Space Industry (Indemnities) Bill

Alex Ballinger Excerpts

Friday 7th March 2025 Commons Chamber

[John Grady]

The Bill applies across the United Kingdom, and obviously there is a space industry in south Wales, too. It will encourage investment in south Wales by protecting investors against unlimited liability. I see this as critical for the space industry in south Wales as well as in Scotland. Naturally, I focus on Scotland because I am obsessed with the place, but, I would add, Madam Deputy Speaker, that it is very important for Bradford, too.

It is important to note that the space industry is a source of good jobs, and not just for people with PhDs in astrophysics. Last year, the Scottish Affairs Committee heard that there were great opportunities for many different people in the space industry. It will provide jobs for school leavers, graduates and PhDs across the spectrum. That is something that is brilliant about space.

[Alex Ballinger (Halesowen) (Lab)]

Does my hon. Friend recognise that the Ministry of Defence is a massive investor in the space sector, having invested £6.5 billion over the last decade? Does he welcome that investment as we are strengthening European security?

[John Grady]

I am obliged to my hon. Friend for his intervention. That is a very important point. Every week, we can pick up the paper and look at the discussion about where we need to invest in defence. We must invest in space, and we must have our own capability here in the United Kingdom—that is critical.

Over my lifetime, the domain of warfare has, sadly, expanded from ground, sea and air to space as well as online. It is critical that we invest in our capabilities here. The Bill is important for that. It is critical that we continue to pursue investment by the Ministry of Defence and the UK Government, which I believe has cross-party support. It creates economic opportunities for the United Kingdom, too. The lesson of history and technological development is that investment in defence has significant civilian spin-outs, so it is quite right and proper for us to invest in it.

In summary, we have a huge opportunity and it is one that we must seize. The Bill has one, sole objective: to help get investment into the space sector so that we seize this opportunity. With that in mind, I now turn to provide more detail about the legal and commercial background to the proposed Bill. I must admit that, given my previous career as a lawyer, I find this bit the most interesting. However, I quite accept that for others it may have a more treacle-esque quality to it. I beg forgiveness, but I am afraid I must proceed!

As I have explained, the Bill seeks to limit space operators’ liability. I start by emphasising that there is a very, very strong safety regime in operation here. Spaceflight activities are very heavily regulated by an independent regulator, the Civil Aviation Authority, to ensure that they are safe. In order to carry out spaceflight activities, one must obtain an operator licence granted by the CAA, which is independent of Government. It has a clear legal duty to secure the health and safety of the public and the safety of their property. That trumps all the CAA’s other duties. It must put safety first.

A range of tests applies to the granting of licences. The applicant must be able to demonstrate that it has taken all reasonable steps to ensure that the risks to people and property are as low as possible, and that the level of those risks is acceptable. More generally, there is a detailed and robust safety regime governing spaceflight activities operated by the CAA. So, here we are concerned with small risks that are reduced to the minimum extent possible by a strong regulatory regime.

Under international space law, the UK Government have a long-standing legal liability for damage caused by spaceflight operations. There is, despite the safety regime, a residual risk that things can go wrong and that the Government can face claims. The UK Government can make claims against operators under section 36 of the 2018 Act. Again, that is quite proper. Under the regime, operators have to assume risk and under the Bill, although it limits liability, operators continue to bear risk. Of course, the Government need to ensure that operators can pay out on claims made against them, which is why the 2018 Act regime and the licences make provision for compulsory insurance to be put in place by the operators. And, of course, it is usual for businesses to insure against foreseeable risks.

Under the regulatory regime, the risks must be properly assessed and appropriate levels of insurance put in place. The policy for that is set out in a detailed guidance document published by the Department for Transport, the Department for Business, Energy and Industrial Strategy—as it was then—the UK Space Agency and the Civil Aviation Authority. I think everyone will be relieved to hear that I do not propose to give a detailed exposition of the regime or take them through the documents, but the critical point is that the regime requires appropriate levels of insurance to be in place that protects the taxpayer and is supervised by a strong independent regulator.

The risk for spaceflight operators is that claims from the Government under section 36 exceed the carefully assessed insurance. The current legislation does not require the CAA and the Government to cap operators’ liability. The relevant section makes it entirely optional. Section 12(2) of the 2018 Act provides that

“An operator licence may specify a limit on the amount of the licensee’s liability under section 36 in respect of the activities authorised by the licence.”

The key word here is “may”. My proposal is that “may” is changed to “must”, and that an “any” in section 36 is changed to “the” as a consequence. The Bill simply swaps two words with two other words.

The Government have a long-standing policy, as did the preceding Government, that liability should be limited. However, the issue for investors is that that is not set out in statute. This means that a future Government and regulators could change the policy with comparative ease, and that could damage existing investments and could lead to investors finding that they are exposed to unlimited liabilities. This is deterring, and will continue to deter, investment in the United Kingdom. The issue is causing real concern to investors.

This is a point that the space industry has made to the Government. In 2020, a cross-departmental consultation took place on the insurance and liability regime under the 2018 Act. In summary, many respondents raised concerns with the lack of a legally firm guarantee in the policy to limit liability. That caused concerns that operators would be exposed to unlimited liability in future. The then Government accepted the point but explained that introducing a provision to require a cap on liability would require primary legislation—and that is what I am proposing today. The Government also made it clear that, in the meantime, all operator licences would include a limit of liability. I agree with that decision.

The issue was also discussed in the 2021 report prepared by the taskforce on innovation, growth and regulatory reform, which proposed the introduction of a mandatory cap on the liability of licence holders, to encourage investment in the sector. Respondents to a UK Space Agency consultation in 2021-22 reiterated calls to make the limit of liability in section 12(2) of the 2018 Act mandatory. This is a long-standing unresolved issue.

The space industry and potential investors are right to be concerned. As some hon. Members know, I am a recovering lawyer. In my past career, I had to deal with complex liability issues—I reassure Members that none of them was of my own making. I learned that investors are happy to accept risk, but if they are investing millions or billions in a high-risk industry, they want to know that they are not exposed to unlimited losses beyond what they can reasonably insure.

The investors are correct to state that a Government policy can be withdrawn with much greater ease than a statute. Indeed, the plain fact, in my experience, is that the scope for legal challenge when Government policies are withdrawn is often quite limited. In such a situation, many investors simply will not invest. They want to know that risks are clearly and fairly allocated, manageable and covered by insurance, and they want to understand that the liability regime is legally solid. In contrast to a guidance document, a statute will provide much greater protection. Investors accept that it will not provide absolute protection, but a statutory protection will give much more comfort. That is a reasonable position for potential investors to adopt.

It is important to understand that investors have a choice of places in which to invest. Many countries want this space investment, and the United Kingdom has to be attractive to investors. These investments are long term and investors need to be sure that they are covered on a firm legislative basis—they need some security. My understanding is that all other launching nations—that is, nations with launch capability—limit liabilities or provide a state guarantee for the type of activities that currently take place from their territory.

At present, faced with this massive economic opportunity, we are at a disadvantage. There is a clear risk to the competitiveness of our space industry and, as a result, to its growth. The unlimited liability of the indemnity to Government is damaging investor confidence and makes the United Kingdom a less attractive place from which to launch. That will undermine our ambition for growth in the sector, and our ambitions to ensure that we can keep our country safe and to grow our defence in this area. The Bill confronts the problem and will make the UK a much more attractive place to invest.

To sum up, Madam Deputy Speaker—I suspect some people will be glad, given the dry topic, although I am happy to keep going—the space sector is central to almost everyone’s life. How could we check our emails in this Chamber without it? There is a significant economic opportunity for the UK here. The space sector is critical to our defence. The United Kingdom has a firm foundation for a thriving space industry, and we must build on it, including in Scotland, south Wales, Cornwall and the south-east of England. There are even people on the Isle of Wight who work in space.

There is a robust safety regime governing space operated by an incredibly highly experienced independent regulator. Operators have to put in place compulsory insurance, but there is a concern for investors that above that insurance, they will have unlimited exposure. That has been repeatedly explained to Government. The investors’ position is reasonable. The proposed change would limit liability and make the UK a more effective place to invest.

The Bill will help create economic growth, jobs and prosperity for decades to come from Cornwall to Shetland. It is good news for the great cities of Glasgow and Edinburgh and for great south Wales, and for growth and jobs across the United Kingdom. It is time to resolve this issue; jobs and investment depend on it—including in Bradford, Madam Deputy Speaker, which is a real centre of excellence for space.

The Bill changes two words: “may” to “must”, and “any” to “the”. It may be one of the smallest Bills in recent memory. I have not done the research into the smallest Bill in Parliament’s history—I guess we are looking for a one-word Bill—but this Bill has one big objective: to ensure further investment in the UK space industry. I could say that this is one small step for Parliament, but a big step for the space industry, if I was any good at puns and humour. But, as I suspect some of the hon. Members from Scotland could tell us, I am no good at puns and I am humourless. Nevertheless, I commend the Bill to the House.

--- Later in debate ---

[Alex Ballinger]

Will my hon. Friend give way?

[Mr Quigley]

Indeed I will—I am quite enjoying this.

[Alex Ballinger]

My hon. Friend mentioned satellites. Does he recognise the massive benefits that satellites bring to the UK—everything from contactless transactions to supporting our defence and national security?

[Mr Quigley]

Bearing in mind the last Bill we were debating, I am not sure how much we can say about the benefits that satellites have brought, but yes, I do appreciate that.

We on the Isle of Wight already have the infrastructure to build on, with our skilled workforce, proximity to the south coast’s aerospace sector, and strategic location for maritime and aerospace testing. We are well placed to benefit from the fairer, clearer regulatory framework that we will create by passing this Bill. Not only are we strengthening the UK’s position in the global space industry, but we are opening up new opportunities for regions such as the Isle of Wight. Let us ensure that our island and the UK as a whole remains at the forefront of space innovation. I urge colleagues to support the change of two words that this Bill would effect, for the sake of not only our commitment to the growth agenda, but this country’s commitment to the future.

[Alex Ballinger (Halesowen) (Lab)]

I congratulate my hon. Friend the Member for Glasgow East (John Grady) on introducing this important debate. The two-word change might be the most consequential change ever made in Parliament. I am pleased to support the Bill.

Today marks the commencement of British Science Week, a celebration of science, technology, engineering and mathematics. This year’s theme, “Change and adapt”, is particularly fitting—it feels almost as if the stars have aligned—because we are debating the space industry today, which is built on technology, engineering and mathematics. The Bill perfectly aligns with the theme of British Science Week, as it seeks to implement small but significant changes to adapt the space industry in the UK and make it fit for the future.

As many other Members have explained, the space sector is an incredibly valuable industry for the UK economy, and one that we should all take pride in. The UK has long been committed to boosting commercial industry, with over 1,500 space companies on our shores. The UK leads in start-up and scale-up investment, second globally only to the United States. That is a huge achievement and a real opportunity that we must continue to nurture.

A consultation undertaken by the previous Government showed that operators holding unlimited liabilities often viewed that as a barrier to conducting spaceflight activities from the UK. The same consultation confirmed that other launching nations limit liabilities or provide a state guarantee for spaceflight activities conducted from their territory. This reality does not give investors a firm footing when looking towards the UK as a place to invest. If we are truly serious about fostering growth across the length and breadth of our country, the space sector must play an incredibly important role. The Bill ensures that companies and investors are confident about the UK as a space in which to invest.

People in Halesowen may question what this means for them, as our small part of the west midlands does not have the largest space industry, but we all benefit from the services born of the space sector. Satellite technology, which I mentioned just now, is made possible by the space industry and enables us to buy our morning coffees with contactless payments. Satellites assist with navigation and, importantly, many of them support our defence and national security, keeping us all safe.

The Ministry of Defence has been a major player in this field for some time, investing £6.5 billion over the past decade, including £5 billion for satellite communications through Skynet, and £1.5 billion through the defence space portfolio. The defence space strategy sets out our focus on intelligence, surveillance and satellite communications. I know that colleagues from across the Chamber will welcome that approach, as do industry and allies alike. The additional £1.5 billion of investment through the defence space portfolio brings significant investment to space research and development, and the jobs, skills and expertise that go with it. Through that investment, we are ensuring not only that we meet the threats of the future, but that we help to build the capability, expertise, skills and jobs that will serve defence and the wider civil space programme. Any efforts to expand on that are therefore wholly welcome.

Investment in space is much more than that, however. I know that for many of the Members in the Chamber, particularly those of us with a keen interest in “Star Trek”, the prospect of sending rockets into the sky is an exciting one. At its core, investment in the space industry is about so much more: unlocking the economy and allowing significant economic growth.

[James Naish (Rushcliffe) (Lab)]

My hon. Friend talked about how Halesowen might not benefit hugely from the space industry, but the Government are developing our industrial strategy right now, and space should be right at the heart of it because of what it could bring Halesowen and similar towns and cities across the country. Does he agree?

[Alex Ballinger]

I welcome the UK’s industrial strategy, particularly the defence industrial strategy. Many businesses in Halesowen, such as Somers Forge, work in the UK defence sector—primarily the Navy—given our engineering expertise in a heavily industrial part of the country, but there are opportunities for lots of businesses across the country to get involved in the space sector. This small change will unlock a lot of investment that could be used in many different places.

There are other reasons to support the sector. If our goal is to eliminate the obstacles that hinder new businesses from establishing themselves in the UK, these two small words will help to make that change. In doing so, we aim to create an environment in which companies are encouraged to set up operations here, rather than relocating to other countries. We must focus on retaining jobs and ensuring that the employment opportunities of the future are available right here in the UK. Additionally, fostering a thriving business ecosystem will not only boost our economy but drive innovation and technological advancements. By supporting the sector, we can create a sustainable and prosperous future for our nation, attract global talent and investment across science, technology, and research and development, and contribute to the Government’s core mission of growth.

Once again, I congratulate my hon. Friend the Member for Glasgow East on his Bill. It is a significant step towards ensuring that the UK remains at the forefront of the space industry, driving economic growth and innovation for years to come, and a clear signal to the world that the UK is open for business, ready to lead in the space industry and dedicated to creating a thriving environment for growth and development. By supporting the Bill, we are investing in not only the space industry, but the future of our country, ensuring that we remain competitive on the global stage and continue to attract the best and brightest minds to our shores.