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Lord Higgins: I understand the noble Lord's point about specific amendments of which we have debated a number. The reason I did not table a specific amendment is that the whole of Clause 6 relates to the payments process, which we have debated throughout. I merely sought to pick up a few loose ends which I, for one, had not fully understood. I well understand that the noble Lord may prefer to write to me about those issues. We have discussed the matter at considerable length; however, I am still not clear, given all the procedures that the noble Lord has outlined, how the Inland Revenue will need to recover an over-payment since it would seem from the noble Lord's remarks that an over-payment will not take place.

Lord McIntosh of Haringey: An overpayment could well take place, just as overpayments and underpayments of tax take place. There may be a mistake by the employer or even--dare I say it--by the Inland Revenue that must be corrected. There is nothing more sinister about it than that. The intention is to correct an inadvertent or even deliberate mistake.

As to interest, the same rate will be applied as applies to PAYE and the rest of the tax system. Interest is charged on underpayments at a broad commercial rate which is fixed by the Treasury at the appropriate time. Presumably, the same will apply to refunds on overpayments. I am advised that the expression

Lord Skelmersdale: My noble friend Lord Higgins referred to loose ends. I have a question the answer to which I certainly do not expect to receive this evening. My question is prompted by an observation of my noble friend Lord Dudley. On occasions there will be a new employee who has just come off income support and manages to get two short-term jobs on the same day. One example that springs to mind, which is not a good one, is an individual who has regular employment for three days a week cleaning two houses, offices or

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whatever. What will be the arrangement for the payment of the tax credit? I have sprung this on the Front Bench opposite and do not have the least idea of the answer. Perhaps the noble Lord will consider it and incorporate the answer in the letter to my noble friend Lord Dudley.

Lord McIntosh of Haringey: I am grateful to the noble Lord for his forbearance. For example, one may obtain a job as a dishwasher and be promoted to waiter in the afternoon.

Lord Skelmersdale: That is certainly not the case. If one is promoted within the day no change takes place. The noble Lord and I agree that it is a serious point which deserves a serious answer at some stage, but not tonight.

Lord McIntosh of Haringey: It deserves an answer and I shall write to the noble Lord and place a copy in the Library for the benefit of other noble Lords.

Clause 6, as amended, agreed to.

[Amendments Nos. 46 and 47 not moved.]

On Question, Whether Clause 7 shall stand part of the Bill?

Lord Higgins: This is the reverse of what the Committee was concerned with previously. There is a series of points not covered in earlier amendments. Essentially, the clause implements Schedule 3 to the Bill relating to the right of employees not to suffer unfair dismissal. Presumably, the purpose of the clause is to ensure that an employee is not unfairly dismissed if an employer decides that he prefers not to have on his payroll someone who is drawing working families' tax credit because of the administrative problems in which that involves him. If that is not so I am not entirely clear why Schedule 3, which is related to the clause now being debated, needs to be incorporated here rather than as part of the already well-established general law relating to unfair dismissal. Presumably, there is a particular reason why it is felt necessary to legislate specifically in this context, but I am not clear what it is.

Baroness Hollis of Heigham: I am disappointed that we have missed an opportunity to discuss the Agricultural Gangs Act 1867 and all the rest of it, which I would have been very happy to chat about for some time. Having been deprived of that opportunity, I turn to Clause 7. It may assist the noble Lord if I explain the purpose of Clause 7. If he wishes to return to the matter tonight I shall do my best to answer the noble Lord or write to him. Clause 7 introduces Schedule 3, which is a very important extension of existing employment rights to employees who are entitled to receive their tax credits through the pay packet.

We fully expect employers to comply with their responsibilities, and we have done our best to minimise any work that this may involve. But we must also ensure that employees do not feel inhibited in claiming their entitlement through fear of victimisation by their employer in the form of detriment or even dismissal. In

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the light of the Opposition's Amendment No. 31, which was agreed this afternoon, where in that situation an employee or lone parent feels pressurised by a less than scrupulous employer this may have particular import. That is the purpose of Schedule 3.

The schedule provides that, as with other employment rights, if employees believe that they have suffered detriment or dismissal simply because they have asserted their right to receive tax credits with their pay they will be able to take their complaint to an employment tribunal. Detriment may consist of any action or failure to act by the employer as a result of an employee's application for tax credits to be paid through the payroll. Examples of this may be refusal of merited promotion, not giving a pay rise which is awarded to other employees, disciplining an employee or singling him or her out for relocation. There will be no qualifying period of service, which means that the right conferred by Schedule 3 will be a "day one" right.

Payment of tax credits by employers is a radical feature of the scheme that this Bill introduces. If employees are to have confidence in this method of payment we must make it clear to them that they will be adequately protected against any form of discrimination at work as a result of receiving tax credits in this way. Groups campaigning for employee rights have welcomed these provisions, and I therefore commend Clause 7l and Schedule 3 to the Committee.

If the noble Lord wishes I can clarify the connection with disabled employees under DPTC, but he may prefer to leave that issue to subsequent amendments when the Committee deals with disability. However, I hope that I have dealt with the question raised by the noble Lord as to the circumstances in which this may be germane.

Lord Higgins: I do not want to detain the Committee for too long. One fully understands the arguments in favour of both the clause and schedule. Even so, one is unclear why the Bill needs this particular clause because it is not already covered by the existing law relating to unfair dismissal. I believe I am right in saying that the schedule makes no specific reference to working families' tax credit, which would be expected if this measure operated within that context.

To put the same proposition another way, either the existing law is already adequate or this schedule, without specifically referring to tax credits, extends the law beyond its present ambit. I am not clear, therefore, why the schedule is necessary. While I fully understand and support its objectives, I am not clear why it is not already covered in law.

Baroness Hollis of Heigham: I believe that it is fairly straightforward. As happened with the minimum wage legislation, it is not within the remit of this Bill to amend employment law in this way, hence the specification.

Lord Skelmersdale: The Minister was unable to provide the answer to my noble friend swiftly enough. The answer can be found at the top of page 20, lines 1 and 2, where specific mention is made of Section 6(2)(a)

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or (c) of the Tax Credits Act 1999. Therefore the Employment Rights Act 1996 is amended by that specification.

Lord Higgins: The noble Baroness said earlier that we do not have power under the Bill to amend the Employment Rights Act 1996.

Baroness Hollis of Heigham: I now have two versions from noble Lords opposite. I understand that, as with minimum wage legislation, we do not have general powers to amend. Therefore it is being done by schedule. I think that it is as simple as that.

Clause 7 agreed to.

Clause 8 agreed to.

Lord McIntosh of Haringey: I beg to move that the House do now resume. In doing so, I suggest that the Committee stage start again not before 8.30 p.m.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.


Lord McIntosh of Haringey: My Lords, unless any noble Lord objects, I beg to move that the Motion standing in my name be postponed until after the conclusion of the Committee stage of the Tax Credits Bill.

Moved, That the Motion standing in the name of the noble Lord, Lord McIntosh of Haringey, be postponed until after the conclusion of the Committee stage of the Tax Credits Bill.--(Lord McIntosh of Haringey.)

On Question, Motion agreed to.

Satellite Communications

7.32 p.m.

Lord Kennet rose to ask Her Majesty's Government what is their policy towards the future international development of civil and military satellite commu- nications and navigation systems, in particular in relation to the European Space Agency and to the Western European Union.

The noble Lord said: My Lords, it is 200 years since Haydn wrote an opera about a picnic on the moon, and a generation since Armstrong took his step. But we do not seem even now to know what we think about ownership, policing, rights and duties in space.

In a few days my noble friend will chair a meeting of the Ministerial Council of the European Space Agency. The agenda covers just about the whole civil spectrum: the agency does not cover the military side. The noble Lord, Lord Renwick, has put down another Question for a few weeks ahead and I hope that the Minister will be able then to give the House lots of good news about

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what happened. For the moment, we can put our own ideas and questions to the Minister and thank him for being available to Parliament.

Space is used for communicating one to one, and one to millions. The rate of expansion is perfectly amazing. There are also all the functions deriving from having a look at what is below: mapping, positioning, global environmental science, the weather, and of course natural disasters; and sideways and above, the monitoring of space itself, asteroids, and the better view of the universe. Most of those functions are triple use: civil commercial; civil non-commercial; and military.

There will of course soon be the stationing of weapons unless the world wakes up and tries to stop the United States doing that. The US military increasingly uses civil systems for military purposes because that is where the speed of technical advance is: from the civil side. On the other hand, the United States is rightly scared stiff of its own vulnerability to cyberwar of all kinds: hacking, listening to signals, stealing property of one sort or another, corruption of signal, forged signals, even shooting down--all the endless things that the United States military has itself been developing to use against others. It now finds itself, and the commercial firms on which it depends, far more vulnerable than anyone else. The immediate profits, however, are so dazzling that the commercial people are simply not interested in these hypothetical dangers. They are in fact far from hypothetical, as is shown by current events at Los Alamos.

Perhaps we may turn to my noble friend for an account of the actual role played by various sectors in building and operating those systems, both civil and military: I mean international organisations, states, and private enterprise, both national and international. That would help us to consider what role they should have.

What control over the objects and functions is exerted by international organisations and states respectively? Last summer the European Union and the European Space Agency passed a joint resolution towards greater synergy and an extended competence for states. Good. So what arrangements should a civilised state make? Those arrangements have to be both for international control (at present there is nothing but the space treaty); national control (including the military preparedness of each state); and for its own industrial enterprises, both national and transnational.

For the UK there is the terribly familiar conundrum: do we do what the United States would find it convenient for us to do; or do we do what would be convenient for ourselves and our European neighbours? At present the US space industry is conspicuously dominant. Unless we are careful it will soon reach a predominance that we may well find inconvenient, if it has not done so already. The market in all these fields is hugely distorted of course by military considerations, and such a market cannot be allowed to dictate government decisions.

The US military has every hope that it is well on the way to establishing space dominance. This would include weapons in space; and it would include the anti-satellite weapons which were voluntarily banned

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alongside the ABM treaty. Space dominance and information warfare dominance are parts of the announced and already funded policy of Full Spectrum Dominance 2010: this too, the Government must take into account. The Ministry of Defence dislikes admitting the existence of those American policies, but that has to be put to one side. The policies are there and are in operation.

I turn now to a more pleasant subject: Galileo. It is an initiative for a European navigation system being devised by the European Space Agency and the European Union which would for us complement the US global positioning system. For what may come to exist between the EU and Russia, the Russians choose the word "co-operation" rather than "complementarity". It is an interesting difference.

I understand that the DTI supports Galileo, but only subject to other departments sharing the cost. Among those departments would be the Department of the Environment, Transport and the Regions. Its responsibilities for shipping and aviation should make it an obvious supporter. But is it in fact supporting the DTI? And is the Ministry of Defence interested, or is it happy to depend on a system subject, as it knows, to very active United States control?

In passing, what are the Government's plans for the follow-up to Skynet 4? What criteria are there for Skynet 5? Is the value of the UK industrial base taken into account when the decision between US and UK manufacturers is made?

How much money do the Government think it right to put into doing what they believe is right? I give some figures for space spending per country in 1998, expressed in millions of euros: France, 632; Germany, 553; Italy, 269; the United Kingdom, 186; and Belgium, 125. The figures per head in each country for civil space spending are even more striking. The United Kingdom is in 13th place, after Finland and Austria; and in the table for combined civil and military space spending we are in ninth place below Norway and well below Belgium, neither of which has a military space programme. That last table shows the US at 89 euros per capita per annum, France at 30 and the United Kingdom at seven.

On environment, the oceans and so forth, Europe must have its own sources of knowledge in view of the US tendency to refuse international responsibility for its own contribution to environmental degradation.

I return to the militarisation of space. Despite the space treaty, the purpose of which was the reservation of space for peaceful uses for the benefit of all mankind, this militarisation has gone on steadily, particularly with the development of military satellites. So far, the weaponisation of space has not taken place, but the United States has for several years now been developing a laser weapon to be used from above what it considers is, or ought to be, everybody's national airspace, in Boeing 747s, so far the only platform strong enough. This promises a breach of Article 4 of the space treaty. In the language of the treaty: such weapons can certainly cause "mass destruction". What, one wonders, is the

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news of the US transatmospheric space plane which was being planned in 1997, which would among other things disable adversary space vehicles and release weapons against terrestrial targets?

In February 1997, I asked the then Government what inner and outer limits they had set for our national airspace, over which we exercise sovereignty. They answered that no particular circumstances had arisen which had caused them to define the vertical limits of UK airspace. In March 1997, they said that they had not considered the detailed implications of the space-based laser for the UK, and that they were not concerned whether there were military satellites in outer space or not. They did not consider that an agreement on the extent of national airspace was necessary. For years, although the UN General Assembly has had "Prevention of an Arms Race in Outer Space" on the agenda, Britain has tended to abstain or vote against, on the ground that there was no such thing in view. Perhaps it is now time to take these matters seriously: both the dimensions of national airspace and the weapons in space. The laser in the Boeing is due to be tested later this year.

We also need some new law to deal with space garbage. I hope that when the Government publish their new space policy document in July all these things will be seriously considered and dealt with. In considering the time available to get things under control, we must remember that global warming is now bringing the concentric layers of atmosphere, troposphere and stratosphere around the earth closer and closer to each other.

I conclude with a quotation from a paper by the Director-General of the European Space Agency. He stated:

    "Today's space systems are the key ... to regional and global security and peacekeeping". In the same document he also stated:

    "If in the next century an enlarged European Union wants to play a political and economic role commensurate with its size, economic wealth and cultural heritage, then a full space capability is essential. Full space capability means the autonomy to access space and to define, build and operate complete space systems in all strategic areas". To my mind, and to the minds of many on all sides of the House, the answer is, "Be European, as usual".

7.43 p.m.

Lord Cope of Berkeley: My Lords, my interest in the subject arises from my previous existence as Member of another place. For some years, Filton, near Bristol, was in my constituency. It included the British Aerospace space facilities, now merged into Matra Marconi. Filton remains Britain's most complete aerospace complex in terms of the expertise in different areas. That is recognised by the fact that the chosen Centre of Expertise for Aerospace and Defence for Business Link is the South Gloucestershire Chamber of Commerce, of which I happen to be the honorary president.

However, the debate is looking forward anxiously to the European Space Agency's ministerial meeting on 11th and 12th May. The ESA is an important organisation of which the United Kingdom should be an enthusiastic member.

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Given the huge sums of money spent on space projects, in particular by the United States and Russia, co-operation between countries of our more modest size is essential, just as it is for aircraft and missile systems. We can no longer "go it alone".

The EU Commission is also involved. Among the items on the agenda for next week's meeting is the proposal that Europe should have its own next generation satellite navigation system, known as Galileo. That would be run by the ESA. It is important that it should be run entirely by the ESA and the member states of that agency rather than by the EU.

There are two basic reasons for that. First, the ESA does not include all the EU countries, let alone the candidate countries, but it does include several countries which are not members of the EU and do not wish to be; notably, Norway and Switzerland. Canada is a co-operating state.

Secondly, I am happy that the EU should be a customer, but I believe that the EU decision-making machinery is unsuitable for such a project. Apart from the problems of the EU's financial management systems, which the new Commission is due to remedy, decisions on the ESA and Galileo need to be made strictly on their merits and not traded for concessions on other matters, as tends to happen in EU negotiations. I have previously attended EU Council meetings in a variety of ministerial capacities and have therefore experienced that.

By contrast, over the years a whole range of European aerospace projects have been co-operative projects between different groups of European countries in both the civil and military areas. Many have been highly successful, in particular the Airbus. Those are the relevant precedents for the running of Galileo.

I believe that Britain should support Galileo and participate enthusiastically in it. I hope that the different government departments mentioned by the noble Lord, Lord Kennet, have been brought together so that we can ensure that we do participate enthusiastically. One can expect that the governments of France, Germany, Italy and so forth will push for the maximum for their companies--and the British Government must do the same. This country already has an outstanding record both in space satellites and in related parts of the aerospace industry. Without active participation in Galileo, all that and the jobs involved will be at risk.

Technology and the technological lead move quickly from firm to firm and country to country if frustrated. Furthermore, we could find our money, through the EU, being used to help our competitors in other EU states. It is not only a question of the immediate work on Galileo, huge as that will be--perhaps £2 billion or more--but the massive potential for work on applications and downstream work. Information services which use positioning information are big business and they will undoubtedly grow in commercial importance. We should continue to be in this sector of technological expertise for its own sake and for the spin-offs.

There is also an important defence angle. Putting it in crude terms, the more different satellite navigation systems there are surrounding the globe, the more

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difficult it is for someone to interfere with them all. At some stage in the not-too-distant future, that may prove a most important factor, because defence systems are relying more and more in practice on satellite navigation and positioning systems and the old techniques, such as hand-calculated navigation, are falling into disuse. Satellite systems have become quite literally vital, not only for ships and aircraft but for missiles, artillery and ground troops generally. Therefore, both the MoD and our defence contractors, as well as the civilian firms in the field, have an interest in Britain participating fully in Galileo and in other projects.

I hope that the Government will be pitching hard for the Galileo Agency to be set up in the UK. I believe there is great logic in that, given our expertise and experience, and because there is an expectation that Galileo will involve public/private partnership. British financiers have more expertise than any others in that area as well.

Of course, Galileo will not be the only system in action. The present ESA Geostationary Navigational Overlay System already augments both the United States and the Russian systems. In looking to the future, it would be helpful to understand how the Government and the ESA see Galileo working alongside the US and Russian systems. Specification, control and industrial participation are all relevant to this.

I therefore hope that the Minister will be able to give us an encouraging description of the brief which government negotiators will be taking to the meeting on 11th and 12th May in respect of Galileo.

Before I sit down, however, I should like to mention briefly another subject which arises from this Unstarred Question. I refer to military satellite communications, to which the noble Lord, Lord Kennet, also referred, and specifically to the approach of Skynet 5, the next British military communications system.

I understand that the previous co-operation with France and Germany has ceased for timing reasons, which I fully understand, although I believe it is a matter of regret. As a result, the MoD has started negotiations on possible PFI contracts with Matra Marconi Space UK and with Lockheed Martin. However, I am not clear how the Government see military communications developing in the WEU and NATO. It would be helpful to have a steer on that.

There are very important links between military and civilian developments in this regard. As the noble Lord, Lord Kennet said, military systems can use the very advanced work that is being done in the civilian field, and our current leadership in the military field is a great advantage in developing civilian projects also.

I believe that it is right to be particularly vigilant in respect of the question of United States space dominance. I believe that the USA has recently tightened up its own export regime for satellites, but it is also true that US companies have shown a close interest in UK know-how. We must be vigilant to ensure that any restrictions and any co-operation are on a strictly reciprocal basis. The Americans are most

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valuable allies and have been on many occasions, but they are also formidable competitors and one has to watch one's own position in dealing with them.

I believe that space is a most important area of activity for technological reasons, for defence reasons and for economic reasons. The British Government and people should support such activity as much as possible.

7.54 p.m.

Baroness Sharp of Guildford: My Lords, from these Benches, I congratulate the noble Lord, Lord Kennet, on initiating this important debate.

I continue to be astounded by the pace at which technology is advancing in this area, as in others. Today, provided you have the right sort of mobile phone, I gather that there is nowhere on this planet where you are beyond its reach, which, if I might say so, makes the tranquillity of your Lordships' House from the obtrusive ringing of such instruments all the more valuable.

High resolution earth observation satellites can identify ground level features of less than one metre in diameter. Satellites have long provided the key element in ship and aircraft navigation, but now we are beginning to see in-car navigation systems. Soon, if we want it, satellites will be able to run our cars, aircraft, trains and buses without any driver or pilot. I doubt whether we shall be able completely to eliminate human error, and I am by no means sure that I, for one, will be happy to hand over all such controls to "big brother".

All these developments, and more, indicate the enormous potential of this technology and the considerable market that it creates for both hardware and software. At present, these markets are dominated, as we have already heard, by the United States, whose network of satellites (known as the global positioning service or GPS) is run by the Department of Defense. Here we have a classic example of what is known as dual-use technology. The GPS system is the backbone of the military communication, observation and navigation systems. Thanks to its functioning, NATO has been able to follow troop movements and to observe troops in Kosovo, to direct its cruise missiles to very specific targets, and to monitor the impact of their bombardment.

However, GPS is not just for military use. Its civil applications have been booming, especially, of course, for communications applications, as we become increasingly hooked on sending packets of digital information to each other around the world.

I gather that at the moment the projections are that the market in communications technology in 2005 is likely to be worth no fewer than 500 billion euros; for navigation technology systems something like 70 billion euros; and for earth observation something like 25 billion euros.

Given the size of those markets, the question at issue is whether Europe can continue to rely on the US GPS system or whether it should build its own. There are, in many senses, clear advantages to having one world-wide system with common standards and common interfaces. However, the downside, as we have heard from the

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noble Lords, Lord Kennet and Lord Cope of Berkeley, is the dependence, particularly on the US, and particularly, as it is run by the Department of Defense, on the continuing goodwill of the US military. Not surprisingly, the US military has refused any notion of joint control of its system. In other words, while Europe may share and use the system, the US will own and manage it.

As we have already heard, that domination is causing increasing unease. The unease arises both on security grounds--in terms of how far we want to be totally dependent on the goodwill of the US military--and on commercial grounds. There are, as I have indicated, increasingly large markets with lucrative side-markets in areas such as sensors and transmitters which again currently fall disproportionately to US suppliers. The Germans, the French, and even the British are anxious to secure larger shares of those markets.

It is from those origins that Europe's plans for its own global navigation satellite system (GNSS) have emerged, plans that have coalesced into project Galileo. The Commission has proposed a £2.9 billion Euro programme, half to be funded, as the noble Lord, Lord Cope of Berkeley, indicated, by a public/private partnership, but the other half to come from the public purse, with the Commission contributing via its Trans-European Network System (TENS), run from its Transport Directorate-General, to the tune of 500 million euros, as I understand, part from the framework programme, and the remainder to come from the European Space Agency. The proposals have to date been doing the rounds of the lower level committees within the Community but will, as has already been mentioned, be coming before the ministerial meeting of the European Space Agency in May, and decisions are imminent. From these Benches, we hope very much that we shall have a positive response from the Minister today in terms of his support for the European initiative.

Not surprisingly though, the US is not enthusiastic about Galileo because it breaks its monopoly as regards the GPS system. But with markets expanding so rapidly, there is a strong case for competition; for example, European users would have little choice but to accept any user charges which the US may impose. As the noble Lord, Lord Kennet, made clear, it also enables Europe to develop its own military capabilities in that area rather than, as at present, being totally dependent on US hardware and software and the US military system.

The noble Lord, Lord Kennet, mentioned the involvement of the WEU. The WEU has established, outside Barcelona, a small facility which is at present training European capabilities in image interpretation and the development of those facilities. In the first instance, it was used for monitoring and verification purposes. Indeed, I gather that the latter--verification--stimulated the establishment of that Barcelona centre after the signing of the 1990 treaty on the reduction of conventional forces in Europe.

I gather that in spite of that, the potential for satellite observation is not being exploited as it might be in terms of verification. We have learnt from experience in Iraq

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that verification can be the sticking point in many arms control negotiations. It is a vitally important application of the new technology and I seek an assurance from the Minister that its development is being given due weight beside those other applications which, in the short term, are more attractive because they perhaps yield greater profits.

Finally, I should like to put in a word for what is, for me, a home-based industry given that I come from Guildford and that Surrey Satellite Technology, based on the communications system research centre at Surrey University, has pioneered the development of small, low-orbit satellites, known as Little Leo. Those weigh only 300 pounds and can be put into orbit relatively cheaply and used for all manner of observations and data collection facilities--monitoring lorry or train movements and even, as an article in the Observer last Sunday suggested, reading remote gas and electricity meters.

Surrey Satellite Technology is one of Britain's major success stories, where university and industry has met. But I wonder whether enough help is being given to the small players in that sector. Over the weekend, I was speaking to one of the leaders of the research group at Surrey University about this impending debate. I asked him what message, if any, he wished me to convey to the Minister. His immediate response was to say that the British National Space Centre--the DTI group responsible for that industry--is not really interested in small companies. The DTI group's main concern is with the big companies--Matra Marconi and British Aerospace--and with the large lucrative markets, especially the communications markets.

As the noble Lord, Lord Kennet, mentioned, Britain is putting about 186 million euros per year into space technology. That may not be very much beside what the French and Germans are putting in, but beside the current innovation budget of the UK Government, it is quite large. It is a substantial sum. I am not confident that the money is being spent currently in a way which necessarily brings the greatest return to British industry. Is too much going to the established companies to exploit the established markets? Is enough going to those small, new and potentially highly innovative companies to help them to establish themselves? Are we being, as we so often are, too risk-averse in that area? I look forward to hearing the Minister's reply.

8.3 p.m.

Baroness Miller of Hendon: My Lords, I too thank the noble Lord, Lord Kennet, for introducing this timely and important short debate. The debate is timely for two reasons. The first is the events in the Balkans. The military application of satellite navigation systems not only enables soldiers on the ground to know precisely where they are on the surface of the earth within a matter of a few feet; it would also enable artillery fire to be called down on an enemy with the same accuracy. Currently, it is vital for the pinpoint accurate targeting of guided missiles.

Nearly 60 years ago, during the war, British scientists found a way to divert the Luftwaffe's rudimentary radio navigation beams and send the bombers astray.

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I mention that because in March this year, the Daily Telegraph carried the disturbing report that hackers had seized control of a British communications satellite covering Scandinavia and the North Sea, triggering what was described as "a frenetic security alert."

The Leader of the House of Commons warned of the growing risk of malicious electronic attacks on Britain's critical information infrastructure. I hope that in his reply the Minister will be able to assure us, without, of course, compromising security, that methods are urgently being put in place to prevent communication satellites being interfered with or navigation satellite systems being compromised by either mischievous amateurs or an enemy and thus misdirecting missiles on to, perhaps, civilian targets or even on to empty fields.

The American Global Positioning System (GPS) and the Russian Global Navigation Satellite System, known by the acronym of GLONASS, are military networks. They are very similar. Each uses a network of 24 satellites. The European Commission has proposed that Europe should have its own satellite navigation system, to be called Galileo, both for security and economic reasons. All noble Lords have mentioned that important topic. I shall not dwell upon it as I could not improve in any way on what my noble friend Lord Cope of Berkeley has already said.

Decisions on the project will be taken at the forthcoming ministerial meeting. Bearing in mind its importance to the British aerospace and electronic industries, I hope that the Minister will be able to give an indication of the Government's intentions on participation.

On the technical side, bearing in mind that the American and Russian systems occupy a large part of the available spectrums--what laymen like me call the wavelengths--what sort of deal may be expected to allow Europe to get in?

As regards defence, we currently use Skynet 4 satellites, costing some £427 million, which will need to be replaced around the year 2005. Originally it was intended to build a new Skynet 5 system in conjunction with Germany and France. However, those two countries ran into what I believe were funding difficulties and there was a danger that the project would not be ready in time. Therefore, Britain decided to go it alone.

Written Answers in the other place announced that proposals from industry for the design state of Skynet 5 were being evaluated and that implementation was planned to commence in 2002 with the satellites being brought into service in 2006. It would be helpful if we could be informed to whom the design contracts were awarded. The replies indicated that the Government preferred the system to be paid for by the PFI. I am intrigued as to how that would work in the case of a piece of military hardware. How would those providing the finance be paid? Would the satellites be leased to the Ministry of Defence? Would there be payment per contract, as in the case of a mobile telephone? If private finance is involved, how secure will the system be? I hope your Lordships will forgive my total naivety, but I await the Minister's reply with genuine interest.

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Doubtless the United States will be interested in the UK's military programme and in Galileo. However, bearing in mind the US regime for the export of satellites and other technological hardware, what steps will the Government and the EU take to ensure that there are reciprocal exchanges of information and that no surprise restrictions will be applied belatedly by the United States? My noble friend Lord Cope of Berkeley mentioned that point.

It was possible to finance the enormous cost of developing existing military systems because of the bottomless purses available for the American, European and other military forces. However, the military communications systems have, in common with the rest of the space programme, produced spin-offs for the benefit of civilians. The navigation systems now available to yachtsmen and merchant ships alike are just one application. Some of the ubiquitous mobile telephones can operate from anywhere in the world, as the noble Baroness, Lady Sharp, mentioned. I do not mean just from the next table to one in a restaurant but from otherwise inaccessible and telephone-free places. I telephoned my husband from the plane to say that I would be home in 10 minutes for dinner and he could hardly believe it.

Communication by satellite is growing at a breathtaking pace. It is not unreasonable to predict that in the not too distant future telephone boxes will disappear from our streets. I believe that to be no exaggeration. There were 4 million new domestic users of mobile phones in the United Kingdom last year. Forty per cent of homes--that is some 10.4 million--have access to one and in some cases parents provide them for their children.

Calls to your home or office can be diverted to the mobile phone in your pocket or handbag--wherever you are in the country. Soon a call will be able to find you anywhere in the world. I am sure that the noble Baroness, Lady Sharp of Guildford, agrees with me when I say that I am not sure that that will be a blessing.

The same rapid advances apply to television. I can recall the excitement when the first broadcast was made, by microwave, across the English Channel from Calais on 27th August 1950. The audience was a mere 30,000, compared with the millions who daily take for granted the pictures that we receive in our homes of wars, disasters, other news events and sports, often while they are happening.

Undoubtedly, it was the fact that television could cross frontiers that contributed to the fall of communism. Ordinary people in their own homes could see the standards of life and freedoms enjoyed in the West in contradiction to the lies they were fed by the propaganda machine.

During the Gulf War people in Iraq could see events on CNN that their military censors were trying to conceal. Let us hope that the inhabitants of Serbia are able to receive pictures from the BBC and CNN of what is really happening to the Kosovars.

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The second reason why this debate is so timely is that on 11th and 12th May the seventh European Space Agency Council meeting, at ministerial level, will take place in Brussels. Britain participated in the ESA from its earliest days. Governments of both parties have given it their support from the beginning, but perhaps not as wholeheartedly or to the fullest extent due from a nation which wants to be involved in "the white heat of technology" or take the rightful place that its skilled scientists definitely deserve.

Governments have nothing to do with the work of the ESA. All that governments do is provide the money. It is not government money, but taxpayers' money. Although the government of the day contributed just 3.6 per cent of the development of the Ariane 4 launching system, we withdrew from Ariane 5, which now earns £700 million a year and has 60 per cent of the launcher market. I do not make a political point here. I simply comment that I detect the dead hand of the Treasury here, as in so many areas. I have no doubt that the Minister will assure us of the Government's continuing support for the European Space Agency.

The ESA took a leading part in developing satellites for telecommunications, broadcasting and cable feeds. When the Olympus experimental satellite was launched in 1989, it was the largest civilian satellite in the world. It also provided the high definition television transmissions and capacity for the experimental digital broadcasting which is just about to burst on to the world. The noble Baroness, Lady Sharp of Guildford, also mentioned that.

This month's ministerial meeting will have an agenda prepared by the Director-General of the ESA calling for the provision of funds amounting to billions of euros: 2.6 billion for the year 2000/2001, including 1.85 billion for the scientific programme. Private industry around the world is also providing research funds and facilities in this area, which explains why those shares are enjoying such a boom on world stock markets.

In Brussels, Ministers will be asked for commitments to some 12 major programmes, at least five of which are directly concerned with communications and navigation. Some, like Galileo, will make Europe less dependent on American and Russian systems. There are also programmes for the development of launch vehicles which will serve the same purpose.

Communications and space technology constitute an expanding and fiercely competitive industry. Even the Chinese are now offering facilities for civilian use of their military hardware at prices which, as you may expect from their low labour costs, are comparatively inexpensive.

The ESA is involved in many projects, too numerous and lengthy to mention in this short debate, but we hope that when the Minister returns from Brussels he will see that, either via a communique or in a statement to Parliament, we are given the fullest possible report. I notice the noble Lord nods his head.

We shall welcome and support the Government's continued participation in the work of the European Space Agency because that will ensure that Britain continues to maintain its rightful place in the forefront

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of the technology of the new millennium. It will also ensure that Britain remains in the forefront of science and is qualified for and secures its full entitlement of the high grade employment that comes from those expanding new industries.

8.14 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, I am grateful to the noble Lord, Lord Kennet, for raising this important topic at such a timely moment. I want to respond to the points that he and other noble Lords have raised. I shall try not to delay noble Lords from getting to their mobile phones and ringing their husbands and wives about dinner.

This is an exciting moment for space science and the space industry. The commercial market for communication and global navigation satellites is expanding rapidly. Earth observation from satellites is playing an increasing role in the monitoring of the Earth's environment and voyages of discovery have already been launched to explore other bodies in our solar system, such as comets and Saturn's moon, Titan. Further missions are planned for launch in the near future, such as Mars Express.

I share the view of the noble Baroness, Lady Sharp of Guildford, of the importance of such commercial developments which are beginning to take place at a rapid rate. I also greatly admire Surrey Satellite Technology Limited, an extremely entrepreneurial company. Some months ago I was delighted to be with the company in China when it was sealing its agreement with the Chinese Government to produce satellites. I was delighted to see that 10 days ago they used a Russian intercontinental ballistic missile to launch the latest satellite.

I can assure your Lordships that in such matters the DTI wants to support small businesses. In the multimedia area we see a lot of innovative small businesses which we want to encourage.

The Government have recently engaged in a wide consultation exercise with the space industry as part of the preparation both for the ministerial meeting and the new space plan. That exercise has helped us to be clear about our top priorities. In the commercial field those are telecommunications, navigation and technology and in the scientific field they are top quality space science and earth observation. In the first two of those subjects, which are the subject of this debate, there are great commercial opportunities. Later I shall give some figures about the size of those markets.

We believe that those exciting programmes will capture the imagination of our young people. We see no reason to take part, for reasons of national prestige, in programmes which will not yield either commercial benefits or significant scientific opportunities. We have not spent as much as other countries, as the noble Lord, Lord Kennet, has pointed out, but our expenditure across both civil and military programmes is, nevertheless, substantial at around £300 million a year. It is also much better targeted than many other countries. We have avoided the trap of national prestige projects, which now bear heavily on some other European countries.

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I am glad that the noble Baroness, Lady Miller of Hendon, did not make a political point about Ariane-- I thought that was very generous--as that was a decision of the last Conservative government. In many ways I believe it was a sensible decision. Good decisions were taken to keep us out of some national prestige projects which means that now we have slightly more room for manoeuvre in terms of commercial markets that are opening up.

A major vehicle for the United Kingdom's ambitions in space is the European Space Agency. I say to the noble Lord, Lord Cope of Berkeley, that we are very enthusiastic members of that agency. I believe that the ESA's Director-General is doing a good job in running and improving the agency, but we shall have to ensure steady and continuous further improvement to keep up with world class standards, including the adoption of new approaches, such as the NASA concept of smaller, faster and better.

Her Majesty's Government, therefore, remain a strong supporter of the development of civil satellite communications and navigation in conjunction with our partners in the European Space Agency. We also continue to work with the WEU on defence matters.

We have played a very active and successful role over the past 25 years. During that time UK industry has taken the lead on important telecommunications programmes such as the European Communications Satellite programme and MARECS--a maritime version of it. Those two successful development programmes led to the first generation commercial satcoms systems for fixed telephony within Europe and global maritime communications, which led in turn to the creation of international satellite operators such as EUTELSAT and INMARSAT. They have also created substantial UK industrial capabilities.

The provision of satellite telecommunications services is the main drive behind an explosion in opportunities for competitive companies in the space sector. Whereas military programmes have underpinned space revenues in the past, since 1996 commercial revenues worldwide have outstripped those from government. We anticipate substantial markets in digital broadcasting (around 60 billion US dollars), multimedia (40 billion US dollars) and mobile telephones (10 billion US dollars) by 2010 that will offer increasing opportunities throughout the decade.

On 11th and 12th May I will attend an ESA meeting of European Ministers in Brussels. The extensive agenda includes consideration of new programmes in telecommunications and navigation. One of those programmes is designed to promote multimedia technology development and applications using satellites--targeting a market which, as I have already said, is likely to be worth 40 billion dollars by 2010. They include a wide range of applications, including social applications such as tele-education and telemedicine, as well as economic applications in the wake of the explosive growth in the Internet. The programme will be a public/private sector partnership with government investment being matched by private sector funds.

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The UK is already participating in the first phase of that programme with a contribution of around £7 million. We consider this to be an extremely important programme and will be announcing the scale of our participation in the second phase at the time of the ministerial meeting.

A second programme to be considered at the ministerial meeting will continue support for basic system and market definition studies for future satellite communication activity. The UK is currently participating in order to improve the information available to the UK industry and thereby help to promote the growth of the UK satcoms industry. The amount committed so far is 8.7 million euros and a further contribution is being considered.

On satellite navigation, Europe is already implementing a first generation programme which is known as the European Geostationary Navigation Overlay System. This development will augment the signals from the existing US Global Positioning System and the Russian Global Navigation System satellite constellations to improve accuracy and reliability for civilian safety critical applications such as aircraft navigation. The UK has invested over 40 million euros in this programme and is the second largest contributor after France. This contribution has been provided by the DTI, DETR and the National Air Traffic Services.

The European Commission proposed that Europe should build a second generation global navigation satellite system. That would be a European system under civilian control. A decision on whether to proceed is expected to be taken at the European Union Transport Council this June. In the meantime, ESA has assisted the European Commission in performing studies to assess the technical feasibility and likely cost. The UK has already invested 7.5 million euros in this second generation work and is considering a further contribution to the project definition phase which will be considered at the ESA ministerial

The European Commission's proposal for such a second generation system is an exciting one. It is also one in which the UK wants to take a leadership role as it will provide an opportunity for UK industry to increase its understanding of space-based navigation and as a result obtain a larger share of the growing global market in space-based navigation equipment and services. This market is expected to exceed 50 billion dollars a year by 2005. The European Commission's proposal will, however, need to be carefully thought through and planned. A key UK concern is that the system operator should be established early on in the programme so that the system can be tailored to the needs of consumers and does not become producer driven.

In answer to the noble Lord, Lord Cope, in that regard, it will have to be a joint EU and ESA project. I agree with him, however, that the work must be done on the basis of who can perform best rather than being divided up on political grounds. That and other issues will be discussed with our European partners.

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My noble friend Lord Kennet also mentioned the Western European Union. The UK is an active participant in the Union's Space Group, which is charged with responsibility for all aspects of space. The UK also operates its own dedicated military communications system, Skynet 4, which will need to be replaced starting in 2005. The replacement project is known as Skynet 5. The UK entered into a collaborative project--TRIMILSATCOM--with France and Germany but withdrew in August 1998 because UK timescale and performance requirements were not compatible with those of our prospective partners and could not be met in a cost-effective manner. The UK therefore opted last year to pursue a national PFI approach which has stimulated considerable interest from our European allies.

In answer to the question of the noble Baroness, Lady Miller, two consortia led by Matra Marconi Space (UK) Limited and Lockheed Martin Missiles and Space are currently under contract for design phase studies which are due to be completed in late 2000. In answer to my noble friend Lord Kennet as to whether industrial considerations are taken into account, I should say that both industry teams involve British companies. The award of a contract for service delivery will be based on the best value for money.

The UK sees no clear requirements for additional dedicated WEU communications satellites. We believe that where satellite communications are required to support WEU operations they should be met by utilising capacity available from existing military or commercial sources. The UK, in common with other NATO nations, has access to the Precise Positioning Service (PPS), provided by the US Global Positioning System (GPS) at no cost and, in answer to the question of my noble friend, is content from a military point of view to continue to depend on that service. The MoD therefore has no military requirement for an additional European navigation system but would take advantage of such a system should it come to fruition. We believe that if this European system does proceed, as we hope, for reasons of interoperability and sunk investment, it should be 100 per cent compatible with GPS. It must also be designed to ensure that its use could be denied to adversaries. Finally, let me say that I agree with the noble Baroness, Lady Sharp, that in this respect as in others, competition is very healthy.

The UK policy on space surveillance is to rely on existing arrangements with our allies, and it is not our policy to discuss the details of those collaborative arrangements. The UK participates in the WEU satellite centre at Torrejon in Spain and is aware of various initiatives for a European space-based earth observation system. Indeed, the UK also contributes to discussion on such initiatives in the WEU space group.

My noble friend Lord Kennet raised two other important questions. The first related to vulnerability to information warfare. The Government are aware of US anxieties in this area. I can assure the noble Baroness, Lady Miller, that this is an issue with which we are deeply concerned and which we take extremely seriously. The MoD continually updates its threat

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assessment and that is taken into account in requirements definition and system design for projects such as Skynet 5.

My noble friend mentioned the issue of space dominance. Although current US plans for achieving space dominance reflect a US perspective, they also raise defence issues common to the UK and other allied nations, in particular how affordably to achieve superior capabilities to any adversary across the full range of military operations--referred to in the US as full spectrum dominance. From the UK perspective, the issue is principally one of access to space-based information.

The theme of the importance of information to strong defence was, of course, reflected in the Strategic Defence Review. In addition, both the US and the UK place strong emphasis on the need for enduring, international relationships to which we fully subscribe and to which we make an effective contribution.

I hope that my response has answered most of the questions that have been raised. I thank those noble Lords who have spoken in what I believe has been an extremely interesting and very timely debate, especially in view of the ESA ministerial meeting. I should like especially to thank the noble Lord, Lord Kennet, who raised these important topics. I also hope that I have assured your Lordships that Her Majesty's Government are fully aware of the huge commercial and scientific opportunities opening up in space and that we are moving effectively to capitalise on them to the great benefit, we believe, of British industry and British science. I also look forward to reporting back on what I hope will be a very successful ESA ministerial meeting next week, when I respond to the Question which the noble Lord, Lord Renwick, has recently tabled.

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