Changeover to euro now under way

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The Independent Online
THE PRIME Minister said yesterday the Government's new plan to prepare Britain for joining the euro was "not a change of policy. It is a change of gear.

"We can no longer afford to pretend either that the euro does not exist or that Britain should not actively prepare for it," Tony Blair said. Failing to plan for membership would be a "denial of reality", he told the House of Commons.

The public sector will start preparation immediately, with provisions in the Finance Bill to get parliamentary approval for tens of millions of pounds for changes to computer systems by the Inland Revenue and other departments.

The changeover for the Revenue and the Department of Social Security in particular will involve large-scale information technology projects, which are likely to form one of the most time-consuming elements of the national changeover.

The 64-page national changeover plan acknowledges that businesses are unlikely to start spending money without a clear lead from the Government.

But the plan says: "The amount of pre-planning and practical work that takes place between now and a decision to join will be crucial in determining how quickly things could move forward thereafter."

The timetable set out in the plan rests on the assumption that businesses and government alike start their planning now, well before a referendum. Early preparations could shrink the period between the referendum vote and the switch to euro notes and coins to between 24 to 30 months.

The period between the Government's decision in principle to join and the final withdrawal of the pound is pencilled in at 40 months. So if the decision were taken in the first half of 2001, the switch from pounds to euros would take place during late 2004.

Planning for the production and distribution of 2 billion euro notes and 13 billion coins has already started. Legislation - including changes to the status of the Bank of England - will be introduced as soon as the Government has decided to join. And the banks have said they will start converting to euros at the same time, ahead of the referendum result.

But most changes by the public sector and other businesses, with the minting of euro coins, will not start until there has been a "yes" vote.

Many business organisations were lukewarm about the plan, criticising both the lack of a firm date and what many saw as an ambitious timetable.

The strongly euro-sceptic Business for Sterling campaign said the changeover would cost British business billions of pounds.

The Treasury admitted that the cost to business could be considerable, but said it would depend on how well companies planned now. The national changeover plan should help concentrate minds on what steps were needed.

The British Retail Consortium, which took part in drawing up the document, insisted that the timetable was too ambitious, with stores needing a three- year period after the referendum to convert tills and computers. Elizabeth Phillips, the deputy director general, said cutting this period to two years would double the changeover costs for retailers.

Many businesses are unlikely to spend any significant amounts of money on the changeover until the referendum.

Stephen Alambritis of the Federation of Small Businesses said: "What small companies respond to is certainty." They were concerned that bigger businesses would insist on their suppliers dealing in euros before a date for UK membership had been set, he said.