Companies (Millennium Computer Compliance) (Hansard, 18 December 1996)

§ Mr. David Atkinson (Bournemouth, East)

I beg to move, That leave be given to bring in a Bill to require companies to conduct an audit of the capacity of their computer systems to deal with calendar dates after 31st December 1999 and to report both on those audits and on the actions their directors propose to take in consequence. The aim of the Bill is to avoid for this country much of the widespread chaos and confusion that it is being increasingly predicted will occur throughout the world at the turn of the century, in just three years' time. I am grateful to hon. Members of all parties who have so willingly offered to sponsor it.

The cause of such Doomsday predictions is the inability of the majority of computer systems to recognise 2000. That is because they use, as we all do, two digits for the year of the date instead of four. Thus, today's date is written as 18/12/96, rather than 18/12/1996.

Unless they are properly reprogrammed, computer systems will recognise 2000 as 1900, or simply reset to some other date. That will mean that they will no longer deliver what they are programmed to deliver, and because so much of our daily lives depend on computers, the result will be, to use a tabloid word, catastrophe. As no one who has looked into the bizarre problem in any detail has so far suggested otherwise, the matter must be of urgent concern to the House.

When the matter was first raised on the Floor of the House in my question to my right hon. Friend the Prime Minister just a year ago, it was greeted with expressions of ridicule and disbelief. One year later, many written questions to Ministers in every Department, follow-up questions where appropriate, and my Adjournment debate on 6 June have contributed to increasing coverage in specialist computer magazines and the national press.

Many hon. Members are now aware of the issue, and realise that there is a real problem that must be addressed. I especially appreciate the interest of the hon. Members who attended my briefing meeting last Wednesday, and the fact that the Parliamentary Office of Science and Technology has issued a briefing note, No. 89, on "Computer Systems and the Millennium". That is in the Library, and I recommend it as essential background reading.

The briefing note refers to some of the forecasts of the danger of failure to ensure that computer systems are millennium-compliant. Consequences could include payroll systems collapsing so that workers cannot be paid; financial records losing track of investments; invoicing systems failing to generate bills, or charging 100 years' worth of interest; telecommunications networks failing; and problems with supply in utilities such as gas and electricity.

We must also take into account the possible unpredictable behaviour of embedded microchip systems in places such as elevators, bank vaults and medical equipment, and in Government systems such as those responsible for benefit payments, for maintaining criminal and medical records and for revenue collection.

In response to my Adjournment debate in June, my hon. Friend the Minister for Science and Technology talked about the action that the Government were taking on their 963 computer systems—which are not, of course, the concern of my Bill. He also mentioned the Government initiatives to encourage awareness of the problem in the private sector. Those include establishing TaskForce 2000, in co-operation with the Confederation of British Industry and the Computing Services and Software Association.

My hon. Friend gave the House two especially telling warnings during my Adjournment debate. He said: some companies will go out of business if they have not tackled the problem, or not ensured that their suppliers have tackled it … it is a management problem that must be dealt with at the top … The Government cannot do it for them. It is no use companies coming to us in 1999 and saying, 'The Government have not fixed it.' The Government did not install the computer software. Failure to deal with the problem could lead to commercial collapse".—[Official Report, 6 June 1996; Vol. 278, c. 818–9.] My Bill is designed to avoid such commercial collapse. Even responsible companies that have taken the necessary action will find that others with which they have dealings, such as their suppliers, will not have taken action, which will make all those in the supply chain vulnerable to business failure. Truly the chain will be only as strong as its weakest link. I do not believe that all the warning, advising and cajoling in the world will be enough to ensure that the new millennium will begin trouble-free.

Like the Government, I do not want more regulation and red tape to be imposed upon businesses. Some concern has been expressed that my Bill might add to the many burdens that already fall on them. However, it should not add to the burden, because it merely clarifies an existing duty for directors of companies and their auditors to give shareholders in the annual report a true and fair assessment of the company as a going concern for the foreseeable future.

As the future is uncertain, that usually means looking no further than 12 to 15 months ahead. However, the effects of the unique problem that I am talking about can be assessed now, and a view taken on whether the company will be a going concern in the year 2000 if action is not taken now. Indeed, action must be taken now. It will be no use trying to solve the problem in 1999. Most information technology projects take several years to implement, and this will be the largest information technology project that firms will ever have undertaken.

For instance, British Telecom intends to spend hundreds of millions of pounds simply to ensure that its telecommunications system will work in three years' time. Auditors who sign company accounts for the financial 964 year 1997–98 and beyond will leave themselves liable to legal action by shareholders of firms that go out of business because they did not take action in time.

My Bill is designed to avoid the prospect of huge numbers of legal cases in the new millennium, with costly attempts to determine who is to blame for companies' failure.

The Bill will require companies to conduct audits of the capacity of their computer systems to deal with calendar dates after 31 December 1999 and to report both on the audit and the actions that their directors propose to take in consequence. It is an amendment of the Companies Act 1985, which is the principal company statute in force, and of the duty to prepare a director's report. Both obligations are placed on directors rather than companies.

If the House were to allow me to introduce the Bill today, there may be enough time for it to be given the Royal Assent in the spring, so that it could apply to company reports for the financial years ending in 1998 and 1999. That might be sufficient, with the work of TaskForce 2000 and other initiatives by the private sector and the computer industry, to avoid much of the incalculable chaos that is predicted if too little is done.

I accept that there is a cost to checking computer systems for their millennium compliance but the cost of non-compliance, which may mean going out of business, is far greater. This is a race against time. There are only 750 working days left. The problem is one of the greatest challenges facing business management. Like the change in the millennium, it cannot be avoided. That is why I hope that the House will give me leave to introduce the Bill.

Question put and agreed to.

Bill ordered to be brought in by Mr. David Atkinson, Mr. Richard Caborn, Mr. Paul Channon, Sir John Cope, Mr. Tam Dalyell, Sir Anthony Durant, Sir Russell Johnston, Sir Dudley Smith, Rev. Martin Smyth, Mr. Stephen Timms, Mr. John Townend and Mr. Dafydd Wigley.