiring licensing, and

(ii) that Ministers will convey to their US counterparts concerns at the unintended consequences of recent changes in the administration of US export licensing (paragraph 28).

(i) The Government is fully committed to supporting UK exporters. It is also committed to implementing an effective system of export licensing for items controlled for strategic reasons or because of sanctions, and to meeting its international non-proliferation obligations. Export licence applications from the space sector are assessed on the same basis and against the same criteria as any other applications. All export licence applications involving goods on the Military List of the Export of Goods (Control) Order, and dual-use goods where there are grounds for believing that the end-user will be the armed forces or internal security forces or similar entities in the recipient country, are considered against the EU Code of Conduct on Arms Exports. An export licence will not be issued if there is a clearly identifiable risk that the proposed export might be used for internal repression or international aggression.

Export licence applications often raise complex issues which need careful and detailed consideration. These issues cannot be fully explored until after an application has been submitted and all relevant information can be considered. All licence applications are circulated by the DTI to any other government departments with an interest as determined by those departments in line with their policy responsibilities.

Relevant sponsorship directorates within DTI, such as BNSC, are kept aware of export control procedures and policies, and take them into account in their dealings with industry. When an export licence application is recommended for refusal, the relevant sponsorship directorate is given an opportunity to comment before a final decision is reached. Any differences of view within or between Departments are discussed and resolved, involving Ministers as necessary.

(ii) The US Department of State published regulations implementing changes required by Congress to the US export licensing regime for satellites and related components and technology in March of 1999. Since then BNSC and the British Embassy in Washington have had a number of productive exchanges with the US administration, bilaterally and in partnership with EU and NATO colleagues and with industry to discuss common concerns in this area. In particular, the Government has encouraged the US Administration to give clearer guidance to industry on how to work within the new rules and to address concerns about the speed of processing licence applications. We have had to recognise in doing so that these changes to the US export control regime were imposed for national security reasons and are a highly sensitive issue in the United States. It appears that the greatest adverse effect has been on the US satellite industry, which has suffered a large fall in revenues and lost considerable market share to European industry since the changes were imposed.

The US administration has responded constructively to our concerns and those expressed by others including US industry. They have made considerable outreach efforts to explain the new procedures to industry and to help them work with them more effectively. Additional staff were hired under a Congressional mandate specifically to address the concern about licence application processing times and measures have been introduced to speed up approval of licences for exports to NATO and major non-NATO allies of the US. We will continue to monitor the situation closely but the actions of the US Administration this year give some grounds for optimism and average processing times are apparently falling.

Higher education and space

(h)  The next UK space strategy must explicitly address the question of the supply of appropriately qualified graduates, so that the space industry can be sustained in the years ahead. We would hope that in the review of the next UK space strategy, due weight is given to the support of higher space education, both to promote space to future students and to ensure the maintenance of centres of excellence (paragraphs 29 and 30).

The Government recognises the importance of attracting students to space science and engineering courses, not least because space is a beacon subject, attracting students to science and engineering more generally. BNSC is aware of concerns regarding appropriately qualified graduates and liases with the space education sector. This factor will be taken into account in the preparation of the next UK Space Strategy.

Telecommunications

(i)  It is important that the UK remains involved in the field of satellite telecommunications, at both the pure and applied levels of research (paragraph 35).

The Government remains committed to supporting the development of new satellite telecommunications technologies. During the last 18 months, the UK has increased its subscription to the Advanced Research in Telecommunications Systems (ARTES) programmes and BNSC has launched a new £9m national satcom programme, S@TCOM. The key drivers are seen as multimedia/e-commerce and advanced mobile system developments.

ARTES provides the main vehicle through which ESA carries out its satellite telecommunications activities which range from market studies to full system development. The UK contributes to three elements namely:- ARTES 1 (market studies/strategy); ARTES 3 (multimedia systems); and ARTES 4 (pre-competitive technology development activities). The S@TCOM programme is complementary to the ESA ARTES programmes and aims to develop innovative technology and applications in satellite communication and navigation in order to allow industry to exploit commercial market opportunities.

MOSAIC

(j) The Particle Physics and Astronomy Research Council (PPARC) expressed disappointment that they were unable to support bids for one of the DTI's key initiatives, MOSAIC, due to timing problems. Given the low number of space­related initiatives, this raises questions over the effectiveness of the lines of communication between the DTI and other BNSC partners. We hope that if, in the future, DTI provides such seedcorn funding the programmes are better managed. We will follow the outcome of the MOSAIC programme with interest and trust that the programme will be fully evaluated (paragraph 41).

PPARC has an earmarked budget line for developing space science activities outside the ESA programme. Late in 1998, PPARC had built up sufficient prospective resources in the budget line to consider issuing in 1999 an Announcement of Opportunity (AO) for small science missions or payloads. In view of the interest in MOSAIC expressed by the Space Science community, the initial plan was to issue the PPARC AO at the same time as the MOSAIC AO so that proposals could be submitted to both.

However, pressure for release of the PPARC AO a year ahead of schedule arose from a strong UK interest in a specific collaboration with US space scientists in the Swift mission proposed in August 1998 in response to a NASA AO. Since NASA was in command of the schedule, PPARC was left with a choice between MOSAIC, which had not yet been approved given funding uncertainties, and the definite opportunity of participation in an important mission which was a strong contender in the NASA competition. PPARC chose the latter and issued an AO in February 1999. The strong scientific and financial support from the UK was a factor in the Swift mission being selected by NASA in October 1999. This meant PPARC was unable to finance participation in MOSAIC when the AO was announced in December 1999.

BNSC worked closely with PPARC in the definition of the MOSAIC programme to encourage space science proposals with matching funds from space science sources beyond PPARC. A number of space science proposals were put forward under the MOSAIC competition although none were in the event successful. It was unfortunate, but unavoidable in the circumstances, that PPARC could not co-ordinate its cycle with both NASA and BNSC. However, the BNSC partners, DTI and PPARC were both fully in contact throughout this period.

The Minister for Space announced the successful applications under the MOSAIC programme at Farnborough Airshow and BNSC is committed to carrying out a full evaluation of the programme.

GALILEO

(k)  We are concerned that there is an apparent lack of leadership of the UK's participation in Galileo. We recommend that a sustained effort is undertaken by BNSC to ensure joined­up thinking across Government, particularly between DTI and DETR, on the Galileo programme. In the absence of any clear indication of how income may be derived from Galileo, we recommend that, once the definition phase is concluded, the Government discuss with industry the commercial potential for raising income from Galileo and make that assessment publicly available before committing further public funds (paragraph 46).

The Government does not accept that there is a lack of leadership for the UK's participation in Galileo although the case for Galileo has still to be proved. The Government expects that the Commission and ESA studies currently underway will help to do this. BNSC is working closely with UK industry, DETR (which is the lead Department for the UK) and other interested Government Departments. The Government is continuing to seek clarification from the European Commission and the industry on a number of aspects of Galileo, including the benefits to users, the commercial potential for raising income, and the likely costs, in order to provide a basis for decisions on further development. As to joined-up Government, good links exist between the key interests.

Earth observation

(l) Despite more than a decade trying to stimulate commercial markets for Earth observation data, provided at public expense, it is universally accepted that the take-up has been unsatisfactory. It is widely agreed that the market for Earth observation data has not increased as rapidly as was initially anticipated. It appears to us that some of the EO missions of the last decade have suffered from insufficient prior discussion with those who may have wished to use the results. As a consequence they did not provide the high quality real­time and continuous information which users demand (paragraphs 51, 52 and 55).

(m)  We welcome the news that the first low cost opportunity mission in the Living Planet programme is to be UK­led, and one of such self­evident practical significance (paragraph 54).

(n)  Expenditure on EO is one of the areas currently being evaluated by the DTI. Further EO expenditure at current levels must be driven by more than an expression of general but unsubstantiated hope that commercial markets will be generated. It must also be accepted that there are good public policy reasons to gather EO data which cannot be expected to generate a commercial return (paragraph 55).

The Government agrees that the growth in the commercial market for Earth Observation (EO) data and derived information products has not been as fast as some may have expected. The level of 'user drive' in the definition of requirements for future missions is now seen as the key factor determining the rate of take-up for EO as an information source. Other important aspects relate to the maturity of techniques for the conversion of raw data into useful information, mission costs and length of development periods. BNSC will only recommend government funding of pre-commercial EO missions if the focus is on delivering competitive information services based on a robust business case.

This changing approach has had a number of positive effects. Sustained UK pressure has led to a truly user-driven EO programme at ESA with Living Planet. UK environmental scientists have had considerable success in the selection of ESA Earth Explorer missions, notably CRYOSAT whose practical significance was recognised in the Report. Such advances are linked to the development of environmental policy and in the longer term to key areas of likely future economic benefit. The importance of the public sector customer for EO is being recognised through the BNSC Government Information From The Space Sector (GIFTSS) initiative, and the drive of the EC Global Monitoring For Environment and Security (GMES) initiative towards user needs. With these changes, the UK should take advantage of its skills in EO, built up over the last ten years. The critical need for a user-driven approach is at the heart of all of the recent investments in EO by BNSC.

Whilst the predicted commercial growth in the market for EO derived information has not been achieved, the market is now growing and there have already been some notable highlights. For example, the UK has strength in the commercial application of Interferometric Synthetic Aperture Radar (InSAR), which provides critical information on phenomena such as subsidence, landslides and earthquakes. Similarly, commercial applications of crop monitoring, location of telecommunication assets and oil spill monitoring are also successful applications of EO. The launch of Envisat will provide continuity for, and broadening of, the current observations allowing further growth in these application areas.

Beagle 2

(o)  Beagle 2 is an example of an innovative approach to funding and of a project which seems to have won funding despite, rather than because of, the system. It now has the full support of PPARC and the space community. It would be a sad comment on the seriousness of the UK contribution to space science if the necessary funding could not be found. The project is entitled to expect Government support in finding ways to fill the funding gap which we understand has yet to be filled (paragraph 60).

The Government is pleased to be able to confirm that BNSC has successfully worked with the Beagle 2 consortium to ensure that the finances of the project are put onto a more sound footing, pending receipt of sponsorship income. The project offers unique and valuable opportunities for sponsorship, which we expect to see enthusiastically taken up.

Launchers

(p)  The general perception among all those involved is that the Government and BNSC are following a policy of no involvement in launchers. It is our strong impression that in BNSC there is a less than open mind on the case for Government assistance to launcher development. If Ministers do indeed have an open mind on the use of public funds for launcher research and development, they should make this explicit (paragraph 67).

(q)  We recommend that a review is undertaken of the UK's participation in launcher development programmes. Since no partner in BNSC is likely to be fighting for UK involvement in reusable launch vehicles (RLVs), we also recommend that this evaluation be undertaken by a body independent of BNSC (paragraph 69).

Ministers continue to have an open mind on this issue. The Minister for Science will consider attractive public good and commercial prospects for inclusion in the space programme subject to the availability of realistic resources. This principle was followed when considering and eventually rejecting the question of entry into FLTP in December 1999. The Minister for Science also decided at that time to support more immediate initiatives in launchers at the sub-system and equipment level through the UK National Technology Programme. Three such proposals have been approved.

One of these proposals covers further development and exploitation of a market assessment model developed in the UK by BAe(Systems). In conjunction with members of UKISC, this model will be used to reassess the combined effects of development costs and timescales, revenue streams, market entry conditions and windows of financial return in the current and medium term launcher market. BNSC will help facilitate this work and ensure that comparisons are drawn with open source data, for example from Euroconsult. If the results of that work are significantly different from those considered during the extensive public consultation on the UK Space Strategy, the Government will consider passing the results across for further review by an independent analyst.

For the moment, however, it is the Government's view that current proposals for the development of new launchers are heavily dependent on public money and could not be contained within realistic resources in the UK. To put the resources required in this area into context, the Ariane V programme has cost $6bn to date, with plans to invest a further $3bn in the launcher, which achieves sales of some $1bn per annum. During the periods of intensive development, ESA has allocated about $900m per annum to launchers. For the UK to pay its GDP share of this, the DTI element of the civil space programme would need to double.

(r)  The decision has now been made not to participate in the Future Launch Technologies Programme (FLTP). The UK has, however, technical expertise in the area worthy of maintaining and developing. We recommend that consideration should be given to ways of fostering existing UK expertise in technical space infrastructure in the UK outside the normal avenues of space technology funding (paragraph 69).

The Government fully agrees: this is already UK policy. BNSC has for example helped to facilitate discussions for Reaction Engines in France, Japan and the US, including visits to Lockheed Martin, Boeing and SNECMA.

Civil/military overlap

(s) We recommend that, within the framework of the recently agreed US/UK partnership on defence equipment and industrial co­operation, vigorous efforts be made to provide for a level playing field for the US and UK space industry with a presumption in favour of reciprocal removal of barriers to trade (paragraph 74).

The Government recognises the strong potential of the recently signed "Declaration of Principles for Defence Equipment and Industrial Co-operation". Officials of both countries have agreed to work together over the next 12 months to identify a range of co-operative actions that should have impact across the full extent of defence equipments, including space. The declaration will not however have a direct impact on current programmes.

(t)  We recommend that the Government take the opportunity of its response to this Report to set out how it is envisaged that the changes in DERA's status and role will impact on UK space policy, and in particular on (a) the availability to BNSC of expert, impartial, and free advice on space technology, and (b) on the extent to which UK firms offering technology potentially in competition with DERA will be able to bid for MoD contracts (paragraph 75).

The proposed restructuring of DERA has led BNSC and DERA together to undertake a review of their relationship. The review is currently under way and is expected to culminate in a new Collaboration Agreement to supplement the existing Framework Agreement. As part of this process there has been close and constructive consultation with industry through its trade associations, and this is ongoing.

DERA has played a valuable role as a BNSC partner and the expectation is that this will continue. There is however a clear balance to be struck between the useful project management and technical support which DERA provides to BNSC, its proposed new status and the impact of this on industry.

More generally, the BNSC is reviewing the role and contribution of its partners, and potential partners, taking account of their status in the public or private sector.

(u)  BNSC's main role is one of co­ordination. If BNSC is to continue in anything like its present form, it must be encouraged to take a more proactive stance and to provide firm and clear leadership in co­ordinating policy across Government departments (paragraph 80).

(v) BNSC was set up as an ad hoc arrangement in 1985. It is now time to review the role, status, and organisation of BNSC. We recommend that following the completion of the DTI's evaluation of spending on space, the Government undertake a public review of BNSC along the lines of the quinquennial reviews of Government bodies. This review should also consider the possibility of giving BNSC or its successor body its own budget, in addition to the existing budgets of BNSC's partners, in order to ensure that the UK space programme reflects the long term public policy interests of the UK. Full attention should also be given to co­ordination between military and civil applications. We also recommend that the next Director­General of the BNSC or its successor body is recruited on a fixed term contract through open competition (paragraph 81).

The BNSC is a flexible and dynamic partnership. It has successfully co-ordinated the space interests of all government bodies, resulting in an effective UK presence in European space activities. Nevertheless, the Government agrees that after fifteen years of existence it is timely to take a look at how BNSC is set up and operates. The Committee has conducted a full and valuable public review of this issue and has received many submissions from a broad range of interested parties. The Committee also recognised that the BNSC spending partners are completing an evaluation and have gathered considerable relevant information in the course of this. The Government proposes to draw on all this material in conducting a review of the budgetary and organisational arrangements for BNSC, and its position in relation to the DTI and the Office of Science and Technology. The DTI will consult with the other government partners in the BNSC during this review, which in particular will look at the case for introducing greater transparency into its spending on space, by reference to broad programme objectives.

The BNSC remains committed to developing the partnership between departments, which is its lifeblood. Consistent with the programme for the modernisation of Government, it will continue to encourage partners to locate in BNSC headquarters staff with responsibilities for space-related activities. The programme of secondments from industry will be maintained and expanded as opportunities arise. Where the Government considers that the field of candidates for particular posts would benefit by being opened more widely, they will be advertised publicly. The Director General of the BNSC has been appointed relatively recently and the appointment of a successor is not therefore in immediate prospect. When an appointment is next made, the Government will consider the Committee's proposal for a period appointment, taking into account the views of the partners in BNSC and any relevant recommendations of the review described in the previous paragraph.

UK space strategy

(w)  UK space strategy must be sufficiently flexible to be able to react to potential future applications of space technology (paragraph 82).

The UK Space Strategy was established following extensive consultation with the space community. The Government's priority must be to implement the key actions in the Strategy. This will require focus and continuity of policy. It will, however, continue to remain abreast of developments in new space technologies and applications and evaluate these against current objectives.

(x)  The latest space strategy document is admirable in many respects but limited in ambition. We hope that its successor will be able to announce something beyond a modest continuation of existing programmes, and that the civil space programme will be funded on a less cautious basis (paragraph 83).

BNSC is not short of ambition. Its key ambitions are to achieve the highest quality astronomy and space science, improve our understanding of the Earth's environment and to help industry maximise profitable space based business opportunities. These are ambitious goals and, within the bounds of affordability and value for money, BNSC will continue to pursue them with all the vigour they demand. This will necessarily mean that there will be continuity, where this is appropriate, and new initiatives where new opportunities arise. Ambition, however, must, if it is to be successful, arise ultimately from working with BNSC's academic and industrial partners, the users of space opportunities, and sharing in their ambitions.