Countdown to the bug with a pounds 10bn repair bill

Millennium meltdown: The Easter pay packet fiasco will pale against what is in store for the year 2000. Charles Arthur reports

The computer failure that led thousands of people to go unpaid this Easter will pale in comparison to the "millennium bug" - which will cost this country alone nearly pounds 10bn in reprogramming costs.

Government computers such as those controlling tax and benefits are likely to be hardest hit, with a bill for reprogramming estimated at close to pounds 1bn just to carry on day-to-day activities. If the work is not carried out, the disruption will cause extra expense and the reprogramming will still be required.

The problem will hit immediately after midnight on 1 January 2000, while most of the world is celebrating the party of the century. The seeds were sown decades ago by programmers who, in order to save computer storage space - then very valuable - shortened the year component of their programs to two digits instead of the full four.

For all of this century that has sufficed, as it has always been simple to arrange records in date order - a commonly required operation - by putting those with the largest value in the "year" digits first.

But in 33 months' time, that will suddenly fail. Similarly, any operation which tries to find out which of two year-based dates is the later will give wrong answers.

Such a problem would affect pensions, mortgages and life insurance systems. Credit-card companies have already found that some cards issued this year with a three-year lifespan are being rejected by shop tills which think that "00" is a non-existent date. Many systems will believe that anything dated "00" comes from 1900 - and so is either due for a huge payout (in the case of pensions) or hugely in arrears (in mortgages).

The problem arises, as the commentator Joseph Campbell said, because "Computers are a lot like the god of the Old Testament: lots of rules and not very forgiving".

The problem is compounded because many of the programs are used daily, yet were originally written in languages that have since become outdated, so that few people have the skills necessary to update them. In some cases, the original program code is not available; for other commercial software packages, the companies have gone bust, leaving no trace.

There is no quick fix to the problem, and it is not possible - or wise - to try testing the system by changing the date to one after 2000 and seeing what happens. Some programs treat "00" in the date field as meaning the data is empty and will erase it.

Companies and governments in Britain and the rest of the world are quickly waking up to the problem, stung by a number of incidents which have received wide publicity within the computing world. When British Gas Trading recently tried to provide a customer with a five-year trading plan using one of its internal programs, the systems crashed.

It could not cope with any year after 1999. Similar problems are believed to lurk in the billing systems of all the utilities. BT is understood to have earmarked pounds 300m for reprogramming its systems.

However, it is government systems, and particularly the Inland Revenue and Department of Social Security, which face the biggest problems. "They have very, very big systems ...and because they're government they have terrible budget constraints," said Simon Slavin, a freelance computer programmer. "I personally think they will be the worst hit."