Oral evidence: European Defence Industrial Development Programme, HC 1695
Oral evidence, 21 November 2018.
Witnesses
Stuart Andrew MP, Linda Dann, Daniel Drake and Valerie Evans.
Chair
Good afternoon, Minister. I am afraid that my voice has let me down for the first time in 34 years. Thank you very much for coming. This is a joint sitting of the European Scrutiny Committee and the Defence Committee; Dr Julian Lewis is, of course, the Chair of the Defence Committee. I am very grateful for the participation of all those present. The first question that I would like to put to you is as follows: why did the Government agree to a clause in the withdrawal agreement that allows the EU to exclude the UK unilaterally from “sensitive” programmes—even during the transition period, when the UK remains a full contributor to the EU budget?
Stuart Andrew
First, thank you for the chance to appear before you. I hope that we have been open with you in terms of the information that we have received as the negotiations have been going on. Throughout the session, obviously, negotiations are still live, but we will try to answer where we can. On the specific question that you asked, obviously this is a negotiation. We are not going to get everything that we want, but the UK can participate during the implementation period, particularly when we look at EDIDP, which is a two-year programme—allocations for funding that will be available in 2019 and 2020. We will be looking at which of those will be of interest to us as a country, particularly for us in the Ministry of Defence.
Mrs Moon
Will you give us an idea of what proportion of the funds you expect to use for projects that will run beyond 31 December 2020 and are therefore theoretically off-limits to the UK? What numbers are we talking about, and how critical are they?
Stuart Andrew
My understanding is that at the moment the contracts have not yet been decided. They will be decided by the end of this year—in terms of the 2019 programme. These are about capability developments, so clearly they could be long term—they might start now and go on beyond the period. We will look at those that will be of benefit to us as a nation, where we have those capability issues and where we think that this project could help us in narrowing the gap.
Mrs Moon
Is any aspect of this assessment looking at who has the level of capability to ensure that whatever is being developed is going to be of maximum benefit not just to the UK, but across the Alliance? Is anyone looking at that?
Stuart Andrew
I will ask Valerie to come in on the specifics, but we have been very clear that any projects that we go along on really must complement the work that NATO are doing. It would be silly for NATO and allies, who are already working collaboratively on areas, particularly in this field, on capability—there is no point in duplicating work that is happening; it needs to really complement or enhance it, in our view. I don’t know, Valerie, if you have anything specific—
Valerie Evans
I can reinforce the message that the Minister has just given. The work programme has been put together broadly to be consistent with the capability development programme, which is developed within the European Defence Agency. That is exactly put together in conjunction with the NATO defence planning process so they are consistent and coherent, and we are content that those requirements reflect capability shortfalls and will help the Alliance.
Mrs Moon
The part of my question that does not seem to have been addressed is this. How much is there an assessment of which companies have the maximum skills capability to ensure that whatever is being developed will be developed to the best capacity for the use of NATO, so that it is not just a case of, “Well, we’re out, but our companies are actually very good at this”? Galileo has been a prime example of that: we have specific skills that we are not going to be able to utilise for the full use of the Alliance. So how much of that argument has been present in all the discussions that have taken place?
Stuart Andrew
I think it is fair to say “extensively”. These are not just discussions that are happening in terms of the programme committee; there are also ongoing discussions we have already with partners outside the EU framework, as it were, and we are having these discussions with our allies on a host of capability arrangements. We ensure that we continue to make those on a bilateral basis, too.
Mrs Moon
Are you looking for any discount for the UK’s contribution to the EU budget, on the basis of the exclusion?
Stuart Andrew
Not specifically that I am aware of, if I’m honest. Is there anything that you want to—
Valerie Evans
We expect not to be excluded; I think that would be the argument.
Mrs Moon
Your proposal is not to be excluded.
Valerie Evans
Correct.
Mrs Moon
Will you keep these two Committees informed where there are problems? Witnesses indicated assent.
Mrs Moon
There may well be other avenues, where there is a particular capability that is not going to be able to be enhanced to its full extent because of exclusion, that we might particularly want to be aware of.
Stuart Andrew
I should reiterate that point: we are not expecting to be excluded. But if we were, we would be robust in arguing against that. If that were to be the case, I can assure you that we would inform not just both these Committees, but Parliament as a whole.
Mr Francois
If that were the case, Minister, would we get our money back?
Stuart Andrew
As far as I am aware—I mean, we don’t anticipate that happening.
Mr Francois
No, but just in case, unfortunately—
Stuart Andrew
I do not know—I do not think that we will get our money back, if I’m honest. I think this is part of the international obligations that we have made. We have always paid—these are EU commitments. This is coming out of existing EU budgets and is therefore part of the ongoing commitment that we made.
Mr Francois
So they could kick us out, yet still trouser the money?
Stuart Andrew
Well, this is part of the financial settlement that we are arranging, but as I say, I will really emphasise that we will be robust in arguing that that exclusion was unfair and not necessary.
Mr Francois
I am tremendously reassured—thank you.
Mrs Moon
Is there an appeals process? Let us say there was a situation where the development of something was going to take longer than the December 2020 date and Britain was involved—British companies were involved. This is a critical new development—and then we are going to be excluded. Is there an appeals process added into the negotiations that you have been involved in that would allow us to go back and say, “Look, these would be the consequences. This is the damage that would arise. It is not just damage to the UK; it is damage across the Alliance”? Is that a process that you are building in?
Stuart Andrew
Yes, it is. The point that you make, about this being damaging not just to the United Kingdom but to the EU as a whole, is one that we have made very forcefully already. I have certainly, on a recent visit to Brussels, myself made that point on the fact that actually we want the EU, in terms of these projects, to be outward-looking. Collaboration within defence succeeds when it is outward-looking, and that is what we are encouraging them to do. In terms of an appeal process, I think I am right in saying that there is a joint committee that would look at this. Is that correct?
Valerie Evans
In terms of 127.7(b), which I think is the point you are mentioning there, that process is still to be negotiated.
Mr Francois
Are you talking about the joint committee under the withdrawal agreement?
Valerie Evans
Yes.
Mr Francois
Okay, and you know that if they do not agree, the ultimate decision is taken by the European Court of justice, Minister. Are you aware of that? I think it is article 174.
Stuart Andrew
As I say, we are making it very clear—and we will be working with our partners; there are bilateral discussions that we have too—to argue the case that exclusion is not within the interest.
Mr Francois
Quickly, if they do kick us out of Galileo, will there be a flag ceremony?
Stuart Andrew
A flag ceremony?
Mr Francois
Yes. Quite often when you initiate or end a project you have a ceremony where you raise a number of flags on behalf of the partners. When the project ends you have a ceremony when you bring the flags down. If they kick us out and keep our billion quid, will we have a proper ceremony where we formally raise the white flag or not?
Stuart Andrew
I am not aware of one.
Mr Francois
Okay. I am just asking; because if there is, I would quite like to be there.
Dr Lewis
On a slightly more cheerful note, Minister, would you like to take the opportunity to congratulate the Defence Committee’s very own Madeleine Moon on having been elected president of the NATO Parliamentary Assembly?
Stuart Andrew
Dr Lewis, you have reminded me of how remiss I have been, and I do absolutely congratulate her. My fellow city MP Alec Shelbrooke speaks very highly of the visits he has taken with her. I wish her all the best.
Mrs Moon
Thank you.
Dr Lewis
While I have the floor for a moment, could I ask something? I am not hugely familiar with this programme. Can the assembled experience in front of us give us a thumbnail guide as to what the basis of the programme is, and, in particular, how much we have paid in over the last few years—and what we have got out of it?
Stuart Andrew
I will give an overview. The money, as I understand it, is from existing EU budgets. It is circa €500 million so it will be pro rata the amount that we pay in terms of our EU membership, which I understand is about 14%. In terms of the other specific details, if I could refer to—
Dr Lewis
In particular, have we got our money back, or have we been paying in more than we have got back?
Valerie Evans
It has not started yet, and so on this we are looking to the future. The first contract will be placed towards the end of 2019 for the work programme for 2019 and then there will be similar calls for proposals from the Commission against a work programme that we are fully engaged in developing. That work programme is not yet complete. Final discussions are taking place this year. It is based on categories of capability—very broad headings; and then proposals can be put forward by industry against each of these categories.
Dr Lewis
But it is going to subsume things like Galileo? I believe we have quite a few questions about Galileo coming up. Is that right?
Valerie Evans
There is a programme which is Galileo for European defence—that is correct.
Dr Lewis
And how much have we paid in towards the cost of Galileo so far?
Valerie Evans
I am not entirely sure—
Dr Lewis
Can you come back to us on that?
Valerie Evans
This is a complement—the work that will be done under the EDIDP would be additional.
Mr Francois
I am sorry. This is a hearing that took a lot of time to prepare, about European defence, and arguably Galileo is a flagship European defence programme that we are involved in—and you do not know how much we have spent on it. Is there anybody we can talk to who might? Or do you want to text someone back in the Department quickly, and find out?
Stuart Andrew
Our understanding is that it is 14% of the total cost of the project that has been spent on the project. There have been contributions that industry has made as part of it.
Mr Francois
Okay. So if it is 14%, what is that in cash? We will take sterling or euros.
Stuart Andrew
I have not got the figure for you, I am afraid.
Mr Francois
Phone a friend.
Stuart Andrew
At the moment, it is £150 million per annum. It would be 14% of that that we have paid.
Mr Francois
Okay, but over how many years?
Stuart Andrew
The project has been running for—
Mr Francois
Just someone give me a figure, for God’s sake.
Stuart Andrew
I apologise, but we do not have that figure. I will come back to you.
John Spellar
Within the EDIDP, looking forward, can we have some idea of the projects that the UK is going to be most interested in? How do you rate our chances of securing participation if the withdrawal agreement is ratified?
Stuart Andrew
I am sorry—I can’t hear you.
John Spellar
Going forward, in which projects are we most interested in the EDIDP, and how do you rate our chances of securing participation if the withdrawal agreement is ratified?
Stuart Andrew
We have full participation in the programme committee at the moment, and as I say they are going through the list of suggested projects at the moment. Of course, we are exploring all those to see which ones will be of interest to the United Kingdom, but among the ones that we would be interested in that I can give you, we will obviously advance the high-altitude pseudo-satellites project, and check whether that comes forward as one of the final projects.
John Spellar
Any others that we might be particularly interested in?
Valerie Evans
Yes, there are some counter-UAS technology ones that we might be interested in. There are also autonomous ground combat systems. The Baltic states, in particular, are keen to take forward some of those proposals, so there are a number of areas where if the industry is interested, we could participate.
John Spellar
You rightly said that the decisions to award EDIDP funding will have to be approved by member states, and those decisions will take place later next year, by which time we will no longer have a vote on that. My understanding is that Norway, for example, has been contributing to the defence research preparatory action, and yet received no funding from it. What steps are you taking to ensure that UK firms are not unfairly overlooked because, frankly, the British Government and the MoD have less influence over the funding process during that transition?
Valerie Evans
To reiterate, we have been fully engaged and involved in the programme committee, which sets the work programme, so that is the first step. In that work programme, there are some programmes that are specifically identified, so we understand what is going on. Secondly, the evaluation criteria have also been agreed with our full participation, so the process that is going to be taken forward for evaluating those proposals that are taken in is the Commission, aided by independent experts. You are quite right that we would not be able to re-participate as an independent expert, unless in exceptional circumstances. The withdrawal agreement allows for that. However, because the process that they have to follow is rigid and objective, and those independent experts are taken, agreed and appointed by the Commission, we are satisfied that this will be done on an objective basis, and that they will not be able to indiscriminately reject proposals with UK industry. Another thing I would say is that because these are joint proposals—there have to be at least three industries there—they would also be rejecting the other nations’ industries that were proposed within it, so that is another factor making it more remote that that would be the case.
Andrew Lewer
We have touched on a few issues related to this already, but just to put it on the record, the EU has taken the view that article 122 allows the UK to be excluded from the European Defence Fund, and the industrial aspects of Galileo during transition as well. In your view, which other areas of EU activity will fall within the scope of article 122?
Valerie Evans
There has been no suggestion, in all our discussions with the Commission, that any further programmes would be excluded. We cannot rule it out, but we consider that to be entirely remote.
Andrew Lewer
Are you quite confident about that, or is that just as far as you are aware at the moment?
Valerie Evans
Confident.
Stuart Andrew
I should also say that the project awards will be looked at by independent experts, so we can make sure that is—
Kelvin Hopkins
The European Commission’s proposal for the European Defence Fund from 2021 onwards provides for what is termed “association” by a non-EU country only if they are a member of the European Economic Area. Are you looking to broaden the criteria for associations, so that the UK could use that option, if it wanted to?
Stuart Andrew
Yes, we are. We firmly believe that the narrow and legalistic approach that the EU is taking to third countries is actually quite damaging to the EU. As I said a moment ago, just to block all those countries that are not in the EU or, as you rightly say, the EEA as third countries really would miss opportunities for greater collaboration and greater working. The opportunity that exists here is to ensure that we have EU member states working to the objectives of NATO. This is an opportunity perhaps to fill in gaps where that is necessary. If they were to narrow it to just the EU countries, that would be short-sighted. We are arguing for almost a case-by-case basis with the third country definition.
Kelvin Hopkins
So they could be cutting off their nose to spite their face if they are too difficult about this.
Stuart Andrew
That is exactly what I said to them when I met them in Brussels.
Kelvin Hopkins
My supplementary question is this: if association is sought, how confident are you that the final European Defence Fund regulation will allow for association by the UK, even as a non-EEA country?
Stuart Andrew
We are particularly interested in a project-by-project analysis, rather than full association at this stage. We think that that would be of more benefit to the Ministry of Defence. We are looking at those areas where we are interested in that collaboration. Some of the projects that were just mentioned would be of interest to us. That is the line we are trying to go down at the moment with the negotiations that are currently happening.
Kelvin Hopkins
Is there any sign that the EU would be interested in such a pragmatic approach?
Stuart Andrew
I am not in those negotiations at the moment, but that is the pressure that we are putting on. To argue that case, we are also working with those countries that we work with collaboratively outside of the EU on defence matters. There are a number of countries that absolutely recognise the points we are making. We hope that we can continue to force that argument, so that common sense prevails.
Chair
We got no satisfactory answers to the questions that Mr Francois asked earlier on Galileo. I think he would now like to ask some questions on the annual budget of the fund. Is that right?
Mr Francois
Yes, Chair. The proposed average annual budget for the fund is about €1.9 billion. The UK would have to make a contribution under the EU’s normal rules for calculating third country payments that will result in a gross payment of roughly £260 million each year. Is that an acceptable sum? What would we want in return?
Stuart Andrew
I think the first thing I would say is to repeat the point I made a moment ago. We would be interested on a project-by-project basis. That is the access we are looking for, so that we absolutely know that it is benefiting the requirements that we have and how we are working with other countries to fill any gaps. Of course we would look at that in terms of whether it delivered value for money for the UK taxpayer. If it does not, and if it does not meet the requirements that we have in terms of the objectives of that individual project, I cannot see why we would want to partake in that.
Mr Francois
All right. How would the Government seek to influence the European Defence Fund work programme and funding decisions, given that the UK, even as an associated country, would have no voting rights over either?
Stuart Andrew
Again, you are absolutely right: we will not be members of the committee. We will, however, continue to use those bilateral relationships that we have. We have to remember that we are the biggest defence spender in Europe, and I think that brings about a lot of influence. I would expect that we would try to use that influence to ensure that the projects that we want to be involved in are beneficial to both sides and, as I said at the beginning, bring about value for money.
Mr Francois
Lastly, how many people work at DE&S?
Stuart Andrew
I think, off the top of my head, about 8,000.
Mr Francois
Approximately 8,000. Okay. Well, we are not meant to give away the questions, Minister, but as you are a nice bloke and we know you, I will reveal that when we get to our question 11, it is all about Galileo. Do you think that someone sitting behind you could contact one of those 8,000 people, so that by the time we get to question 11 you can tell us exactly what the cost of the UK contribution is, and how much money we have put at risk? We are giving you six questions’ worth of run-up to do it. Is that a fair offer, Sir?
Stuart Andrew
That is fair enough. I take the point.
Mr Francois
Thank you very much. Whichever one of the 8,000 is most appropriate—we will leave that to you.
Stuart Andrew
I just point out that I do not think that Galileo comes under DE&S; I think it comes under the UK Space Agency. But I will—
Mr Francois
I am so sorry. How many people work there?
Stuart Andrew
I don’t know how many people work for that. But I take the point—
Mr Francois
Forgive me. Obviously there must be a different number; maybe we could text them instead. Thanks.
Gavin Robinson
Minister, you have considered association and the UK’s desire to achieve associated status. Is that likely to be given? Are you confident that it will be given? Or are there circumstances in which we could seek associated membership and it would not be granted?
Stuart Andrew
I will hand over in a minute for the specific answer to those points. But I emphasise the point, and I tried to emphasise it on—as I said—that visit that we made: as a major contributor to defence spending in Europe, the security of Europe is obviously important to this country and important to the Government, and we think that it would be a very short-sighted decision to exclude the UK from some of these important projects. I feel very confident that we can make that case.
Gavin Robinson
I accept that, but is it a possibility?
Stuart Andrew
Sorry—is what a possibility?
Gavin Robinson
That associated membership would not be granted?
Stuart Andrew
I think associated membership is a possibility, yes, but I think our preferred model at the MoD is the project-by-project basis.
Daniel Drake
I will just add that obviously some of the sort of seed work on a number of these projects is done through the European Defence Agency and one proposal is an administrative arrangement with the EDA after we leave. There are precedents for that, with other countries successfully agreeing administrative arrangements, and then they are able to work on specific projects, as the Minister has said, through the EDA. So there is that option there.
Gavin Robinson
What consideration have you given to UK participation in any future programmes or projects if we do not have associated status?
Valerie Evans
If we did not have associated status, we would have to do that as a third party, which is permissible under the rules.
Gavin Robinson
You would have to seek approval for the UK defence industry to participate, you would have to grant approval, or you would have to seek changes to the restrictions that currently apply.
Valerie Evans
Correct.
Gavin Robinson
Thank you. And in circumstances where the EU proceeds and ownership of procurement opportunities falls to the European Commission, do you, Minister, or indeed your colleagues, have concerns around intellectual property rights and the ownership of those? And if we are participating and contributing, what surety is there that we have a stake in the ownership of that intellectual property?
Stuart Andrew
We find the prospect of those IP rights being taken, as it were, from, effectively, contributions from this country to be totally outrageous and unacceptable. That is why we voted yesterday against such a decision. We do not think it is right that the Commission should own the IP rights, and we will continue to make that case. There was not full consensus in that vote and therefore there will be further discussion. However, there are a number of countries that were open to what we were arguing.
Gavin Robinson
In circumstances where we are precluded from any level of ownership or stake over intellectual property rights, what steps would you take?
Valerie Evans
We could not participate in a programme or a project on that basis.
Gavin Robinson
At all?
Valerie Evans
At all, yes. May I just say—?
Gavin Robinson
I think, Mr Francois, that was a clear answer—
Valerie Evans
I just want to say that, under the terms of the treaty, the EU will not own and is not able to own defence equipment or technology. In certain exceptional circumstances, where there is a procurement under a contract, they can own it, and the EDIDP is purely being done for an IT system, so that they can communicate on a secure basis, but that is very, very remote. There is the reasonableness that the EU will not own it; it is just that the industry of the member states that would own it, which is not acceptable either.
Gavin Robinson
So the position of the United Kingdom Government is that in circumstances where we have no say, control or stake in intellectual property of programmes coming forward, we will not participate, contribute or be in involved in any way?
Valerie Evans
Correct.
Dr Lewis
Would somebody like to start off by giving the Committee a thumbnail sketch of what you understand by PESCO?
Daniel Drake
I will. It is a permanent enhanced structured co-operation launched by the EU just under a year ago as a political framework through which certain member states could collaborate to build their defence capabilities. The first tranche of projects was launched in March this year—17 projects. The reality is that there has been variable progress among those. The project that I would say the UK has been most supportive of at a political level—of course, we are not a participating member state in PESCO—was the work on military mobility, which has a clear read-across to NATO and a clear role for the EU and NATO to collaborate. Progress against the other 16 projects has been extremely variable. At the Foreign Affairs Council defence Ministers meeting on Monday, the second wave of 17 projects was signed up. That meeting did not finalise the arrangements for third-party participation in PESCO projects, and we understand that they may look to finalise that at the Foreign Affairs Council next month, or it may be at a later date. In a similar way to the EDF, we have made very clear where we think the disincentives would be for any third-party to contribute to PESCO. We are in the process of looking at the second wave of projects to see whether there would be projects that it may in the UK’s national interest to participate in. We have set two very clear conditions. The first is that they should be projects that are clearly complementary to the efforts of NATO—so, for example, projects in areas such as CBRN and co-basing may fall into that category, but we are looking closely at the detail. The second condition is that they must provide a clear opportunity for the UK defence industry at the same time, and we are looking closely at the detail of the projects as they develop, and at the arrangements for third-party participation once they are finalised.
Dr Lewis
Why do you think that the European Union has set up PESCO rather than working through the structures of NATO?
Daniel Drake
You need to go back a bit, because of course the concept of the EU moving more in that direction has been on the table for a long time and, as the UK, we have always been extremely cautious. Clearly the level of ambition is high and through the EDF and other programmes, the EU wishes to play more of a role in building European capability. Our position is that if those efforts genuinely contribute towards more capabilities and the burden-sharing effort that is integral to NATO, we will be supportive of them.
Dr Lewis
But PESCO came out of the Lisbon treaty, which itself was a re-run of the European constitution attempt that was voted down by two countries and then brought back, largely in the context of the Lisbon treaty. This whole operation is part of the building of a distinct EU defence identity, isn’t it?
Daniel Drake
Of course, these programmes are designed to develop a greater EU defence identity. Certainly, the UK’s approach towards it will be very clearly based on whether we think the specific projects that we may want to participate in will be complementary to NATO, as the Secretary-General of NATO made very clear at the Foreign Affairs Council meeting earlier this week, and whether they provide real opportunities for UK industry.
Dr Lewis
I will not push this too far, but I have been looking at the membership lists of the EU and of NATO. As far as I can see, there are 22 countries that belong to both organisations; only six belong to the EU without belonging to NATO. Those six are Austria, Finland, Sweden, Ireland, Malta and Cyprus. With the greatest respect to those six countries, they are not really in the vanguard of the defence effort to protect Europe. So I ask again: why is it sensible for all this effort to be put into trying to improve defence capabilities for Europe, in the context of an organisation that excludes our main ally, the United States, but includes only a small number of small countries that do not really make a lot of difference to the defence effort?
Daniel Drake
I think the way that the NATO Secretary-General put it at the Foreign Affairs Council this week is exactly right. Where these efforts contribute to fairer burden-sharing within NATO, we should support that, and it can complement NATO. However, EU efforts must not compete with NATO—must not duplicate NATO—because NATO remains the bedrock for European security. That is absolutely the UK’s position. Of the 22 that you mentioned, you hear a number of others taking exactly the same position in EU discussions as well.
Dr Lewis
These are well-informed answers. Thank you. I will ask the Minister directly: do you accept that there is a political risk through this development of a counterweight to NATO, as it were, coming into being, and that it requires a considerable amount of caution on behalf of our Government before we sign up to it on anything other than an ad hoc or project-by-project basis?
Stuart Andrew
Absolutely, and that is exactly what our position is. NATO is the cornerstone of our security and we are working with our European partners to encourage them, if they are members of NATO, to get up to that 2% spending, as they are supposed to. We want to ensure that that happens, where there are opportunities to make that happen quicker through these funding schemes, and that is why we are doing it through a project-by-project basis.
Dr Lewis
Can I take it for granted, then, that there is no question of our signing up to this organisation in any institutional way, and that it is only a matter for consideration whether as a separate, outside country we would, on a case-by-case and project-by-project basis, sometimes participate?
Stuart Andrew
Yes.
Chair
Are you ruling out an EU army?
Stuart Andrew
I am personally ruling out an EU army.
Chair
I am glad to hear it, because there is a lot of talk at the moment. Can you give us an insight as to your thinking on this question, because there is a great deal of pressure? Only two years ago, I took part in a conference on these questions and a motion was put by the German delegation, saying that they would insist on an EU army. We defeated it, as it happens, but they said, “You’ve defeated it this time, but it is coming back.” Can you tell me what the position is at the moment?
Stuart Andrew
We continue to argue that we want to maintain our own sovereign capability. That is what we want. We know that other member states want to have the same in terms of defence. I do not think there are any serious proposals for an EU army on the table at the moment. If there were, we would resist them.
Chair
You saw the article by Mr Coughlin in The Daily Telegraph today, did you?
Stuart Andrew
I have not, but I have heard about it.
Chair
I strongly recommend you have a good look at it.
Stuart Andrew
It has been recommended that I read it and I will ensure that I do after this meeting.
Mr Fysh
Just to follow on from that, before I come back to PESCO, Minister, do you think that our strong alliance with the US and involvement with it on various defence industrial projects puts our people in harm’s way more than you would like?
Stuart Andrew
No, I don’t think so.
Mr Fysh
That is good to know. Is that a consistent view across Government?
Stuart Andrew
You will have to ask all the individual Ministers, but I can speak fairly confidently from the Ministry of Defence that that view is shared.
Mr Fysh
Let me come back to PESCO. People obviously have concerns about the degree to which we might choose to go into that relative to our existing alliances. On the defence industrial part, my understanding is that the co-financing rate—the availability of finance—for PESCO projects is 10 percentage points higher than the standard rate of 20% if a nation is a member of the PESCO system. What is your view of whether the UK would have to be a formal participant to get funding from the EU defence funds?
Daniel Drake
Through the EDIDP, the Commission proposes to incentivise industrial co-operation by funding a minimum of 20% of development costs for co-operative programmes. PESCO projects could then receive a further 10% bonus. But of course because the negotiations on the rules for third-state participation in PESCO are still ongoing, the question whether a PESCO third-country entity could bid for EDIDP funding is still to be determined. Of course there is a risk, given the fact that PESCO projects can receive additional funding, that some projects may be branded as PESCO projects even if they should not necessarily fall under that banner. It is quite a technical set of talks, which are linked to the question of third-party participation in both EDIDP and PESCO.
Mr Fysh
What are the terms of the funding? Is it significantly cheaper than other ways of industrial firms raising capital for their projects?
Daniel Drake
I think it is a case of having this 20% of development costs plus another 10% for PESCO. That is the advantage of a project being a PESCO project.
Mr Fysh
But what is the structure? Is it in loans? Are they cheap loans or—
Valerie Evans
It is just that it is the EU providing the money, as opposed to a Government.
Mr Fysh
Sure, but how is it providing the money?
Valerie Evans
It is member states’ contributions to a fund—it set up a fund for that.
Mr Fysh
So it is equity in the project without a cost associated with it? It is a 20% or 30% equity stake in the—
Valerie Evans
Yes. The EU has two mechanisms. The main mechanism is providing a grant to industry, so it is grant-based, if you like.
Mr Fysh
So it is free money—0%?
Valerie Evans
Correct.
Mr Fysh
How would you respond to concerns that UK participation in PESCO might limit our autonomy in defence matters? For example, do we need to stay part of the co-ordinated annual review on defence? Is that going to create obligations for us to explain how we spend our defence budget?
Stuart Andrew
Clearly, as I said a moment ago, we would not support initiatives that were going to undermine our sovereignty in the defence area, and neither would other member states, frankly. There are other member states that have said that. Our participation would be on a voluntary, project-by-project basis, on projects that were of mutual benefit to us and to allies.
Mr Fysh
My understanding from firms in my constituency with European links is that they think that would be a perfectly acceptable way of engaging with it. They do not foresee problems with our taking that position.
Stuart Andrew
I think I am coming down to your constituency next week, so we can have that conversation when I am there.
Chair
Of course, the question of financial contributions and co-operation in intellectual property and industrial projects is one side of the problem. The other side is control and command. You ruled out a European army as far as the United Kingdom is concerned, but of course there is a lot of pressure—we know that from the statements that have been made by some of the leading figures in Europe that they want to go for it. If you participate in the project management, you are taking steps towards control and command—for example, who runs a particular division, brigade, battle group or whatever. Can you throw some light on the connection the two? Quite clearly, we are engaged in the process that gets fairly close to being involved, perhaps merely assimilated. Where do you draw the line so that you say, “We’re prepared to help in terms of co-operation within a NATO framework, but we are just simply not going to get involved in command and control, because that’s a sovereign question”? You raised it quite rightly. Control and command in military matters is about sovereignty. Perhaps you could elaborate on that, then Mrs Moon will come in shortly afterwards.
Stuart Andrew
To be absolutely clear, we are not going to give control and command to the EU. That is not what the UK is proposing or even contemplating. That remains sovereign, and we are not alone in that viewpoint. I think the issue that was mentioned a moment ago, the military mobility project, is one that would be ensuring that, should the need arise, the Armed Forces are able to mobilise across countries where there are restrictions and issues at the moment. That is part of what this mobilisation project is about—to reduce that. It will ultimately help NATO. In those sorts of projects, there is obviously a clear benefit for us, but that does not give control of our Armed Forces to the EU. That will not be anything that we consider.
Mrs Moon
May we clarify? There is a certain skew in the questions, and I appreciate that this is about a particular development that is happening across the European Union, but the command and control issues and the intellectual property rights issues equally apply if we participate in and buy from America. Is that correct?
Stuart Andrew
My understanding is that if we are buying, we always look—industry looks, obviously—at who has the intellectual property rights. They will also want to see whether they are going to take part in any of those arrangements. Industry—
Mrs Moon
We are not talking about some bizarre plot against the UK. This is part of defence development initiatives.
Stuart Andrew
Yes.
Mrs Moon
Thank you.
Darren Jones
On Galileo, my questions will be broadly on industrial consequences. To answer the question put by Mr Francois, my understanding is that under the draft work programme of the EDIDP, €35 million is the answer, in terms of positioning navigation and tracking under the Galileo system, which is about 7% of the budget. For businesses in north Bristol and elsewhere in the country, that is a lot of money, as you can imagine, Minister, so the question about whether the UK can be thrown out by the EU in a transition period under the withdrawal agreement, article 122, is important. Today, Minister, you have said that you don’t think that that will be an issue for us—that the EU won’t throw us out—and your colleague Sam Gyimah in BEIS said a similar thing to my Committee: that it shouldn’t apply. These are assumptions. Have you had confirmation from the European Commission or legal advice to suggest that that is the case?
Stuart Andrew
Specifically on Galileo?
Darren Jones
Yes, under article 122.
Stuart Andrew
On Galileo, yes, we have had indications that they wanted to exclude us—[Interruption.] We are excluded from Galileo, but we have been making the point—
Mr Francois
Sorry—we are excluded?
Stuart Andrew
Yes. A statement has been made to the House about this.
Darren Jones
During the transition?
Linda Dann
The Secretary-General wrote to the Government in January this year to say that they were excluding us from it. That is the exception to the points that are being discussed. We have been in discussions with them to try to understand their position and their concerns, but at the moment that remains their position. The consequence of that has been that our industry is not bidding for future contracts. The point is that we have access to the programme, but not to the secure military part of it—
Stephen Kinnock
We are excluded from the PRS.
Mr Francois
Which is the point.
Linda Dann
Indeed, yes.
Darren Jones
But British companies have been building the PRS, haven’t they, to date, and they are now excluded from future contracts?
Linda Dann
They have been involved in that; so they will have been paid under their contracts. There is no question of them being out of pocket; but for the future they will not be interested in bidding for future contracts, because—
Darren Jones
They won’t get them.
Linda Dann
They won’t get them.
Darren Jones
And is that reflected in our contribution to the EDIDP? If there is a 7% €35 million bracket of work on PRS under Galileo, has that been reflected in an equivalent reduction to our contribution to that project, now that we are excluded?
Valerie Evans
My understanding is that it is a sort of complementary programme to the Galileo—so it is additional funding, not taking away from them.
Darren Jones
But we are paying into EDIDP for positioning, navigation and tracking, in terms of PRS under Galileo. My question is, if we know we cannot bid for those projects, which you just said, have we therefore had an equivalent reduction in the amount we are paying in?
Stuart Andrew
Yes, this is all part of the withdrawal negotiations on the budget payments that we will be making.
Valerie Evans
There will always be, in any full programme, things that interest us, and things that don’t interest us.
Darren Jones
I understand that. Let me ask the question slightly differently. Before we were told we were excluded, we must have agreed to £x as a contribution. After we were told we were excluded, did that change to a different figure, or is it the same figure?
Linda Dann
The payment we would be making is a per cent. So we pay in a lump sum figure.
Stuart Andrew
Ours is about 150 million per year.
Linda Dann
Yes so the contribution, as far as it is possible to assess, is 14%, which equates to, currently, 150 million per annum.
Mr Francois
Over how many years?
Linda Dann
I was just going to say, that is currently. Over previous years, the overall figures will have been different, so the percentage element of it will also vary. So in relation to 2017, for example, our estimate of the proportion attributable to this programme was €898 million. The following year it was slightly less—€808 million—because it is a percentage of the whole.
Mr Francois
Forgive us; I think we have probably mastered that. I think what we want to know—I am looking at my colleague here—is, in simple English, how much money the UK has spent on this programme to date, and, if it is 14% of whatever the annual total was, over how many years. In other words, what is the gross sum that we have paid in? It is a fairly straightforward question. And how much more, if anything at all, are we on the hook for? Or, now that they have told us we are excluded, does that mean we pay no more money—yes?
Linda Dann
The first stage of the programme was 2003. The first satellite was launched in 2005, so that just gives you an indication of the programme.
Mr Francois
So 15 years, in fact.
Linda Dann
Yes, and that was maybe a bit before, I should say, because there would have been the planning up to the first stage, so that in terms of the detailed estimate of what that proportion would be I am afraid I do not have the figures. MoD is not the lead, of course, on the Galileo project. The UK Space Agency is. We have an interest in one part of it, which is the secure bit.
Mr Francois
Which is the whole point. That is partly why Galileo was developed in the first place—because there were people within the European Union who were no longer prepared to rely on continued access to the US GPS signal; so they argued that Europe had to have its own signal. We agreed to participate in this, although there was a row because many people said, if the Americans are ever going to turn it off, we will be the last country on earth they turn it off for, so why do we need to do this? Anyway, we decided that we would, and we spent quite a large amount of British taxpayers’ money paying into this project, for which we have now been told “Thank you very much. You are excluded from the key point in the project.” So the bit I think I and my colleagues are desperately reaching for—let’s have yet another go—is how much money Britain has spent on this project to date. Minister?
Stuart Andrew
We just said that we haven't got the total figures for the full project. I will happily write to you with that. It has varied over the years.
Mr Francois
Okay, but with respect, we gave you notice about half an hour ago that we were going to come back to this. What would normally happen is that one of the bright young things behind you would nip out, make a phone call, or send a text, and say, “Crumbs—we are under pressure here. What is the answer?” You have had half an hour for your team to do that. What, please, is the answer?
Stuart Andrew
I have just explained to you that I don’t have the answer and I will get it to you and write to you.
Mr Francois
Forgive me, Minister, but that is completely unacceptable. That is disrespecting a parliamentary Committee, in my opinion.
Chair
It is not as if you hadn’t known for some time that you would be coming to this Committee.
Mr Francois
Correct. What were you all doing last night? Were you all down the pub? Come on, Stuart—you should know this. It is your job.
Mrs Moon
Minister, can I ask a different question? In terms of PRS, it can feel as if it is an “us and them” situation that we are discussing here. My understanding is that a number of members—France, Spain, the Netherlands and the Baltic States, for example—have actually been very supportive and are insisting that the UK remains part of PRS. It is not a case of everybody saying no to the UK’s involvement; there is also a recognition from many states that our involvement is extremely helpful and is something that would be missed. Is this an ultimate and final door closed, or is it an ongoing discussion that is happening even as we sit here, where people are saying that this is not a good idea in terms of future capability, and, given the risks that we all know satellites are now at risk of from satellite-destroying weapons, that a second satellite with this capability should be available and the UK should remain involved? Is that currently the situation?
Stuart Andrew
We will continue. I repeat what I said. This is a very short-sighted decision. The contribution that UK industry makes to this project is significant.
Mrs Moon
And there are many who think it is a short-sighted decision.
Stuart Andrew
Absolutely, and we will continue to use wherever possible those bilateral relationships that we have to argue the case—but it has to be said that if we are not going to have sight of those secure elements, then this is not going to serve our national interest, which is why we have now begun this 18-month programme, putting in the £92 million, to explore the options through the engineering, design and development of our own global navigation network, to see what options are available to us should all of those discussions come to a complete end.
Mrs Moon
But they are still ongoing.
Stuart Andrew
Yes, absolutely.
Dr Lewis
By way of background, on some briefing material here, it says that initially the UK Government also opposed the project but that in recent years, both the US and the UK have become more supportive of Galileo as the UK has been successful in securing contracts, particularly related to the public regulated service, worth more than it invests. That shows that there are two dimensions to our involvement with this project. One is the question of whether we get the benefit of the system being up there and working and doing its job—as it were, as a consumer of the product—but the other is obviously that there is revenue for British companies to be involved in the creation and possibly even the maintenance of the project. Can you differentiate between those two elements? First of all, is it being proposed that we would be excluded from benefiting from the product of the system when it is working and also—am I right?—that our companies would be excluded from the second dimension as well, which is being able to participate in the building of the programme? Is that right?
Stuart Andrew
My understanding is that there would be elements of it on the civil side that could be used, but we have to look at this as a whole. For MoD specifically, not having that sight of that secure element does not give us the confidence to continue with the project.
Dr Lewis
I understand that we are excluded from using the product, but are our firms also being excluded from bidding for contracts in building the project?
Stuart Andrew
Yes.
Dr Lewis
Right. How capable do you think the remaining EU countries would be of continuing to build the project without our very significant contribution towards building it? I note that they have already been removing various headquarters; I think there was even one place in the Falkland Islands that they have now started to relocate to another country. To what extent will they be able to go it alone without us, and to what extent will we be able to go it alone without them?
Stuart Andrew
You have hit the nail on the head. That is why we think this is such a short-sighted decision: because there is an enormous amount of capability within British industry that has contributed to the Galileo project that they will miss. We have continued to make the case to them that it is a short-sighted decision. In essence, by making the decision, they have created a problem not only for the UK but for themselves. You are quite right that the base in the Falklands is an area that they are having to actively look at if they are going to get complete and accurate service from their own Galileo project.
Dr Lewis
The problem that I have with this, Minister, is that it all seems to come back to what we were saying about PESCO, which is that if you are not part of their grand project to build a European defence identity, they don’t want to know. The purpose of having European defence should not be to defend ourselves against each other, but to defend ourselves co-operatively against external threats. This is where we seem to struggle all along, do we not? The primary aim is not defence, but to build a European defence identity for its own sake or as part of a wider political project. Is that not what is at the root of this?
Stuart Andrew
I have a lot of sympathy with what you are saying. That is why we have been arguing in each of these elements that in any aspect of defence that it pursues, in the first instance the EU has to not duplicate any work that NATO is doing. It should be complementary, to help NATO in its aims. It also needs to be outward-looking if they want to have a successful defence collaboration. Our experience has been that keeping it to those EU countries will not get the best benefit.
Dr Lewis
Finally from me: doesn’t it amount to cutting off their nose to spite their face?
Stuart Andrew
Yes.
Chair
Would it not also be grandstanding? We heard President Macron saying some rather insulting things to the United States. They tried to mollify it because they saw that Mr Trump was extremely cross—with justification, in my opinion—at their lumping America together with China and Russia. That grandstanding is a real problem. As Dr Lewis has just indicated, and you seem to have accepted, the real problem is resolved if people work together with the objective of one another. Bearing in mind that no two democracies have ever gone to war with one another, that is a very important central principle and practice. What is the Government actually going to do with respect to Ascension Island, for example? The Commission last week announced that the EU intends to move the infrastructure—we have mentioned that in relation to the Falklands, but you have Ascension Island as well. How do you deal with people who operate in this extraordinary, erratic fashion? How do the Defence Secretary’s comments that the EU could not run Galileo without using the British Overseas Territories actually work in practice?
Stuart Andrew
The Secretary of State made that very clear, but we will continue to argue that the outward-looking approach is the one that is of most benefit to all. We will also use those bilateral relationships, as I keep saying, to emphasise the point that this will not be in the interests of other sovereign nations.
Chair
That’s the point.
Stuart Andrew
We really need to make that point very clearly to them, and we are doing so.
Chair
And not to compete with NATO.
Stuart Andrew
Not to compete with NATO.
Chair
And to provide enough money to make NATO work properly.
Stuart Andrew
Absolutely.
Chair
Darren would like to ask a question, followed by Marcus and Stephen.
Darren Jones
I would just like to finish my first question, actually, Mr Chairman. To bring us back to the question of industrial policy, I have not heard anything today that tells me that it is incorrect to say that 7% of our contribution of British taxpayers’ money to the EDIDP will be going to the Galileo PRS system, which British industry is now barred from being able to bid for. Regardless of your view on Brexit, that is not a good outcome. The point on multinationals that play in this space, to answer Dr Lewis’s point, is that they will just move their capability to Europe to be able to bid for these contracts, which is a loss of specialism to British industry. The question I would like an answer to, Minister, is this: for those companies in the UK today that have this expertise, that have for a long time worked towards building these systems for Galileo and that are now blocked from being able to bid for future contracts, what will the British Government be doing to ensure that we keep that expertise and those industries in the UK, whether for a domestic system or for a partnership with Galileo? What reassurance can you give them?
Stuart Andrew
We are constantly engaging with industry—on a regular basis. Some issues like this will come up, and we are obviously giving those reassurances. I think this is why—
Darren Jones
Which reassurances?
Stuart Andrew
Specifically, the 18-month plan that we have in place at the moment—this £92 million for engineering and design—to then look at all the options. I hope that they would wait for us to finish that report, so that we can then decide whether or not we are going to embark on our own individual process, which would then create a lot of opportunities for industry within this country.
Stephen Kinnock
In the same vein, on Galileo, we have established that the UK has been a net beneficiary of the programme. We of course put in the membership fee but, because of the expertise and capability of British firms, we have got more out of the programme than we put in. This is very similar to Horizon, of course. We are the most successful country in the entire EU in terms of getting far more out of Horizon and scientific co-operation than any other member state. Can you just give us the net beneficiary figure? What is the difference between what we have put in, in terms of membership fee, and the value of the contracts that we have got out of the programme?
Mr Francois
Stephen, if they don’t know what we’ve put in, they can’t know what the net figure is.
Stephen Kinnock
I just want to see whether there is a—
Stuart Andrew
The approximate total for Galileo—[Interruption.] Yes. The approximate total for the Galileo project has been 10 billion pounds over the period. The UK’s contribution to the end of last year is approximately 1.15 billion since 1999, based on our percentage contribution of the total budget, paid out of the Government’s payment to the EU.
Mr Jones
For clarification, is that the figure in euros?
Stuart Andrew
Yes, in euros—I beg your pardon. Sorry if I said pounds.
Mr Francois
So, very roughly, £1 billion sterling.
Stuart Andrew
Yes.
Mr Francois
Thank you.
Stephen Kinnock
Are you able to say how much we have got out of it in contracts?
Stuart Andrew
I can’t. I will write to the Committee.
Stephen Kinnock
If you could, that would be helpful.
Stuart Andrew
I will try. It is obviously quite difficult, because we are talking about industry, really. Without getting the specific figures from them about how much they have got individually from it and invested in it, it is quite difficult to get the exact figure, but I will at least explore it.
Stephen Kinnock
If you could, that would be helpful. The methodology might be similar to what we have with Horizon, where we have quite a specific figure for how much more we have got out of Horizon than we have put in.
Stuart Andrew
I will certainly explore that and come back—
Stephen Kinnock
It would be useful to know. In terms of the game of poker, almost, that has been going on around whether we need Galileo more than they need us to make Galileo work, it seems pretty clear that the EU has come to the conclusion that they don’t need us, because they would not otherwise start the process of moving installations from the Falklands Islands to other places. So they have made a decision on this, haven’t they? So why do you think the Secretary of State for Defence said, “They need us more than we need them”?
Stuart Andrew
I am not sure that they have actually secured a site yet, in terms of removal from the one in the Falklands. That was an operational advantage that we gave. There is also a tremendous amount of expertise within British industry in this space. I just think that, to go back to the point we made a moment ago, if we are really going to be successful in making sure that we secure European defence—I mean that in terms of the continent—we should work together collaboratively. This idea of pulling up the drawbridge on a project like this is incredibly short-sighted. We are missing out on some expertise and knowledge that UK industries—
Stephen Kinnock
I am very sorry, Minister. I absolutely see what you are saying, and we regret the decision that has been made. However, the fact is that the Commission formally announced on 13 November that, by February 2019 at the latest, it is bringing forward proposals to relocate the ground stations currently in the Falkland Islands and Ascension, we presume to French, Portuguese or Spanish island territories. Again, why do you think that we seem to think that they need us more and would never do anything without us, when they have clearly taken a decision to go ahead?
Linda Dann
On that point, there are other places where they could put those ground receivers, but they would not necessarily have the same coverage as we could offer. Another example of the Commission taking decisions that are not necessarily in the best interests of European security is that, over the summer, we heard that one of the Galileo work packages, which relates to a big ground segment contract of around €200 million, has gone to a small, untested Spanish company. That is a major risk to the Galileo project. The company is relatively small and does not have specialised experience of priming or the annual revenue back-up. As someone said earlier, there is a degree of their cutting off their nose to spite their face.
Stephen Kinnock
There is a degree of risk, but it is clearly a risk that they are prepared to take. I just think that it might be better to just accept that the decision has been made and that the investment of £92 million is to explore whether we can develop our own capability. It would also be useful to have a calculation of the difference between what continuing in the programme would cost us going forward and the net that we make from the programme, because of British companies winning all these contracts, compared with the £92 million that it will now cost us. In the round, I have to ask the panel, overall and in the context of this discussion, do you think that Brexit will be good for our national interest?
Stuart Andrew
We have sufficient capability within the UK to develop this. I am very impressed with what I have seen as I have gone around the country looking at industry and the tremendous amount of work going on, particularly in adapting to the space threat. It is disappointing, but I think that we have gained enough knowledge to be able to look at our own project with confidence.
Chair
I know that Marcus Fysh is anxious to come in, and I can see that Madeleine and Mark Francois are too. I call Marcus Fysh first.
Mr Fysh
On state aid, what is your understanding of the backstop provisions within the withdrawal agreement and whether they will apply? Will there be a state aid exclusion for the defence industry under the backstop provisions, as there is in the current EU treaties?
Stuart Andrew
I am afraid that I do not know that. I will have to come back to you.
Chair
I do not think that the Minister of Defence is up to speed on backstops, Marcus.
Mr Fysh
As I read it, the EU’s exclusion from state aid provisions for defence projects is not carried over in the backstop provisions of the withdrawal agreement. We would be prevented from aiding our defence industries. It is one to look into.
Stuart Andrew
I will look into that, certainly.
Chair
That is really what I was wondering.
Mr Francois
Minister, now that we have the figure, for which we are grateful, the summary is that we have paid in about £1 billion of British taxpayers’ money over more than a decade to contribute to this project. In return, they have locked us out of the key system that was the whole point of investing in it in the first place. Did I get that right?
Stuart Andrew
Yes.
Mr Francois
Thank you. That is a very clear and direct answer. As a British Minister, are you not rather irritated, in the way that a number of colleagues and I clearly are, that we have been taken for £1 billion?
Stuart Andrew
Yes, and I have made that very clear, as I said at the beginning.
Mr Francois
Forgive me, Minister, but you did not say anything as clear as that, because we did not know we were talking about £1 billion at the time.
Stuart Andrew
No, but I have made it clear that there had been a significant investment and that is frustrating, and that we consider this to be a short-sighted decision.
Chair
It is more than that, surely. It is a disgrace. They simply walk all over us. As I have said repeatedly through these negotiations, we are not robust enough in going back at them. This is a good example. They tell us what to do and we go along with it. It is outrageous. This is not the way negotiations should be conducted. We have left lawfully under the treaties. In the balance of liabilities and obligations, it is completely unacceptable for the United Kingdom to be treated in this way. Mr Francois is completely right. You seem to agree but are doing nothing about it.
Stuart Andrew
With respect, one of the first meetings I had was with the Commission to talk about Galileo and to express how we felt this was a very short-sighted decision. I do not want to repeat what I keep saying.
Mr Francois
You have said to Mr Cash and to this Committee that you are unhappy with the decision. I asked if we have been had and you said, “Yes, I agree with you.” What do we do now? I think they have treated us appallingly, which is why I made the white flag analogy. We are now looking at unilaterally developing a system of our own. Why can we not just rely on the American GPS signal, which militarily is what our Armed Forces have used for decades?
Stuart Andrew
That is more secondary—almost a back-up. The space threat is becoming more and more dangerous. We are just making sure that we have the reliability we need for our Armed Forces.
Mr Francois
This is important internationally: there is no question that we do not trust the Americans.
Stuart Andrew
No.
Mr Francois
Just so we are clear, the reason we are contemplating doing this unilaterally is in case it came to war and the US signal were lost, although the Americans would do everything they could to maintain it and they have lots of contingency plans to maintain it even if it is attacked—I know that from a previous life. You want to create a unilateral British system as a backstop in case we lose the American signal. It is not a matter of trust.
Stuart Andrew
No.
Mr Francois
Good. You know more than anyone how much pressure the defence budget is under. It is already massively over-programmed—we are committed in theory to buy far more equipment than we have money to purchase. That is partly why we are going through the Modernising Defence Programme, to try to rationalise the two and square the circle. How much more would this add to the gap? Presumably we are talking billions of pounds for a unilateral British system.
Stuart Andrew
It would be an estimate—
Mr Francois
I appreciate that.
Stuart Andrew
About £3 billion to £5 billion over a 10-year period.
Mr Francois
Thank you. We can’t expect any more detail at this stage. Which Department would pay for it?
Stuart Andrew
It would be right across. There would be an element for MoD, which will be needed, but we are working closely with BEIS too. We will be reliant on a whole host of Departments.
Mr Francois
So a number of Departments would have to put into the pot.
Stuart Andrew
Yes, but I couldn’t give you a breakdown at this stage.
Mr Francois
No, I wasn’t approaching that. In theory, it is £3 billion to £5 billion over 10 years, and a multi-departmental contribution to afford it.
Stuart Andrew
Yes.
Mr Francois
Do you have a rough idea of how much of that might be the MoD’s, or is it too early to say?
Stuart Andrew
It is too early to say at this stage, because we are in the middle of this 18-month development.
Mr Francois
We have paid £1 billion of British taxpayers’ money and the Europeans have basically pocketed it and said, “Thank you very much, you mugs. We are now going to lock you out of the system that you paid a lot of money for.” Rather than rely on the Americans, who we have relied on for this for decades, and partly because we are embarrassed by what the Europeans have done, we have now come up with the idea that we are going to build our own. You are saying that it might cost £3 billion to £5 billion over 10 years to do that, when the Americans have a perfectly reliable signal that they have given us access to for decades. Isn’t this just a vanity project to cover the fact that we are embarrassed about the fact that they have stuck this programme right up our backside?
Stuart Andrew
No, I don’t agree with that assessment. I think there is a growing threat in the space and cyber area, particularly. It would be irresponsible of us not to look at that threat very seriously and ensure that we have robust systems in place. Of course the American system is something that we can rely on, but it would be sensible and prudent for any Government to ensure that we have resilience in an area that is changing at a rapid pace.
Mr Francois
And how on earth are we going to afford it?
Stuart Andrew
That is exactly why we are in the middle of this 18-month assessment. That is why we are looking at what the costs will be.
Mr Francois
Stuart, isn’t the truth that this assessment is basically a fig leaf to cover the Government’s embarrassment about what a disaster this has been? We have been completely legged over by our “European friends,” and the Government are so embarrassed by that that they have got to be seen to be doing something about it, so they have come up with this idea of a study for a £3 billion to £5 billion programme that everyone in the defence industry knows will never be built.
Stuart Andrew
I am not sure it is a true assessment to say that it will never be built.
Mr Francois
We will never be able to afford it.
Stuart Andrew
I said a moment ago that UK industry has benefited a tremendous amount from the Galileo project and stands to benefit from any future UK project that we may have.
Mr Francois
Which major defence programmes will be cancelled to be able to pay for this?
Stuart Andrew
I can’t give that assessment at this stage, because obviously—
Mr Francois
But clearly we will have to, right?
Stuart Andrew
I don’t even know what figures we are talking about at the moment. I don’t know what our share of that £3 billion to £5 billion is. To try to give you an answer about which projects we would have to cancel would be irresponsible.
Mr Francois
But we would have to cancel some, wouldn’t we?
Stuart Andrew
We will have to wait and see what the assessment says. As you quite righty said, we are going through the Modernising Defence Programme at the moment, and we have got an ambitious equipment programme. This will have to come into the mix, but we are working hard on it at the moment.
Mr Francois
Lastly, the Defence Committee, which makes up half of today’s merry band, has been constantly pressurising the Ministry of Defence for a long time—since long before I got to serve on it—to balance their books. They can no longer, as a Department, carry on living in this fantasy land of pretending that they have got more money and can afford more shiny equipment than they know they can realistically pay for. The F-35 is a classic example of the dilemma that the Department faces. What you are proposing to do now is to make that challenge even greater by adding, at the very least, some hundreds of millions of pounds to the MoD budget over the next 10 years, at a time when you are already massively over-programmed and desperately trying to shrink the gap. This programme would only extend it, right?
Stuart Andrew
As I said a moment ago, we are making a full assessment of our needs for our Armed Forces. The cyber and space area is an important part of that. The growing threat is there and is feeding into the MDP. We will make that full assessment at the time. I cannot give you an answer at this stage about whether we are going ahead with our own programme.
Mr Francois
I will give you an answer. You will never go ahead with it. You will never do it.