The Home Secretary, Jack Straw, will also be put on alert to co-ordinate a strategy to cope with chaos on Britain's roads, airports and hospitals.
The Government fears that the ordinary emergency services will be unable to deal with the mayhem caused by the possible national shutdown of lifts, air traffic control systems and hospital equipment.
It plans to put the Civil Contingency Unit, run by a secretive cabinet group known as Cobra, on alert to deal with the situation. The unit, which has the power to assemble the heads of the Army, Navy, Royal Air Force, security services and SAS - for emergency strategy meetings - was last mobilised in 1994 during a training exercise to prepare for a possible nuclear attack by terrorists.
Government sources confirmed that the unit has been put on alert for New Year's Eve.
"We are doing very well with our preparations to deal with the bug in Government departments. Plans are ahead of schedule with hospitals," a senior government aide said.
The millennium bug could cause a shutdown of many of Britain's computer- operated systems because the chips are not programmed to recognise the year 2000. Analysts fear the bug will lead to chaos.Reuse content