Appendix
INTRODUCTION
The Government welcomes the Committee's helpful report
on the Galileo programme. The Committee's analysis of the issues
has helped inform our negotiations with the Commission and other
Member States in the ongoing discussions on the programme.
We welcome the Committee's support of the Government's
view that Galileo, being interoperable with GPS, has the potential
to become a significant global utility, capable of providing a
platform for significant growth in the market for satellite navigation
products and services. As such it would benefit industry in the
UK and Europe more generally.
The Government believes the political agreements
reached at the ECOFIN Budget and Transport Councils in November
2007, which we secured after considerable negotiations, met the
agreed UK objectives which have been endorsed by Parliament. The
aim was to provide the basis for the sound project and financial
disciplines the programme needed, by ensuring a clear and effective
governance structure, in which member states have transparent
access to information and influence and by providing for an open
and competitive procurement strategy in which parallel procurement
will be pursued: all with the aim of helping to keep costs down
and provide the best opportunity for Galileo to succeed.
As discussion proceeds on the programme with our
European partners - specifically on legislation to implement the
political decisions - the Government will continue to emphasise
the need for sound financial and project management. We will also
seek to ensure the Commission and our European partners remain
focussed on the principles agreed in the November Councils, including
the commitment to robust and fair competition in the programme
to help ensure cost control, mitigation of risks and value for
money. And we will remain vigilant in our pursuit of these objectives
in the future.
In the following paragraphs we set out the Committee's
recommendations and the Government's response to them.
RESPONSE
TO THE
RECOMMENDATIONS
COSTS,
FUNDING
AND
VALUE
FOR
MONEY
COSTS
1. The estimated and outturn costs of the Galileo
programme have increased at every stage of its history. We have
no reason to believe that even the very substantial costs now
estimated for the total programme bear any significant relationship
to the likely outturn. The Government has pinpointed specific
areas of concern in the current cost estimates, and it is essential
that any under-estimates are rectified before a decision is taken
on the future of Galileo. Otherwise, it will be impossible to
carry out a proper cost-benefit analysis, and it is in turn impossible
to reach any kind of rational and informed decision. It is therefore
imperative that the Commission carry out further work to verify
the cost-estimates for the remaining phases of the Galileo programme,
as requested by the UK Government and others. (Paragraph 22)
2. Comprehensive, rigorous and realistic information
is in short supply across many crucial aspects of the Galileo
programme, leaving no sound basis on which to make very important
and extremely costly decisions. As we go through the different
dimensions of the programme in this report, the lack of information
and analyses is something to which we will return repeatedly.
It is a point which the UK Government has made to European partners
on many occasions, and one which we raised ourselves three years
ago. It would appear that it has fallen on deaf ears in Brussels.
(Paragraph 23)
The Government shares the Committee's concerns over
the risk of cost escalation in the remaining stages of the Galileo
programme. If Galileo is to offer value for money for the Community
it is essential that costs are kept under control and a full operational
capability is delivered within the budget that has been agreed
by the Council of Ministers and endorsed by Heads of State and
Governments at the December European Council.
The Commission's estimate of 3.4bn (£2.37bn)
over the period to 2013 for the deployment and initial operation
of Galileo, through public procurement, has been subject to independent
review by PriceWaterhouseCoopers and Satel Conseil International
and includes €428m
(£298m)[1]
for contingencies. The Government nevertheless continues to have
concerns, in particular about the adequacy of the allowance for
project risks. The Government has worked with the Commission and
other Member States to ensure that the estimate of €3.4bn
(£2.4bn) forms a ceiling on expenditure within the financial
perspective 2007-2013, and that the implementation of the programme
should be reviewed by an expert independent project management
team on a regular basis.
As the Government made clear in the minutes statement
it tabled with Sweden at the Transport, Telecommunications and
Energy Council on 29/30 November 2007, we expect that independent
reviews will be carried out at key points in the programme, including
when quotes have been received from industry. In this way the
Community will have the opportunity to consider the affordability
of the project in the light of the quoted prices rather than provisional
estimates and, where appropriate, look at the scope for adjustments
to the programme to ensure it remains within the agreed budget.
Overall value for money will also depend upon minimising
the downstream costs of operating and replenishing the system,
including maximising the degree to which such costs are offset
by potential revenue streams from the commercial services to be
offered by Galileo. In its minutes statement, the Government therefore
also called upon the Commission regularly to review costs, risks
and likely revenues from the services offered by Galileo, including
in the light of technological and market developments as the project
progresses. The Government will continue to argue for the early
involvement of commercial expertise in the planning for the operation
of the system and for the potential injection of private sector
funding through a Public Private Partnership (PPP) arrangement
for operation and refurbishment.
BENEFITS
3. We have no reason to doubt that the Galileo project,
if completed, could produce a wide array of benefits, both direct
and indirect. We also acknowledge the difficulty associated with
estimating such benefits ten or twenty years into the future.
This is all the more reason to exercise caution. In our view,
the benefit projections put forward by the European Commission
throughout the life-time of the Galileo project appear fanciful.
These figures have generally been put forward explicitly to assist
decision making in the Council and European Parliament, and yet
the supporting evidence has rarely amounted to more than the most
basic collation of data. We urge the Government to continue to
stand its ground in insisting that up-to-date evaluations of benefits
must be produced. (Paragraph 30)
The Government is pleased that the Committee agrees
that Galileo could produce a wide array of both direct and indirect
benefits. The Government believes that in the light of the benefits
of Galileo to the UK space industry, to UK jobs and ultimately
to the wider economy that the United Kingdom should continue to
support the Galileo project while maintaining vigilance on ensuring
that the project provides value for money, is well managed and
that risks are kept under control.
The latest available estimate - the results of a
first exploratory evaluation by the Galileo Supervisory Authority
(GSA) - of the benefits of Galileo for the EU over a 20 year period
to 2027 were published by the Commission in September 2007.[2]
This showed substantial additional value for the EU of €50-60bn
(£35-£42bn), over this period, over and above the benefits
of the market created by GPS, and additionally the macro-economic
and broader economic benefits to the EU. In our statement at the
November 2007 Transport Council the Government called for regular
review of revenues in the light of developments.
4. We are deeply concerned that the consequences
of the five-year delay to the Galileo programme have not been
taken into consideration in the Commission's calculations of revenues.
Even if there are no further delays, and Galileo becomes operational
by the end of 2013, the market context is likely to be very different
and much more competitive than the one on which current revenue
projections seem to be based. It would therefore appear likely
that there are very significant risks associated with the data
which is being used to underpin the decision to proceed with the
Galileo programme. (Paragraph 37)
The Commission's latest estimates of potential revenues
and its most recent benefits assessment[3]
are both based on Galileo achieving full operating capability
in 2013. The estimate of revenues also recognises that, while
Galileo should offer competitive services of a kind for which
users are already paying in order to supplement GPS signals, with
the real prospect of a revenue stream, the scale of potential
revenues is uncertain.
The Commission estimate these revenues being in the
range of €4.6bn-€11.7bn (£3.2bn- £8.1bn) over
the period to 2030. It is the Government's view that any estimates
of potential revenues at this stage can only be speculative. However,
while revenues will reduce the costs to the public sector of operating
the system, the Commission argues that they will form only a small
proportion of the total potential benefits from the deployment
of Galileo. These also include significant opportunities for the
European and UK space industry together with new jobs and added
economic value from the downstream Global Navigation Satellite
System applications that are expected to be developed with the
greater signal availability offered by Galileo operating alongside
GPS.
COST-BENEFIT ANALYSIS AND VALUE FOR MONEY
5. The Galileo project is at a crossroads. The option
of reducing its scope or dropping the project altogether cannot
and should not be ruled out unless a balanced and comprehensive
cost-benefit analysis, which includes an assessment of the marginal
benefit of Galileo over GPS III, is on the table. (Paragraph 40)
The integrated decisions taken at the 23 November
2007 meeting of the Economic and Financial Affairs (ECOFIN) Budget
Council and at the 29/30 November 2007 meeting of the Transport
Council, which agreed the budget and the principles for a public
procurement of a full operating capability for Galileo, will allow
the project to proceed. This does not, however, alter the need
for the Community to consider further the way forward for Galileo
at key points in the project, including when bids have been received
from industry - when final decisions can be taken on affordability
and the scope of the project - and at the conclusion of the In-Orbit
Validation phase, when judgments can be made on the remaining
technical risks. These decisions should be informed by the work
of the independent expert project management team that will review
the implementation. The Government also expects, in line with
its minutes statement at the November Transport Council, that
the Commission will ensure regular reviews of the costs, risks
and likely revenues from the Galileo services.
6. It would be entirely unacceptable to proceed with
the Galileo project at this stage without fresh, independent and
rigorous evaluations of the balance between costs and benefits.
We simply cannot expect Ministers to commit the sums required
to the Galileo project and the re-opening of the financial perspective
2007-13 without proper cost benefit analysis. We support the Government
wholeheartedly in its calls for the Commission to produce this
analysis. (Paragraph 42)
There are inevitably many uncertainties in trying
to estimate the potential benefits from Galileo in advance of
the services being available, as shown by the GSA's exploratory
evaluation. The Government will continue to press the Commission
to update and develop this benefits assessment, as well as regularly
reviewing the programme to inform decision making as the project
progresses.
The Government nevertheless believes that, despite
uncertainties about the overall level of benefits that Galileo
might deliver, it would be wrong to ignore the real direct benefits
that can be expected to accrue to industry from UK involvement
in the Galileo programme, and the potential for downstream jobs
and added value for the UK from the likely growth in satellite
navigation applications that will result from the deployment of
Galileo alongside GPS.
UK industry has worked hard to position itself in
the Galileo Programme, and has already benefited from contracts
for the construction of the test satellites and other developmental
work. The first test satellite - GIOVE A - was built on time and
to budget by Surrey Satellite Technology Limited (SSTL). The second
test satellite - GIOVE B - is due for launch later this year with
a payload developed by EADS Astrium UK. UKspace - the UK industry
association for space - currently assesses that about 400 direct
highly skilled engineers and technicians are working directly
on Galileo and as many as 1600 posts are dependent on Galileo
in the wider supply chain and employment.
Developing the downstream products and applications
is where it is expected that the major part of the predicted benefits
will occur, and where most jobs are expected to be generated.
The Government is encouraging innovation in GNSS and related areas
through the Location and Timing Knowledge Transfer Network (KTN).
This is managed by the National Physical Laboratory and has more
than 450 organisations and 800 members. Its role is to research,
develop, operate and apply location and timing technologies. These
increasingly use satellite systems and will be looking to exploit
Galileo. The management team works with industry and researchers
to exploit knowledge and connect companies to emerging technologies
and the best international research and practice. As an open forum
it acts as an authoritative voice on the impact of location and
timing technologies. The KTN is part of the wider UK effort on
knowledge transfer. The areas of application that are expected
to grow enormously in the future are personal navigation / positioning
(primarily by integration into a mobile phone handset) and in-vehicle
navigation.
It is foreseen that most people will be using satellite
navigation in their every day lives in ten years' time. This takes
Galileo, used in conjunction with GPS into the mass market. The
final results of a study, jointly commissioned by DfT and BNSC
and conducted by ESYS Consulting,[4]
have been published on the BNSC and DfT websites. The study concludes
that under the most likely scenario, the UK gross value added
from downstream applications, using all available global navigation
satellite systems (both GPS and Galileo), will be approximately
£1.3bn a year by 2025. Total cumulative benefits from 2013,
when Galileo is expected to be in service, to 2025 are estimated
to be £14.2bn (£6.1bn using a 6% discount rate).
7. The possibility
that the project no longer offers value for money cannot be excluded
on the basis of the figures currently available. If, as a result
of the delay along with the cost-overrun and the collapse of the
PPP, the benefits no longer outweigh the costs, the project must
be dropped. The new cost-benefit analysis should include a comparative
evaluation of the "zero-option" of scrapping the project
altogether. It is imperative that the Government have the political
courage to bring reason and cold economic prudence to the table
in Brussels—even if that means advocating that a flagship
programme such as Galileo be scrapped. To do otherwise risks throwing
very significant amounts of good money after bad. (Paragraph 43)
The Government believes that delivering value for
money for the Community over the lifetime of Galileo will require
tight control of costs, effective management of risks and regular
review of likely revenues. At the Transport, Telecommunications
and Energy Council, the Government successfully ensured that a
ceiling was imposed on expenditure on the deployment of Galileo
in this financial perspective to 2013, and that there will be
regular independent reviews of costs, risks and likely revenues
from the services to be offered by Galileo.
FUNDING
8. We agree entirely with the government that a re-opening of the financial
perspective 2007-2013 in order to fund Galileo makes a mockery
of the complex process of negotiations and compromises which form
the basis for the financial perspective. Budgetary priorities
agreed unanimously in the European council should not subsequently
be re-visited through a qualified majority. Otherwise, the commission
would have no incentive to be realistic, disciplined and prudent
in its financial projections and management. Some member states
could seek to reintroduce changes which had been rejected under
unanimity in the European council. This is a slippery slope that
must be avoided at all costs (Paragraph 53)
9. A re-prioritisation of funds within heading 1a of the financial
perspective is, of course, not an ideal solution because other
measures to strengthen competitiveness, growth and employment
would receive fewer funds as a result. But an ideal solution to
the fine mess in which the Galileo programme is currently mired
does not exist, and it is vital that elementary and important
principles of budget discipline are not wantonly abandoned in
a scramble to save this one flagship project. (Paragraph 54)
The Government's strong concerns at the proposal
to revise the Financial Perspective, and the view that a budget
disciplined approach should require reprioritisation of funds
from within Heading 1a (Competitiveness for Growth and Employment)
of the EC Budget, has been set out consistently, including at
the July, October and November ECOFIN Councils. This argument
was again made at the November Budget ECOFIN Council.
However, at the November ECOFIN Budget Council, it
became clear that no blocking minority against the revision of
the Financial Perspective could have been sustained. It was apparent
that a number of member states were aligning themselves with a
potential-blocking minority only in order to pursue industrial
interests that were divergent from those of the UK. For this reason,
and in the absence of a sustainable blocking minority capable
of preventing the revision of the Financial Perspective, the Government
sought instead to minimise the scale of the revision and impose
the greatest degree of budget discipline on the Galileo project
going forward.
The details of the final outcome of the ECOFIN Budget
Council were reported to the House in the European Standing Committee
debate on 26 November 2007. The Government believes the agreement
reached at the Council was the best possible outcome under the
circumstances.
10. Building and running Galileo over 25 years is
estimated to cost almost £10 billion. To put it into perspective,
that is almost two-thirds of the cost of the entire Crossrail
project. British tax-payers could end up paying 17% of these costs,
and we believe they are entitled to demand that such expenditure
is not incurred without a clear demonstration of how they will
benefit from it. We recommend that the Government produce a rigorous
cost-benefit analysis, demonstrating how UK taxpayers will benefit
from the substantial sum of money they are contributing to the
Galileo programme. (Paragraph 56)
The latest estimates from the Commission, in their
Communications of May and September 2007,[5]
show costs for the design and development of the system of €1.6bn
(£1.1bn) (although final costs for the In Orbit Validation
Phase have yet to be confirmed) and estimated costs for deployment
and initial operation of the system of €3.4bn (£2.36bn)
over the period to 2013. These figures have increased from earlier
estimates in part because of the inclusion of further test satellites
and security features and also because the deployment estimates
now include the initial operating costs for the system until full
operational capability has been achieved in 2013. They also include
a contingency amount for the costs of design risks that would
have been transferred to the private sector under a PPP arrangement
and recovered in the operating charges to be paid by the Community
in subsequent years.
It is difficult to provide estimates for the long
term costs of the system in advance of decisions about how it
will be operated. The Commission estimated in 2006 that the gross
financial exposure to the public sector over the planned 20 year
PPP concession (from 2010 to 2030) for both deployment and operation,
including the costs of risks transferred and the recovery of the
contractor's capital borrowing costs might be in the order of
€8bn (£5.57bn). The Commission's Communication of May
2007 provides a number of estimates for operating costs under
the different options then considered. This suggested that on
the assumption of a PPP arrangement for operation and replenishment
following a public procurement, costs might be of the order of
€6bn (£4.18bn) over the period from 2013 to 2030. This
would give a total cost of Galileo (not including other satellite
programmes such as the EGNOS programme to supplement the existing
GPS signal or satellite research) of €11bn (£7.66bn).
Of this €1.6bn (£1.1bn) has already been spent or committed
for the development phase, with a further forecast expenditure
of €9.4bn (£6.55bn) to 2030.
The final results of the ESYS study[6]
are that under the most likely scenario, the UK gross value added
from downstream applications, using all available global navigation
satellite systems (GPS and Galileo), will be approximately £1.3bn
a year by 2025. Total cumulative benefits from 2013, when Galileo
is expected to be in service, to 2025 are estimated to be £14.2bn
(£6.1bn using a 6% discount rate.) The gross value added
figures are based on projections of revenues from the sale of
equipment and services, taking into account the value of inputs
used. The study also looked at the proportion of this gross value
added that might be ascribed to Galileo without GPS, but the complementarity
of the two systems means that it is very difficult to separate
out the benefits. The report however identifies a number of areas
where Galileo will offer unique services and features that will
deliver incremental value.
RISK MANAGEMENT - GOVERNANCE AND PROCUREMENT STRATEGY
11. We support the UK Government in pushing hard
for sound governance structures and procurement strategies on
the Galileo programme. Flawed governance or procurement strategies
could be a source of further, disastrous delays and cost overruns.
We recommend that the Government stick to its position that if
the European Space Agency (ESA) is to manage procurement, a strong
contractual relationship between ESA and the Commission needs
to be established right from the beginning. We also recommend
that the Government ensures that there is no retreat from the
position that competition is vital in the procurement process
at all contract levels. (Paragraph 62)
We welcome the Committee's support for the Government's
position and will continue to press for these outcomes, including
in discussions on the contract between ESA and the Commission
for the procurement of a full operational capability for Galileo.
The ECOFIN Budget Council on 23 November 2007 agreed
on the principle of robust and fair competition in the programme
to help ensure cost control, mitigation of risk from single supply,
value for money and improved efficiency. There was also an agreement
on a Declaration which recognised that all work packages for Galileo
should be open to maximum possible competition, in line with EU
procurement principles, and to ensure procurement in space programmes
was more widely open to new entrants and Small and Medium Enterprises
(SMEs).
At the Transport, Telecommunications and Energy Council
on 29/30 November Ministers agreed the general principles covering
governance and public sector procurement for the programme. The
Commission is identified as the overall programme manager, with
member states having full access to information. There was also
clear support for the principle of competition in the supply
chain, including multiple simultaneous procurement streams to
deliver value for money.
ALL OR NOTHING?
12. There is an alarming absence of rigorous and
unprejudiced appraisal of the costs and benefits of different
options for Galileo. Cost-benefit analyses undertaken years ago,
based on assumptions which no longer hold true, cannot be relied
upon to justify or rule out any particular course of action in
2007 or 2008. It is entirely conceivable that the best cost-benefit
solution at this stage might be to scrap the programme entirely,
and the Government should not resile from that conclusion, if
it is where the evidence leads. It might be, however, that a smaller-scale
project of some kind, such as one with fewer satellites, offers
the best way forward. We recommend that the UK Government press
for the necessary work to provide the information needed to make
sound judgements now to be undertaken urgently. In any case, neither
the project as originally conceived, nor any smaller-scale variants
should be proceeded with in the absence of a compelling cost-benefit
case. (Paragraph 68)
13. We fear that Galileo's status as a flagship grand
projet is clouding the judgement of some
in relation to its true, realistic and proven merits. An atmosphere
that does not allow the continued rationale for the full Galileo
programme to be questioned appears to have enveloped Brussels.
But no amount of perceived prestige and status derived from competing
in a civilian space race and no amount of vague but euphoric anticipation
of enormous economic and employment benefits can make up for rigorous
and balanced analysis of costs and benefit. None of the three
key EU institutions has seen fit to cool the overheated atmosphere
by ensuring that proper comprehensive analyses and cost-benefit
evaluations are undertaken before any further decisions are made.
We recommend that the UK Government do all it can to ensure that
the decision is approached in a dispassionate and unprejudiced
way. (Paragraph 69)
The Government believes that the Community should
continue to review the plans and scope for Galileo as the project
proceeds. The minutes statement tabled by the UK and Sweden at
the Transport, Telecommunications and Energy Council on 29/30
November called upon the Commission to regularly review the costs,
risks and likely revenues from the services to be offered by Galileo,
including in the light of technological and market developments
as the project progresses. It also called for review of the project
by independent experts on a regular basis (as proposed by the
Commission) and at key decision points including once quotes have
been received from industry. The Government does not rule out
the need to further consider the scope of the project in the light
of those quotes.
EU DECISION-MAKING
PROCESSES - EFFECTS
ON THE
GALILEO OUTCOME
THE PRESSURE ON COUNCIL FOR FAST DECISIONS
14. The chances of Galileo successfully achieving
the sorts of benefits that the European Commission expects continue
to decline with every passing month. However, the Commission has
failed to match its own language of urgency with urgent action.
The failure to produce a solid analysis, including a robust and
independent cost-benefit analysis in time for Ministers to make
well-founded decisions within the deadlines set by the Commission
itself is frankly negligent. (Paragraph 72)
15. The Government must work hard to ensure that
no decision on the future of the Galileo programme or on its funding
is made before all the options have been properly appraised. The
United Kingdom, and the European Union, would be better served
by delaying the decision on the future of Galileo until such a
time as the Commission is able to put rigorous and comprehensive
evidence and analyses on cost and benefits before Council and
the Parliament. A further delay would clearly be preferable to
a hasty decision based on unfounded speculation and wishful thinking.
(Paragraph 73)
The Government believes that despite the uncertainties
about the overall level of benefits that Galileo might deliver
it would be entirely wrong to ignore the real direct benefits
that can be expected to accrue to industry from UK involvement
in the Galileo programme, and the potential for downstream jobs
and added value for the UK from the likely growth in satellite
navigation applications that will result from the deployment of
Galileo operating alongside GPS. The Government has therefore
supported work to take forward the project, while ensuring that
the mechanisms are in place to maintain budgetary control and
to allow for informed decisions and key points, including through
independent review by project experts.
COUNCIL DECISIONS BY QMV
16. Given the uncertainty surrounding the likely
final cost of the project, the fact that the budget increase required
on this occasion has fallen short of the 0.03% threshold which
would trigger the unanimity procedure might be viewed with a degree
of scepticism. We recommend that the UK Government strongly resist
any attempt to smuggle major budget increases through as a series
of incremental changes taken under QMV. (Paragraph 76)
The change that the Commission had proposed to the
Financial Perspective - requiring an additional €2.4bn
(£1.67bn) - is less than 0.03% of EU GNI (approximately
€3.76bn -£2.62bn - in 2008), which means that a decision
to allow the change is permitted to be taken by QMV. Under the
EU Treaty any proposed changes that exceed that figure would require
a decision by unanimity. The amount being requested by the Commission
for Galileo represents approximately 0.02% of GNI in 2008.
The Government agrees that attempts at important
budget increases through a series of incremental changes taken
under QMV should be resisted. This is why the Government insisted
that the sum agreed for Galileo in this Financial Perspective
should form a budget ceiling for the procurement and initial operation
of Galileo. The Government also secured a joint agreement between
the European Parliament, the Council and the Commission, affirming
that any further call on resources concerning Galileo could only
be considered if it were accommodated within the ceilings of the
agreed Multiannual Financial Framework and without reverting to
the use of a Financial Perspective revision.
17. We recommend that the Government push for any
decision on the future of Galileo to be made unanimously by Heads
of State and Government at a European Council. It is neither reasonable
nor democratic for decisions of such magnitude and cost to be
taken by QMV in individual Councils of Ministers. Furthermore,
a very important principle is at stake when deciding whether or
not to re-open the Financial Perspective. This decision in itself
could have very significant consequences for the Community, and
therefore merits unanimity. (Paragraph 77)
Galileo is a Community project to be funded from
the Community budget, and is therefore covered by normal Community
rules. This includes qualified majority voting in the Transport,
Telecommunications and Energy Council. The Government supports
qualified majority voting; it has allowed us to unlock decision
making and promote a number of the UK's priorities, for instance
opening up transport markets, liberalising energy and promoting
energy security.
An integrated decision on Galileo was reached with
decisions being taken in ECOFIN Budget and the Transport Councils
as the appropriate Council formations. The European Council confirmed
the integrated decision of the Council on the financing, governance,
and procurement policy for the European satellite navigation programmes
at its meeting in December.
THE ROLE OF THE EUROPEAN PARLIAMENT
18. The process for reaching a decision on the future
of Galileo and its funding is impenetrably complex. We fear that
this complexity, along with the fact that the Galileo decision
is now caught up in the negotiations on the 2008 EU budget, is
creating an unstoppable momentum for a very expensive decision
that is not supported by any robust evidence. We are deeply concerned
that, with no one individual or body taking ultimate responsibility
for a decision of this magnitude, a path of least resistance will
simply be taken. This path is rapidly becoming a decision to proceed
with and fund Galileo in the manner proposed by the European Commission
in September. The Galileo train appears to have left the station
without a qualified driver or anyone to apply the brakes. It would
be a shameful indictment of EU decision-making if our worst fears
were vindicated. (Paragraph 82)
The procedure is clear. The European Parliament participates
fully in the budgetary process as the other half of the budget
authority. Just as the Council has to agree to the funding proposal
for Galileo, so will the European Parliament.
The European Parliament had previously adopted a
resolution supporting the continuation of the Galileo programme
while opposing any solution which would combine the EC budget
with intergovernmental additional funding. The European Parliament
called for full financing of Galileo under the EC budget - in
line with the Commission's proposal.
The financing agreement for Galileo and the European
Institute of Technology reached at ECOFIN Budget Council in November
2007 was endorsed by both sides of the Budget Authority. The accompanying
declarations were jointly agreed by the Council, the Commission
and the European Parliament.
Further discussions at official level between the
Commission and member states on the draft regulations to implement
the Council decisions will take place before the regulations are
brought forward for adoption. The regulation will be subject to
co-decision procedure and will also have to be adopted by the
European Parliament.
CONCLUSION
- THE GOVERNMENT'S
OPTIONS
19. The jury is out on the continued rationale for
Galileo. There is insufficient reliable and robust information
about projected costs, relative to the benefits, for us to be
able to judge whether scrapping or proceeding with the programme
offers the better value for money for taxpayers. Neither are we
able to judge which system configuration, and what level of involvement
by the private sector, would provide the best cost-benefit ratio,
in the event that we proceed with the programme. More worrying
still, neither the European Commission, nor any Member State,
is in any better position to make these judgements. The evidence
and analysis provided by the Commission is scant, and gives no
real thought to crucial risks and alternative options. On this
basis, Governments find themselves pressurised to make snap decisions
costing billions of pounds of taxpayers' money. The Government
must do everything within its power to prevent any decision on
Galileo from being made until independent and robust analyses
of the costs and benefits of all the options are on the table.
(Paragraph 86)
20. We note that the Government on its own does not
have the power to stop, or to impose changes on the Galileo project.
However, the Government must nonetheless consider seriously what
the true price of complacency on Galileo could turn out to be.
In the worst case scenario, this matter is serious enough that
the UK might have to make progress in negotiations in other EU
policy areas contingent on a reasonable and well-informed decision-making
process on the Galileo programme. (Paragraph 87)
21. We are not opposed to the Galileo project per
se, but we see no choice but to recommend
that the British Government seek a debate on the future of Galileo
at a European Council of Heads of State and Government. We also
recommend that the Prime Minister discuss with other Heads of
State and Government how to ensure that decisions of this magnitude
will never again be pressed through in the unacceptable manner
and on the basis of such poor evidence and analyses as has happened
in the case of Galileo. (Paragraph 88)
22. The history of the Galileo programme provides
a textbook example of how not to run large-scale infrastructure
projects. Many of the problems encountered by the project are
not peculiar to the EU and can be observed across a wide range
of projects carried out by Member States. However, the processes
and institutions of the European Union are in danger of falling
into disrepute if Galileo is allowed to continue in its present
form. The Government must work to ensure that common sense and
good governance are reinstated. The time has come for the Government
to initiate a reappraisal of other large EU projects to ensure
that the Galileo fiasco is not repeated elsewhere, outside the
limelight. (Paragraph 89)
23. We believe it is essential that the UK Parliament
is given the opportunity to debate developments in the Galileo
programme once again before any decision is made on the project.
British tax-payers will be paying around 17% of the cost of Galileo
— hundreds of millions of pounds at the very least —
and they have a right to expect that this expenditure will be
adequately scrutinised by their elected representatives. If no
time is found for an urgent debate, we shall seek an Estimates
Day Debate at the earliest opportunity. We therefore recommend
that the Government schedule a debate on the floor of the House
of Commons as soon as possible, and certainly before the next
meeting of the Transport Council on 29 November 2007. (Paragraph
90)
The Government notes the Committee's conclusions
but we believe - in line with the vote taken after the European
Standing Committee debate on 26 November 2007 - that the clear
direct benefits to the UK, together with the wider potential benefits
to the UK and European economies from the Galileo system operating
alongside GPS, justify the United Kingdom's continuing support
for the project. This will be subject to ensuring that the project
is constrained within the agreed budget for this financial perspective,
that the mechanisms and necessary skills are in place to ensure
that the risks can be effectively managed, and that there is an
open competitive procurement architecture with parallel multi-source
procurement to provide open access and fair competition for the
private sector at all levels, including SMEs. These points were
agreed in the ECOFIN Budget and Transport Council discussions
on 23 and 29 November and endorsed in December 2007 by the European
Council.
1 Exchange rate 1 Euro = £0.6968 - all figures
converted at this sterling rate which applied on 30 September
2007. Back
2
pg 8-9: Commission staff working document (SEC(2007) 1210 which
accompanies the Commission's Communication of 26 September 2007
(COM(2007)534). Back
3
As footnote 2 above. Back
4
ESYS Consulting - UK GNSS Downstream Benefits Assessment: 2007
Final Report for BNSC/DFT of 20 December 2007. Back
5
Commission's Communication of 16 May 2007 (COM(2007)261 final)
and Commission's Communication of 26 September 2007 (COM(2007)534). Back
6
See footnote 4 Back
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