APPENDIX 1
MANAGING THE MILLENNIUM THREAT (PAC 97-98/367)
Supplementary Memorandum submitted by
the Comptroller and Auditor General, National Audit Office
Q89. The derivation of the £3 billion estimate
for remedial work across all the public sector
The Committee asked for details of how
the estimate of £3 billion for remedial work across the public
sector had been arrived at.
The reference in the C&AG's report (paragraphs
5 and 1.32) to £3 billion was a report of the speech given
by the Prime Minister to the Action 2000 Midland Bank Conference
on 30 March 1998.
The Accounting Officer of the Public Service
(OPS), Robin Mountfield, said the £3 billion figure in
the Prime Minister's 30 March speech was explicitly not forecast
by the Prime Minster, but rather a figure others had used which
the Prime Minister had thought was reasonable. The Prime Minister
himself referred to the origin of the £3 billion figure in
response to a written question in the Commons on 30 April:
"The figure of up to £3 billion for
the cost of millennium compliance across the public sector was
an estimate to indicate the possible scale of the problem which
is faced by the sector. It took account of forecasts which have
been made by independent experts and companies with experience
of dealing with the costs of tackling this problem. Such forecasts
have ranged from £1 billion to £3 billion. These forecasts
are within a range because of the actual costs of compliance are
not easy to predict accurately in advance and historically have
tended to be underestimated."
(Written Answer to Malcolm Bruce MP 30 April,
Official Report, column 173-4).
Following on from this in his evidence to the
Committee Mr Mountfield described two routes to support a very
broad estimate of that order:
(i) figures had been given for central government
of £402 million in the Chancellor of the Duchy's statement),
for local government of £500 million (by the Local Government
Association) and of £170-£320 million for the NHS. Those
excluded other parts of the wider public such as TECs; Higher
and Further Education; BBC; NDPBs; London Underground; Post Office;
etc. Making allowance for these and other public sector bodies,
a figure of £3 billion looked plausible.
(ii) Alternatively a crude calculation could
be based on an extrapolation from the central governments estimate
of £402 million for approaching 700,000 employees (Civil
Service and Armed Forces), an average of around £600 per
employee. For a public sector as a whole employing just over 5
million people (see Economic Trends, March 1995), if the same
cost per employee applied, this extrapolation suggested a total
of around £3 billion. This calculation was, of course, based
on extremely broad assumptions and had no pretentions to be forecast.
National Audit Office
14 July 1998
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