Select Committee on Social Security Minutes of Evidence

Examination of Witnesses (Questions 80 - 85)



Mr Leigh

  80.  Four very brief questions on preparations for the euro. Can you tell us something about the challenges you face; the costs being incurred in advance of a parliamentary decision by you, preparing for the euro; whether we could avoid the difficulties of a `big bang' approach by allowing payment to be made in sterling, for a time; and whether there would be any sound technical reason for delaying a decision beyond the 2000 Year, to avoid the millennium bug, on the euro?
  (Mr McCorkell)  I think, in relation to the euro, we are obviously working on euro compliance, as is the rest of Government, and we created a project specifically to look at this from the Department's point of view last year. That project has been working across the Department and across Government to establish (a) what the requirement is and what the options are, for implementing that requirement. The analysis of that work, we are now in the analysis phase of that work, and that is targeted to finish in June. So, I think, in reality, to answer your list of questions, then, to give some real answers, it will be June before I can give some real answers. However, we do know that we will have potentially significant work on each of our benefit systems, the timing of the transfer to euro will be quite significant in that, because, obviously, in our new contract with AFFINITY to replace these systems they include euro compliance, so it depends when the euro is introduced which ones we may or may not have to change over. And we will be looking at all the options across that, but it is likely to be June before I could give you reasonable answers to those particular questions. I think we believe that this is likely to cost more than the Year 2000 problem, the way it is starting to shape up; is that right, Peter?
  (Mr Sharkey)  Yes; indicative. You might be interested to know, we already receive euros, we are euro compliant, as far as we need to be, because National Insurance contributions can be received in euros, from 1 January 1999, as can VAT. You also said about, instead of the `big bang', continuing to be paid in sterling. I do not know if this is policy, there has been a lot of discussion in the press, but there will be a period, will there not, where it is not as if on Friday you can work in sterling and on the Saturday it is all the euro, I think the length of that period is up for discussion, but there certainly will be a period where both sterling and euro, it is anticipated, will be in circulation, and one would assume, from a departmental perspective, both will be running in parallel. And, in some ways, whilst that is good, in that it is not `big bang', in some ways it is easier for the IT systems to do one one day and the other the other, running two in parallel, and it might be quite difficult. But there are lots of discussions going on around Government more widely, and we are fully involved, as George said, in that, and, as a Department, fairly well prepared in our thinking, we believe.

  81.  You said the cost is going to be more than anticipated; what costs have you incurred so far, what were the anticipated costs, and what do you expect the costs will be?
  (Mr McCorkell)  Again, I would prefer to give you a note on it[7], but the costs so far are relatively small, because we are in the definition analysis phase, so it is likely to be the small team, which is probably no more than three or four people, who are working on doing the analysis, in order then to come up with the real costs and the plan of action and the options for taking it forward.

  82.  But why did you say that you envisage the costs will be greater, what were you meaning by that statement?
  (Mr McCorkell)  That is purely based on the indications, because, clearly, the people who are working and starting to do this analysis are getting a feel for the scale of the change that we will have to make; they can, obviously, relate that to the Year 2000 programme, that we have already been through, and say "Well, changing all your systems for that sort of thing costs this amount of money, and therefore this is purely sort of a judgement, as work is ongoing, that the potential is for it to be more costly."

  83.  By how much, 50 per cent more, 100 per cent more; you must have a rough idea?
  (Mr McCorkell)  I would not be prepared to put any figure, I think it is very much just an indicative judgement and, as I said, until the analysis is complete and——

  84.  What do you mean by an indicative judgement, what are the indications?
  (Mr McCorkell)  All I can say is that, when people who are starting to do this analysis and are collecting the information and starting to work out the requirements, their personal feel is this is bigger than the Year 2000; it is no more than that, it is not a figure that you should base anything on.
  (Mr Sharkey)  Can I just say why the judgement becomes from—the Year 2k problem was an IT issue that affects business, the euro is a business issue that affects IT, and the effects on the business are much greater. Year 2k only affects the business where it goes wrong, in theory. The business issue of the euro, which means all your business processes change, all your stationery changes, all your rules change, and all that, and the IT changes as well, in the same way, so the scale of the problem is just much bigger, from a business, not an IT, necessarily, perspective.

  85.  Is there any difficulty then with this coming in at exactly the same time as the Year 2000, you did not answer that point, or is that just a problem that you can live with; if we decide to join the euro around 2000, or very shortly after, is this going to be causing any problems, or not?
  (Mr McCorkell)  If you were to decide to join the euro in the Year 2000, I would strongly recommend against it.

Mr Leigh:  There is an answer worth getting, I suppose. Thank you.

Mr Pond:  I hope that has not weakened your enthusiasm for the euro, Edward.

Chairman:  Gentlemen, that was extremely useful. Thank you very much for your time. You have obviously spent a lot of time preparing for this morning. It is a very important part of the Social Security field, in the broadest sense, and the work that you do is much valued. If we have been giving you what appeared to be a bit of a hard time, it is only because, I think, really, speaking for myself, I do not think that you get listened to enough, maybe that is because you are not throwing your weight about enough, or maybe it is because people to whom you are talking have got deaf ears; but I think that the work you do is important. We are very grateful to you for helping us with our examination of the Agency's work this morning. Thank you for coming.

7   See Ev. pp. 29-30. Back

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