Government zeros in on pounds 1bn bill for millennium

The next government will have to spend at least pounds 1bn, equivalent to half a penny on income tax, updating civil service computer systems to cope with the millennium date change problem, a minister warned yesterday.

The surprise estimate emerged as the taskforce group set up by the DTI to raise awareness of the date change crisis admitted that most leading companies had so far failed to get to grips with the problem, despite an alarming rise in the cost of recruiting highly trained staff.

Most computer systems, along with many of the micro-chips built into industrial and household appliances, cannot cope with the dates after 2000 because they were only built to recognise the last two digits of each year. Retailers' systems are already rejecting products with sell- by dates after the millennium because they think they are almost 100 years old.

Ian Taylor, Science and Technology Minister, pledged that the civil service would have solved its millennium problem by the end of next year, the last date which industry experts believe will give organisations enough time to test new systems. However he predicted central government and the various agencies which pay benefits and levy taxes would need to spend at least pounds 1bn. He also said he doubted the DTI's current estimate of pounds 3m to solve its internal date change difficulties.

In the private sector senior consultants are able to command pay of up to pounds 2,000 a day to manage complex millennium computing projects. Jim Tucker, who advises the privatised utilities on the issue, said several firms in the industry had already stopped taking on new work. He explained: "The people shortage is getting critical. Companies most at risk are those who haven't realised it is at such a critical stage. They will find even middle-ranking consultants charging pounds 1,000 a day."

Stories of consultants stolen in a salary-bidding frenzy have become frequent. The Post Office yesterday confirmed that Dr Nick Fitzhugh, its director in charge of the millennium project, had recently left to join the consultancy arm of accountants Ernst & Young. Dr Fitzhugh was unavailable for comment yesterday, though the Post Office said he had been replaced.

Robin Guenier, head of Taskforce 2000, savaged the plans of leading companies at a news conference yesterday, describing their efforts so far as "totally inadequate". One serious concern is that even if companies sort out their own date change problems, they may end up suing suppliers who are not so well prepared. Hundreds of internal computer programmes may need to be altered in big organisations.

Mr Guenier went on: "It's already too late to expect a total solution. It is no longer possible. But the alternative if we don't do this right is the prospect of serious economic, social and political difficulties in 2000 and beyond."

However, research commissioned by Taskforce 2000 last November showed just 28 per cent of senior managers were fully aware of the problem, only a small rise from the 15 per cent figure in a previous survey in March.

Worse still, just 9 per cent of organisations had completed an audit to assess how much work needed doing.