European Global Navigation Satellite System

Part of Orders of the Day – in the House of Commons at 9:39 pm on 2nd July 2007.

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Photo of Owen Paterson Owen Paterson Shadow Minister (Transport) 9:39 pm, 2nd July 2007

I am grateful to my hon. Friend and neighbour for making that point. He is right to stress the significance of American help and I will tackle that further in my remarks. It is inconceivable that the GPS could be turned off, but I shall say more about that shortly.

After outline approval at the Nice European Council in December 2000, the ESA, in partnership with the European Commission, made plans to match the US GPS. Crucially, unlike the US system, it was to be completely under civilian control and, also unlike the US system, which enjoyed taxpayer funding, its deployment and operation was to be financed by a public-private partnership, with the private sector bearing two thirds of the costs.

Unfortunately, although the Galileo project was intended to be Europe's satellite navigation system, it also became, in the manner of so many European projects, a virility symbol, which was intended to demonstrate the success of European economic and political integration. Mrs. Loyola de Palacio, then Vice-president of the Commission with responsibility for transport and energy, declared at the inception of the development stage of Galileo on 26 March 2002:

"Europe has finally taken the political decision to launch this strategic programme. Today we are seeing the creative side of Europe... It will help Europe to maintain its autonomy, its sovereignty, its technological capacity and control of its knowledge."

Five years later, Galileo is at what the European Commission coyly calls a cross-road. More accurately, it is in crisis, which arises from the complete failure of the plan for financing the scheme and the time scale for deployment. On the basis of a study by PricewaterhouseCoopers, the Commission claimed:

"Considerable economic benefits should be generated by Galileo."

It also claimed that the project would cost €3.6 billion to complete and that, assuming a "worst case scenario", total benefits would be €17.8 billion. On that understanding, in 2002 the then Prime Minister—the current steward of the Chiltern hundreds—personally approved the scheme at the Barcelona European Council on 13 and 14 March. Two years later, the Commission confidently predicted that Galileo

"will definitely become operational in 2008".

A mere three years later, the Commission admits to a date of 2012, and some industry sources suggest that it could be 2014. Although 30 satellites are planned, the only tangible achievement is a single test satellite, Giove-A because the second, Giove-B, has been short-circuiting and will possibly not be launched until December.

As for future costs, an unpublished Commission report now admits that, against the original estimate of €3.4 billion for deployment, plus an additional €5.3 billion for operation and maintenance—a maximum of €8.7 billion—the system will now cost €9 billion to €12 billion up to 2030. The best-case scenario for revenue becomes €8 billion to €10 billion, or less if the more accurate US GPS III offers high-level services free of charge. From a projected profit of €17.8 billion, the maximum is now €1 billion, with a possible loss of €4 billion.

That is why the PPP refused the risk, as was said. With Navstar provided free of charge, one unnamed executive of the failed consortium is quoted in the Financial Times as saying:

"There is a doubt over the revenues... Why sell Pepsi-Cola when you can get Coca-Cola free?"

The Commission is now asking member states to bail out its pet project by injecting a huge tranche of public money despite a solemn guarantee in November 2001 that

"no more public money would be needed after 2007".

So desperate is it that the venture should continue that it offers two main options: that the funding should come either through the ESA or, preferably, through the Community budget. Additionally, in its February communication, it also proposed a new stealth tax—incredibly, a levy on GPS receivers, most of which are designed to receive a signal provided free of charge by the US.

In the manner of a child commenting on Lord Randolph Churchill, we must ask what Galileo is for. Ostensibly, it is to provide navigation services, not only for people who live in Europe, but worldwide. As was said, the US Navstar GPS system is currently available free of charge to every user, while coming along is the Russian GLONASS and Chinese Beidou compass system, both of which will also be free of charge.

Arguing against cancellation, some advocates will say that Galileo offers greater accuracy and a guarantee of a service not offered by other systems. Galileo's high level of accuracy, however, applies only to the subscription services. There will be no significant difference in the publicly accessible signal, which at the moment is deemed perfectly sufficient for any number of commercial or Government systems. Last year, for example, I visited Berlin and saw the Satellic road-pricing scheme in action, which tracks and charges every single truck over 12 tonnes on German autobahns. Only GPS is used. When I asked about Galileo, the answer was quite clear: they said that if it comes along, they might use it, but they are under no pressure, as they have GPS and their system works. That scheme has been a huge success, pulling in about €250 million a month.

Last week, I had meetings with representatives of Trafficmaster plc, a highly successful company selling navigation services to more than 100,000 vehicles in the UK. Its technical director, Christopher Barnes, said that

"the free to air GPS service is sufficient for vehicle navigation and therefore we are unlikely to be interested in paying (either voluntarily or through a compulsory tax) to use a European service, even if technically it would be better."

There is extremely limited application for the higher accuracy that Galileo will offer and, in any event, any such advantage will last only until the US deploys Block III Navstar, which promises equivalence.