Finance houses in the City of London are spending many millions of pounds making their IT systems ready for the introduction of the single European currency, which is to be rolled out in most of the EU between 1999 and the end of 2001. But some government departments and local authorities are behaving as though the euro will hardly affect them unless and until Britain joins, say critics in the accountancy profession.
The Federation des Experts Comptables Europeens (FEE) - which represents accountants in Continental Europe - says that the operations of public bodies will be strongly influenced by the euro, even before Britain becomes a member. Public bodies are obliged to tender across the whole EU market; some of their investments are likely to be held in euros; and they may find it cheapest to borrow in that currency, particularly for private finance initiative deals.
Noel Hepworth, euro project director for the FEE and former director of the Chartered Institute of Public Finance and Accountancy, blames the Government for not doing more to encourage public bodies to prepare for the euro.
"Elsewhere in Europe there will be a three-year transition period, but it may be just a year in Britain," Mr Hepworth predicts. "There is not enough time in one year to prepare, so we must spend more time here preparing before [the entry date is announced]. The Government has said we can't go in until we are prepared, so the Government needs to say clearly that the transition period will be very short and that organisations, particularly public bodies, need to prepare a long time in advance of the transition period - which means just about now."
The sensible thing, says Mr Hepworth, is for public bodies to use Year 2000 preparations as an opportunity simultaneously to convert IT systems to account in the euro currency.
"A lot of people have argued that you should not mix up the Year 2000 and euro problems, but increasingly the view is that when you carry out an inventory on Year 2000 you should also carry out an inventory on currencies," he explains. "It is absolutely pointless to sort out Year 2000 without sorting this out as well."
But one complication is that the shortage of computer programmers which has pushed wages up to deal with the Year 2000 problem may have an even more dire effect on euro preparations. Many programmers who work in Cobol - the language used by most old IT systems, such as those still in operation in many local authorities and other public bodies - have been induced out of retirement to correct Year 2000 bugs in programmes. It may be more difficult to keep them in the labour market once that work has been completed. "The sooner you change systems over to the euro, the easier and cheaper it is," argues Mr Hepworth.
Public bodies in any case have an educational and promotional role to play, he suggests. In France the state-owned railway, SNCF, will print the euro price alongside the fare in francs from next year. FEE believes that local authorities in this country should soon begin to do something similar, by issuing bills for council tax and business rates showing the sterling price and what it represents in euros, and do the same on statements for council tax and housing benefit. This would encourage the private sector to take its own action to prepare for euro trading.
Mr Hepworth believes that auditors have a key role to play in ensuring that businesses are properly preparing for the euro. "Management has a responsibility to prepare accounts on the basis that their organisation is not going out of business," explains Mr Hepworth. "If you cannot trade in the euro by the appropriate date, which is by the end of 2001 in the rest of Europe, then you are out of business. Auditors need to ensure that the basis of the accounts is true, and that accounts have been prepared in accordance with this. Auditors should be asking managers what is being done about the impact of the euro, and give advice."
They should consider a similar approach in the public sector, FEE suggests.
Both the Audit Commission and the National Audit Office declined to comment on what advice they were giving to public bodies about preparing for the single currency. However, the Treasury points out that it has established a euro preparations unit to help businesses and public bodies prepare for the single currency. The unit will liaise with other government departments, which will be expected to encourage the public bodies they work with to prepare for the change to the euro.
Mr Hepworth, though, believes that the size of the Treasury unit is too small, that other government departments are placing too low a priority on the issue, and that the significance of euro preparations has become lost under the attention given to the so-called millennium bug.
The FEE's advice to public bodies on preparing for the Euro can be obtained on the World Wide Web, at www.euro.fee.be/Reuse content