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					         NICS EURO
      POLICY HANDBOOK




                  September 2004




2
DFP Version 1.0
DOCUMENT CONTROL

 Document Title     :   NICS Euro Policy Handbook:

 Status             :   Final

 Version            :   1.0 (September 2004)

 Distribution       :   NI Departmental Euro Co-ordinators

 Document Authors   :   Jim Drennan

 Document Owner     :   David Thomson

 Master Held        :   Jim Drennan, DFP

 WP Used            :   Microsoft Word

 File Name          :   NICS Euro Handbook

 Product Type       :   Written Report

 Size               :   Pages 37




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       CONTENTS
GLOSSARY OF USEFUL TERMS...................................................................................................................4
FOREWORD ....................................................................................................................................................5
ACKNOWLEDGEMENT ...................................................................................................................................5
1      INTRODUCTION ......................................................................................................................................6
       BACKGROUND ............................................................................................................................................6
       EURO PROGRAMME ....................................................................................................................................6
       EURO HANDBOOK .......................................................................................................................................6
2       ILLUSTRATIVE TIMETABLE .................................................................................................................7
3      MANAGED TRANSITION PLAN .............................................................................................................9
4       POLICY PRINCIPLES ...........................................................................................................................10
       A)     HELPING CUSTOMERS AND STAFF BECOME FAMILIAR WITH THE NEW CURRENCY ..................................10
               Dual Display ..................................................................................................................................10
               Screen and Document Design Policy ............................................................................................11
               Euro Identifier ................................................................................................................................11
               Policy after E Day ..........................................................................................................................12
       B)     ROUNDING OF CURRENCY AMOUNTS .................................................................................................12
               Technical Rounding.......................................................................................................................13
               Triangulation ..................................................................................................................................13
               Vertical Rounding ..........................................................................................................................15
               Practical Issues of Rounding .........................................................................................................15
               Dealing with Small Amounts ..........................................................................................................16
       C)      SMOOTHING OF MONETARY AMOUNTS .............................................................................................18
       D) CONVERTING AND STORING DATA ......................................................................................................19
           Conversion Policy..........................................................................................................................19
           Reasons for Conversion ................................................................................................................19
           Reasons against Conversion ........................................................................................................20
           Principles of Data Conversion .......................................................................................................20
           Archiving Principles .......................................................................................................................21
           Data that should be archived from an operational system ............................................................22
           Archiving options ...........................................................................................................................22
           Euro specific archiving requirements ............................................................................................22
           Handling Stored Data ....................................................................................................................22
5      ACCOUNTING POLICY ........................................................................................................................24
6      EURO COMPATIBILITY POLICY ..........................................................................................................27
7      COMMUNICATIONS POLICY ...............................................................................................................29
8      TRAINING POLICY ................................................................................................................................30
9      LEGISLATION POLICY .........................................................................................................................31
10      PUBLIC SECTOR CONSUMER CODE OF CONDUCT .......................................................................32
       OVERALL AIM ...........................................................................................................................................32
       WHAT HAPPENS AND WHEN? ............................................................................................................32
ANNEX A:            EU EURO LEGISLATION........................................................................................................35
       THE TREATY PROVISIONS .........................................................................................................................35
       EUROPEAN REGULATIONS .........................................................................................................................35
ANNEX B:           BIBLIOGRAPHY.......................................................................................................................37


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GLOSSARY OF USEFUL TERMS


BASDA               Business & Accounting Software Developers Association
D DAY               Date on which the decision to hold a Referendum is made
DFP                 Department of Finance and Personnel
DKK                 Danish Kroner
ECU                 European Currency Unit
E DAY               Start of Dual Circulation period and the introduction of UK
                                             th
                    euro notes and coins, 6 April of any one year
EMU                 Economic and Monetary Union
EU                  European Union
EPU                 Euro Preparations Unit
EURO AREA           Those members of the EU who joined the EMU on 1/1/99
                    (Austria, Belgium, Finland, France, Germany, Ireland, Italy,
                    Luxembourg, Netherlands, Portugal, Spain) and Greece who joined on
                    1/1/01
HMT                 Her Majesty’s Treasury
MTP                 Managed Transition Plan
NCU                 National Currency Unit e.g. Swedish Kroner
NIAO                Northern Ireland Audit Office
R DAY               Date on which the Referendum is held
RT DAY              Retail Transition Day when euro retail banking facilities introduced
S DAY               Date of withdrawal of sterling as legal tender
SRO                 Senior Responsible Owner


T DAY               Date on which the euro is introduced to the UK, initially to run in
                    parallel with sterling but no UK euro notes and coins.
                    Fixed conversion rate between sterling and euro in place.
TRANSITION PERIOD   Period from T day to E Day




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FOREWORD

Most of our business processes and IT systems will be affected if the UK joins EMU
and so adopts the euro. The euro would also impact increasingly on Departments
even if the UK does not join.

The policy of the UK Government is in favour of joining EMU and therefore also of
adopting the euro once the economic conditions are favourable to the UK. The five
economic tests were assessed in June 2003. The assessment was that the UK
should not yet hold a referendum. The Chancellor made a statement in his 2004
Budget speech that the position would be reviewed again in the 2005 Budget.

 In light of the Government’s continued commitment to and support for the principle of
joining the euro, preparations will continue to be an integral part of the policy on EMU
to ensure that the UK retains a genuine option to join, if that is what is decided,
following a referendum.

This Handbook outlines the current policies on the euro. It will be revised as and
when our experience and knowledge of the euro increases. Experience will continue
to be gained from other EU Member States, both from euro area countries and those
countries who have not yet joined EMU. We are participating in the public sector
working groups set up by the EPU of HMT. These working groups are addressing
most, if not all, of the key issues in this document. As issues are resolved, the
resulting policy will be incorporated into later versions of this Handbook.


ACKNOWLEDGEMENT

DFP is grateful to colleagues in HM Customs and Excise for sharing their Euro
Handbook and for allowing us to adapt it for use in Northern Ireland.




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1       INTRODUCTION
        Background
1.1     Eleven Members of the European Union (Austria, Belgium, Finland, France,
        Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain) joined
        the third stage of Economic and Monetary Union [EMU] from 1 st January 1999.
        Greece joined EMU on 1st January 2001. These euro area countries introduced
        euro notes and coins on 1st January 2002. Of the remaining countries,
        Denmark held a Referendum in 2002, which resulted in a ‘no’ vote, and are
        planning to hold a second Referendum in 2004. Sweden held a Referendum
        on 14 September 2003 and decided not to join at that stage.

1.2     The policy of the UK Government is in favour of joining EMU and so adopting
        the euro once the economic conditions are favourable to the UK. The five
        economic tests were assessed in June 2003. The assessment was that the UK
        should not yet hold a referendum. The Chancellor made a statement in his the
        2004 Budget speech that the position would be reviewed again in next year’s
        Budget. In light of the Government’s continued commitment to and support for
        the principle of joining the euro, preparations will continue to be an integral part
        of the policy on EMU to ensure that the UK retains a genuine option to join, if
        that is what is decided, following a referendum.

        Euro Programme
1.3     The Euro Programme has been set up to coordinate and manage all the efforts
        of the key services, centrally delivered to NICS departments in meeting the
        government’s policy on preparations in advance of any decision to hold a
        referendum on joining the euro and then to manage any subsequent
        changeover.

1.4     The NI administration Euro Changeover Plan sets out:
         the background to euro preparations in the UK and NI;
         the euro changeover timetable and working assumptions:
         the management structure to oversee euro preparations in NI departments;
           and
         how euro compatibility is being addressed in the key services, centrally
           provided by DFP.
        Euro Handbook
1.5     This Handbook states the latest policy position of the key strategic issues
        facing Departments in the event of a changeover to the euro. The 3rd Outline
        National Changeover Plan publishes a number of key policy principles that
        have been reflected in the Handbook.




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2            ILLUSTRATIVE TIMETABLE
2.1         The 3rd Outline National Changeover Plan gave details of the Illustrative
            Timetable that would possibly be followed in the event of a UK changeover to
            the euro.

2.2         This Illustrative Timetable gives a very useful context in which to place the
            policy principles and strategies covered in the remainder of this Handbook.

2.3         The Illustrative Timetable for a UK changeover to the euro is as follows:

    D Day        R Day         T Day                                         Retail                    E Day         S Day
                                                                             Transition



       Min 4 Months

                                 Approx 20 Months

                                                                                    Approx 10 months

                                                                                                                 2
                                                                                                                Months



                  Referendum     Fixed exchange rate from T Day                     All systems              Dual    Sterling
                  held                                                              and processes      circulation   cash
                                 Euro is used in non -cash form
                                                                                    have to                 period   withdrawn
                                 Euro facilitation is phased in for customer -      operate in
                                 facing systems                                     euro.
                                 Retail Transition (approx 20 months after R        E Day
                                 Day) full banking facilities available             will be
                                                                                    6th April.



            D = Decision to join
            R = Referendum
            T = Time of joining EMU
            RT = Retail Transition
            E = Euro cash available
            S = End of dual circulation and withdrawal of Sterling

2.4         This timetable can be broken down into several separate phases. These
            phases help us to frame our business requirements for a changeover to the
            euro. The phases are:
            Pre-Referendum
            This phase will continue up to the date of a Referendum (R Day).
            Post-Referendum
            This phase assumes that a Referendum result is in favour of the UK joining
            EMU. During this period, whilst there would be a commitment to join,
            conversion rates would not have been locked and the euro would be treated as
            a foreign currency. If the Referendum resulted in a ‘No’ vote, then the
            managed close down of the Programme would occur.


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      Transition Period

      At the start of a Transition Period (T Day), the conversion rate between sterling
      and the euro would be fixed. “No compulsion, no prohibition” comes into being.
      In the UK, the euro would be available as a currency in cashless form.

      Retail Transition Day

      This is the day from which the banking sector will offer full retail banking facilities
      in euro. We intend to offer full customer facing euro tax services at the same
      time.

      Dual Cash Circulation Period

      This period starts at the end of a Transition Period (E Day). Internal accounting
      must be in euro. It is the period during which UK euro notes and coins would
      circulate alongside sterling. The period is anticipated to be two months but
      would be no longer than six months. “No compulsion, no prohibition” ends at the
      beginning of this period.


      Withdrawal of Sterling
      This final phase covers the period from which sterling would no longer be legal
      tender in the UK, i.e. at S Day.




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3       MANAGED TRANSITION PLAN

3.1     The Government have agreed that the best way to ensure a smooth and cost
        effective changeover to the euro is to adopt a phased approach. They are
        developing a national Managed Transition Plan (MTP).

3.2     The MTP has been summarised in the 3 rd Outline National Changeover Plan.
        The Plan is being further developed by the HMT Euro Preparations Unit
        following discussions with key private and public organisations.

3.3     Departments will consider what customer facing euro services they will be able
        to offer from RT Day. Departments will also ensure that all internal systems
        and business processes are capable of accommodating the euro by E Day.




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4       POLICY PRINCIPLES

4.1 There are a number of strategic issues that need to be addressed in a uniform
    manner across the NICS and in many cases, across the public sector.

4.2 For these issues, the following policy principles have been developed:

A)    Helping customers and staff become familiar with the new currency

4.3 Principles and best practice guidelines in terms of presenting euro and sterling
    information to customers and staff during, and after, any Transition Period have
    been developed in conjunction with HMT and Whitehall departments.
    Information should be presented in a way that minimises confusion, thereby
    reducing any errors and queries that could occur.

      Dual Display

4.4 Dual display means simultaneously displaying the same information in sterling
    and euro. It is an important means of easing the changeover from sterling to
    euro and for minimising the risk of error. It also increases the familiarity of the
    euro for staff, customers and suppliers.

4.5 The Draft Consumer Codes in the 3rd Outline National Changeover Plan stated
    that:

       “Dual currency information in sterling and euro for consumers should be
      provided, in an appropriate form, for at least the period from euro cash day minus
      4 months until the withdrawal of sterling notes and coins is completed”.

4.6 The dual display policy is designed to reflect government policy. It will be applied
    to all financial, but not statistical, information. Statistical outputs will be available
    in either currency according to customer need, with a clear indication of the
    currency used. The policy is as follows:

           Dual display of both sterling and euro will be shown on all customer facing
            outputs from RT Day and will continue for at least up to the end of the dual
            cash period at S Day. This will apply to outputs where the main currency is
            sterling or euro and will include forms and Public Notices and any
            associated guidance.
           After E Day, customer-facing outputs in euro will be shown with euro as the
            prominent currency on the summary line with sterling for information only.
           After E Day, if any customer-facing outputs are still to be produced in
            sterling they will continue to provide a euro summary line.
           Dual display will be shown for the summary line on screens and customer
            facing outputs and not on individual line conversions.
           The alternative currency must be displayed prominently and consistently.
           The euro and sterling figures will be the exact equivalents to the nearest
            euro cent converted using the technical rounding rules and not a smoothed
            figure.

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                  When summary line information is provided on customer leaflets, forms and
                   notifications, a note to explain rounding differences will be included on any
                   outputs showing both currencies, including summary line dual displays.
                   This note will be of the form:

              "All conversions from sterling to euro and vice versa have been undertaken
              using the EC Rules and a conversion rate of €1= £0.xxxxxx."

           The conversion should be in italics and outlined in a box. It should be placed
            as close as possible to the amount being converted.

          Screen and Document Design Policy

4.7   When designing computer screens it is intended that we will adopt the following:

       Screens or documents will not contain mixed currency except:
                    where a summary line conversion is required; or
                    on search result screens.

       Where both currencies must appear on the same document or screen then
        the fields will be clearly distinguishable. The identifier should be clearly visible
        and the symbol should be in a protected field (unless it is a field where the
        user is forced to select the currency for the evidence input). The position on
        the screen is irrelevant as long as it is clearly visible within the screen.

       If, exceptionally, mixed currency screens are unavoidable, GBP or EUR are
        preferable to £ or € [which are very similar symbols] to differentiate between
        currencies.

      Euro Identifier

4.8 The term “euro identifier” means any letter, word, symbol, colour or design
    feature that is specifically used on screens or printed output to signify the
    presence of information in or about euro. A euro logo would be a suitable euro
    identifier. In developing a euro identifier we should follow these principles:

              The symbol, style and colour should be consistent across departments as far
               as possible in order to achieve a common look and feel of euro products and
               a common approach to euro familiarisation.
              A euro identifier will be added to all appropriate out-going documents,
               particularly where dual currency information, or information pertinent to the
               conversion process, is included.
              Any of the following identifiers are acceptable provided they are used
               consistently within single systems screens, forms or printed outputs:
                "€"
                "EURO"
                Distinctive colour

             The timing of the addition of an identifier will be dependent on the

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            timing of the implementation of euro services.


        Policy after E Day

4.15 At E Day dual circulation of euro notes and coins and sterling commences, and
     continues until S Day. E Day signals the period when we will rapidly move to
     operating euro only. Our policy for customer facing outputs (excluding
     statistical outputs) will be as follows:

            For customer facing outputs in euro, euro will be shown as the most
             prominent currency on the summary line with sterling for information only.
            If any customer facing outputs are still to be produced in sterling they will
             continue to provide a euro summary line.

        Our general policy is that:

           All internal guidance will continue to show values in sterling and euro.
           We will endeavour to have all our Public Notices and Guidance in euro only
            from S Day.
           The euro identifier will be removed from forms and computer screens at the
            most cost effective time after S Day, or at a point when there is no doubt or
            confusion between euro and sterling.


B)    Rounding of Currency Amounts

4.16 The EU Legislation on Rounding that applied to the euro area countries will be
     adopted if the UK were to join EMU. This means that the following principles
     will be used:
                 The fixed conversion rate will be set at six significant figures, the
                  conversion will be truncated to 3 decimal places and the resulting
                  calculation will be output to 2 decimal places. The 3rd decimal place is
                  used to round up or down to the 2nd decimal place.
                 Inverse conversion rates will not be used.
                 When converting from one legacy currency to another, the triangulation
                  approach, i.e. conversion via the euro, should be used. This only applies
                  to those currencies of countries that are in a Transition Period at the
                  same time.
                 To reduce rounding differences, data conversion events or occurrences
                  will be minimised.
                 On conversion, data should be held in the same number of decimal
                  places as in the original state. This will apply to data used internally as
                  well as externally. However, extra precision, e.g. extra decimal places,
                  can be introduced wherever appropriate.
                 When amounts need to be shown as additions of other amounts, the
                  conversion of the total should be used, rather than the sum of the
                  individual items. This will apply to amounts that have to be accounted for
                  and for those used for information.

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                 The same data items that are present in different places in the same
                  system or in different systems should be converted in exactly the same
                  manner. Conversion routines programmed into computer systems must
                  all follow, precisely, the EC conversion rules.
4.17 These principles imply the following means of converting from one currency to
     another.
        Technical Rounding
            Conversion Rate to 6 decimal places for UK [i.e. six significant figures] in
             the form of €1 = £0.xxxxxx = R (R = Rate).
            To convert £A to €B:     B = A R
            To convert €B to £A:     A=BxR
            Output resulting values to 2 decimal places.
            Use 3rd decimal place to determine 2nd decimal place. Where 3rd
             decimal place is 5 or greater, round up, where it is 4 or less, round
             down.
            For negative numbers, the rounding calculation should be undertaken by
            removing the negative sign and then replacing it before outputting the result.

 Examples

 using €1=£0.787564
1.      Convert £25123.45 to euro
     £25123.45 = €25123.45 ÷ 0.787564 = €31900.201= €31900.20
2.      Convert €114,367.36 to £
     €114,367.36 = £114,367.36 x 0.787564= £90071.615 = £90071.62

The rounding to 2 decimal places is done after the conversion calculation.

      Triangulation

            Used to convert from £ sterling to currency of another country (e.g. Sweden)
            in a Transition Period at same time as the UK .
            Use UK conversion rate in the form of €1 = £x.xxxxxx = R.
            Use other country’s conversion rate to 6 significant figures as published. Let
            this rate = S.
            Use Technical Rounding to convert sterling to euro using R.
            Use Technical Rounding to convert this euro amount to National Currency
            Unit (NCU) of the other country using S.
            To convert from NCU of the other country to sterling, use triangulation and
            technical rounding in reverse i.e. from NCU to euro using rate S, from euro to
            sterling using R.

Examples
using €1 = £0.787564 and €1 =DKK7.46038

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1.      To convert from sterling to Danish Kroner (DKK)
        £100.00 = €100.00÷ 0.787564 = €126.974 =
        DKK126.974 x 7.46038 = DKK947.27

2.      To convert Danish Kroner to sterling
        DKK1000.00 =€1000.00 ÷ 7.46038 = €134.041
        = €134.041 x 0.787564 = £105.57




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        Vertical Rounding

             When operating with columns of financial figures, the sum of the converted
             amounts would not necessarily be the same as when applying the
             conversion rate directly to the sum. This is called ‘vertical rounding’.

       Example
       using €1= £0.787564

                             £                 € (6 dps)        € (2 dps)
            Line             25                31.743452        31.74
                             25                31.743452        31.74
                             25                31.743452        31.74
                             25                31.743452        31.74

            Total            100               126.973808       126.96

            Conversion       100               126.973808       126.97

            Difference                                          -0.01


            The correct conversion is €126.97 not €126.96



         Only use technical rounding to convert summary or total amounts.
         Do not use technical rounding on line by line amounts.
         The risks inherent in vertical rounding are manageable from a presentational
          perspective. The question will be covered in appropriate communications.
         Unless there are serious operational consequences, amounts should be
          rounded at the total level rather than the component level.
         The Government should seek clarification in any rounding Regulation
          applying to the UK that, where necessary, parts of the public sector could
          round at the component level.

        Practical Issues of Rounding

4.18    There are at least the following practical issues that arise when undertaking
        rounding:

             In a Transition Period, when systems convert euro amounts to sterling
              amounts for processing, and reconvert to euro on output (technical
              rounding), the output amount is not necessarily the same as the original
              input amount. This will happen when organisations keep their systems in
              sterling and at the same time offer euro services. This causes
              presentational and customer service issues that would have to be explained
              and managed.


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           Example
           using €1 =£ 0.787564

           A payment of €1345.89 being processed by a system still in £ could
           use £1059.97 internally and output the payment as €1345.88 i.e. 1
           euro cent less


                 In a Transition Period, when totalling individual items converted from one
                  currency to another, the sum of the converted amounts may not equal
                  the straight conversion of the total of the unconverted amounts (see
                  “Vertical Rounding” section above). These are presentational
                  differences that have to be managed.
                 In a Transition Period, payments received in one currency against an
                  invoice expressed in the other currency may not satisfy the liability
                  precisely. Apart from customer service this also raises issues about the
                  definition of when debts are satisfied, and accounting discrepancies that
                  have to be handled, for example, by:
                   setting tolerances;
                   storing discrepancies in suspense accounts; or
                   suppressing system routines which would generate reminders.

                 On system conversion, horizontal or vertical rounding discrepancies can
                  occur when converting the sterling database to a euro database with the
                  result that columns do not sum to totals.
                 On system conversion, accounting problems will arise if closing sterling
                  balances do not equate to opening euro balances.
       Dealing with Small Amounts
4.19 During a Transition Period and in the Dual Circulation Period, both sterling and
     euro amounts will be used. It is important that applying either currency leads to
     the same results. There are particular rounding issues when dealing with the
     conversion of small amounts.




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         Examples
         using €1 = £0.787564
         1.     Pennies to euro cents

                                           Pennies   Euro Cents
                                              1          1
                                              2          3
                                              3          4
                                              4          5
                                              5          6

         2.        Euro cents to pennies

                                       Euro Cents      Pennies
                                           1              1
                                           2              2
                                           3              2
                                           4              3
                                           5              4
         So 2p converts to 3 euro cents, but both 2 euro cents and 3 euro
         cents convert back to 2p.

4.20     Two occurrences of the conversion of small amounts in the public sector would
         be:
          mileage rates, such as, 25 pence per mile; and
          specific excise duty rates, for example, £0.4552 per litre.
4.21     There are two primary ways of dealing with the conversion of small amounts:
             Use extra precision
         This would mean for mileage rates, converting 25 pence per mile to 31.74 euro
         cents per mile rather than 32 euro cents per mile, which would retain the shape
         of the sterling value. Using 25 pence per mile and 31.74 euro cents per mile on
         a journey of, say, 73 miles would lead to a claim of £18.25 or €23.17, which are
         equivalent. NB a rate of 32 euro cents [0 decimal places] and 31.7 euro cents
         per mile [1 decimal place] would not provide the same equivalence.

         For duty rates, £0.4552 per litre would convert to €0.577984 per litre. When
         applying the two amounts to, say, 1 million litres, the duty charged would be
         £455,200 using the sterling rate or €577,984 using the euro rate which are
         equivalent, within £1 or 0.0002%.




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           Quote the amounts being converted into larger batches

        Mileage rates could be quoted as £31.74 per 100 miles and duty as €57.7984
        per 100 litres.
        It would be a business decision as to which method to use depending on exact
        circumstances. In the examples above, for the mileage allowance, extra
        precision would be easier to administer than quoting only the allowance for
        larger quantities of miles. For the excise duty rates, there are arguments to
        support either method. The IT system may not be able to handle extra decimal
        places and so the rate should be quoted for larger quantities. Equally, the
        format of other rates and design of forms might lead to a need to quote the
        rates in a ‘euro per volume’ format.

C)      Smoothing of Monetary Amounts
4.22 Smoothing is an administrative process that would take place after E Day when
     dealing with euro amounts that have been converted from sterling. The
     following principles should be used:

         Smoothing for presentational reasons should only take place where
          absolutely necessary;
         Where amounts are reviewed and uprated regularly, departments should
          normally live with the unsmoothed euro amount for a short period, and
          introduce a smooth value at the next uprating;
         All conversion of monetary amounts should take place according to the EC
          rules on technical rounding, set out in Articles 4 and 5 of Council Regulation
          (EC) 1103/97 (see Annex A);
         Normal business rules should apply to amounts in euro as well as sterling;
         Where the costs of smoothing are lower than the costs of the IT changes
          necessary to avoid smoothing, then smoothing may be necessary;
         The smoothed results of amounts of similar type should, as far as possible,
          be consistent across the public sector;
         Where smoothing is necessary, it should be in the citizen’s favour;
         New fines and penalties should use the levels set out in the Schedules
          applicable to Northern Ireland in the most recent Criminal Justice Act where
          possible. These levels would be smoothed in the event of a changeover.
         Where fines or penalties are set as a range or maximum amount, guidance
          would be issued to decision makers to choose a smooth euro amount within
          the permitted range;
         For fines and penalties (particularly fixed penalties) where these solutions
          are not possible, smoothing may be required;
         Where fines or penalties need to be smoothed, they could be either
          increased or decreased. This would be a policy decision for the department
          concerned; and
         Public sector organisations should ensure that citizens with whom they deal
          are provided with adequate, targeted and easily understood information on
          any smoothing of monetary amounts. In the operation of this principle the
          needs of vulnerable groups should be taken into account.


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D)   Converting and Storing Data
Conversion Policy
4.23 Various IT solutions to the changeover of systems have been considered.
     These include wrappers where the base currency remains in sterling
     surrounded by a euro shell, ‘big bang’ conversion, or dual currency systems.
     Each of these solutions has associated costs and benefits, which need to be
     appraised before a decision on conversion method is made. The following
     principles for data conversion will be used:
           All system owners would need to ensure that their system was able to
            adapt to the change and that the legal and audit requirements were met.
           The system owners would need to work with IT suppliers and key
            stakeholders to thoroughly plan the conversion of their systems. It is vital
            that conversion of our systems is undertaken in a co-ordinated and
            structured manner.
           The system user requirement will have documented all the interfaces with
            other systems. The flows of data between systems will have been
            identified. When data is passed between systems, the currency of the data
            must be explicit. For the timing of conversion, it would be good practice to
            cluster systems with large dependencies.
           A rigorous housekeeping exercise will be undertaken before conversion.
            As much data as possible should be archived with an indicator showing the
            currency. For most systems, conversion should take place as soon as
            possible after the financial year-end in order to minimise balancing
            problems after conversion.
           There would be different considerations for the timing of system conversion
            depending on whether it was internal or external, whether it operated in
            batch or real-time and its dependencies on other systems.
           It is usual practice for the system receiving data to make any necessary
            technical changes or include interim workarounds.
           A data conversion strategy for each system should be produced by the IT
            suppliers including the estimated cost of conversion.


Reasons for Conversion

4.24 The following are reasons for converting stored data but they might not apply in
     every circumstance:

         avoids having to change and test the established system-processing to
          handle two different currencies i.e. sterling for sterling years and euro for
          euro years and the need for features such as screen toggling;
         reduces IT cost of system changes;
         keeps all the data involved in the calculations of the current balance figure,
          pension calculation, etc in the same currency;
         avoids making expensive changes to stable IT calculation processing, to
          enable the calculation to work with data in two currencies;
         maintains the integrity of the calculations and the costs and risks in changing
          the system to make the calculations work in two currencies;
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           aggregate figures can be simply converted at low cost;
           no or minimal link or audit trail to underlying transactions required;
           minimal link with customer records required; and
           comparisons and trends can be made in common currency.

Reasons against Conversion

4.25 The following are general reasons for not converting stored data but they might
     not apply in every circumstance:

         problems of setting euro equivalent legislative amounts retrospectively for
          the past years. This would be particularly difficult if the system did not work in
          decimals;
         customer records will still be predominantly in sterling for transactions before
          E Day, customer service will be more difficult if all the department’s records
          have been converted to euro and there will be a mismatch between what the
          operator and the customer are seeing;
         the risk of creating unbalanced records because of vertical rounding
          discrepancies; and
         the cost of conversion.

4.26 The relative risks must be assessed carefully but on balance the
     recommendation is to convert the stored data that contributes to the current
     calculations and to archive data that is closed or does not support current
     calculations.

Principles of Data Conversion

4.27 The following general principles should be applied when deciding whether to
     convert stored data:

         Limit the data conversion exercise, if possible, to data that can be converted
          automatically by programme. Do not convert supporting paper records
          underlying any IT system.
         Any conversion of data from sterling to euro would give rise to unavoidable
          vertical rounding differences between the sterling sub totals and totals and
          their euro equivalents. The fewer conversions of data the less likely this
          becomes.
         There is a cost to converting data in terms of, for example, the programming
          and testing required for the conversion exercise, the processing of the
          conversion exercise itself, potential system downtime to implement the
          conversion, the need for an audit trail of the conversion process, and the
          need to manage any rounding discrepancies.
         Only convert data where there is a useful business purpose. There may be
          records on the live database that do not contribute to any current business
          purpose. These should be archived before the conversion process.
         Set out clear archiving policies for each system using the archiving principles
          set out below.
         Do not convert data from systems with the following features:

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           Systems with “fixed boundaries”, typically an income tax year. Each year
            is self-contained and governed by year specific legislation and may have
            year-specific forms.
           Systems that are highly retrospective e.g. tax years that can be reopened
            for the previous 6 years. Any system where there is a retrospective audit
            requirement.
           Systems with a large external customer base, where customers make
            regular returns that serve as inputs to the system, and receive outputs
            after processing.
         Convert data from systems with the following features and archive as much
          data as possible:

            Systems which require “continuity of processing”, i.e. where all or part of
             the data held, however old, contributes to current calculations. This could
             include debt management systems, pension calculation systems and
             accounting systems.
            Systems for Accounting, Budgeting, MIS, Statistics etc.
            NB Convert stored data, at least at presentation level. Consider the need
            to convert at transaction level.
            Systems that are single currency and where the cost of implementing a
             dual currency solution (sterling and euro inputs, processing and outputs,
             screen toggling etc) is considered prohibitive. This could include off-the-
             shelf packages such as payroll or pensions systems where the
             calculations would work equally well with sterling or euro but not a mixture
             of both.

            NB Careful analysis is required of relative risks and costs. Cost may be the
            determining factor.

         When a conversion strategy has been established for each system:

            Convert only data that must be converted to support current operations.
             Put in place an Archiving Strategy for each system. Archive all data that
             does not support current operations.
            Convert all stored data at the fixed T Day conversion rate.
            Preserve a record of the converted data in its original form (whether on
             paper, Microfiche, computer flat file, etc) for audit purposes.
            Inform users of the system what the Department’s policy is on data
             conversion so that customers know what to expect.
            Inform users of the Department’s requirements for their own record
             keeping, such as keeping records for audit purposes for a certain number
             of years in the records’ original format.
            Discuss the conversion strategy and the audit requirement with the NIAO
             before conversion of the data.

        Archiving Principles

         Each system should have an archiving policy that specifies how long and for
          what reasons data is retained on a system and under what circumstances
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          data may be removed to another less readily accessible storage media
          and/or deleted.
         Areas that should be considered when implementing an archiving policy are:
           Preparation - what data to be archived, method and frequency;
           Storage - where archived data is stored including security;
           Retrieval - what processes to use and whose responsibility it is for the
            retrieval of archived data;
           Retention – dependant on customer and legal requirements and need to
            consider volatility; and
           Destruction – what happens when the maximum retention time is reached.

        Data that should be archived from an operational system

         Data that is no longer required for current operational update purposes.
         Data that is no longer required to support immediate current operational
          needs that includes legislative and audit needs.
         Data whose retention will adversely affect system performance, access or
          run times.
         Data whose storage requirements may become excessive.

        Archiving options

         Data required to support less immediate operational, legislative or audit
          needs can be removed to an offline storage medium.
         Where data may need to be brought back into a system it must be stored in
          a format where it can be readily reinstated into the system.
         Where data is required for ‘view only’ purposes, it may be archived to CD-
          ROM, floppy disk, microfiche or paper.
         Where data is no longer required it can be removed from a system and
          deleted.

        Euro specific archiving requirements

         Preserve a record of the converted data in its original form for audit
          purposes.
         Maintain an audit trail of conversions from sterling amounts to euro amounts.
         Meet customer requirements.
         Meet NIAO requirements.

       Handling Stored Data
4.28 Many of our business processes and associated IT systems use stored data.
     We need to refer to data when resolving legal issues and for audit
     requirements. The uses of stored data include:

           processing data from previous years;
           account balances, including under/over payments carried forward;
           comparison of Departmental year-on-year performance;
           debt recovery;
           handling insolvency claims;
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          review of earlier years for enquiries, investigation or risk analysis; and
          credibility checks.

4.29     Systems and business processes might need to handle historic data alongside
         current data. If historic data was converted from its original currency to
         another, it could be reconverted. The following policies should be adopted for
         handling stored data:

          When data could be used for evidential purposes it is preferable that the
           data is retained in its original form. Hence, we would need to store the
           historic data in the original currency. We need to have the means to identify
           the original currency of the data for later retrieval.

          When undertaking trend analysis or comparing data from different years, it is
           vital that the appropriate conversions are made so that the comparisons are
           made in the same currency.

          When historic data from before T Day is converted, we would use the fixed
           rate. However, this could lead to a number of issues that will need to be
           addressed e.g. relating to the current period when euro tax payments are
           being made against a sterling liability with a floating exchange rate.

          Most historic data is stored electronically. However, some data is stored on
           non-IT media, e.g. microfilm/fiche. This data would also be retained in its
           original form.

         We would need to develop conversion routines to be used when any historic
         data needs to be retrieved.




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5         ACCOUNTING POLICY

5.1      When accounting for euro, the Department will adhere to the following
         principles:

         A)    Account for ‘real’ accounting discrepancies

         Accounting treatment is different depending on whether the discrepancies are
         ‘real’ or ‘presentational’.

      Example

      This is a typical hotel bill from Netherlands where conversion of all the sub
      items produces a vertical rounding discrepancy of 0.01 euro [1 euro cent].
      This discrepancy could either be ‘real’ or ‘presentational’.

                         Description        Amount     Amount
                                            EUR        NLG

                         Room                99.83     220.00
                         Food                11.34      25.00
                         Drinks               2.04       4.50
                         Tax                  3.06       6.75
                         Total to be paid   116.28     256.25
                         Exchange             0.01       0.00
                         Difference


      If the sub-ledger entries – for bed, breakfast, drinks, Tax – are captured in
      the departments accounts and appear on the general ledger the
      discrepancy of 0.01 must be treated as ‘real’.
       If the sub-ledger entries – for bed, breakfast, bars, VAT, etc are provided
       for information purposes only, i.e. they are purely explanatory and to aid
       familiarisation, and the individual sub totals will not appear on the general
       ledger or contribute to aggregate figures which will appear in the general
       ledger, then the discrepancy of 0.01 is not a genuine accounting entry and
       can be treated as ‘presentational’.

          Where discrepancies are ‘real’ they should be:
               identified in processing;
               captured and stored; and
               accounted for.

              Where discrepancies are “presentational”, they do not need this accounting
              treatment.

          Where there is doubt about the need to account for conversion
           discrepancies, system owners should consider the materiality of the
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           discrepancies, the need for accuracy, whether the system deals with external
           customers where even small discrepancies could embarrass the department,
           and the cost/value for money of accounting for them.

         Where there is still doubt, system owners should err on the side of caution
          and build in the capability to identify and account for discrepancies.

        B) In considering how to present the discrepancies, have regard to the
           interests of good customer service against the need for neat
           accounting solutions

         The customer service requirement should take precedence.

         For ‘Time to Pay’ arrangements that start after T Day, the following will apply:

                     The payment schedule will be issued in sterling and euro.
                     The payee will be able to pay in either currency up to E Day.
                     All payments after E Day will be in euro.
                     For schedules that span E Day, there will be a balancing last
                      payment.

Example
                      Using €1=£0.787564

                                 debt: £100000.00
                    No. of payments:           50 monthly
                    monthly payment: £2000.00
           E Day occurs after payment          36
                        Amount paid: £72000.00                      €91421.14

                         Outstanding debt: £28000.00                €35552.66

  revised payments: 13 payments @ €2539.47
                      1 payment @ €2539.55
                        Total repaid €35552.66                      £27999.99

                                Debt paid: £99999.99               €126973.80
                             Original debt: £100000.00             €126973.80

                                  shortfall:      £0.01                  €0.00




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        C) Having established the options for presenting the rounding
           discrepancies, follow these guidelines:

                 The conversion process should normally be carried out at a financial
                  year-end, although there may be occasions where it could be undertaken
                  at another time;
                 The software for conversion routines, if practical, should be designed to
                  be used at a year or period-end;
                 Departments should hold the accounts in one base currency, this should
                  be applied even if the software has the capability to hold dual base
                  currency;
                 It is inevitable that the conversion process will introduce rounding issues
                  at transaction or summary level;
                 Software is available to provide for rounding adjustments that arise on
                  conversion to the euro as the rounding discrepancies will need to be
                  posted to a separate account with full audit trail;
                 The conversion rate used will need to be held within the system;
                 The IT system should be designed to post the rounding differences
                  derived from the trial balance to a suspense account, which in turn will
                  be written off to equalise the balances;
                 Sterling accounts should be fully reconciled before the conversion
                  process takes place, this helps to identify the discrepancies that are
                  caused by the changeover;
                 Superfluous data should be identified prior to the conversion process
                  and as much of the remaining data pre-converted, ensuring that nobody
                  can access the system during the conversion process. More details are
                  available in the 2nd Edition of the HM Treasury publication “Euro
                  Compatibility: a guide for managers (January 2004); and
                 Once conversion has taken place, check that the opening euro balance
                  in the General Ledger is equal to the sterling closing balance for the
                  same account, multiplying the amount by the fixed exchange rate.




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6        EURO COMPATIBILITY POLICY

6.1      Euro compatibility is not optional. All government departments are bound to
         consider euro compatibility in light of the Prime Minister’s statement of February
         1999 which stated:

         “where computer systems are being upgraded, all departments will build in euro
         compatibility where that represents value for money.”

         This statement charged Departments with ensuring that all new systems were
         made euro compatible unless there was a value for money reason why they
         should not.

6.2      This message was repeated in the Fourth Report on Euro Preparations and
         updated in the Sixth and subsequent Reports:

         “…central government is making targeted investments to build in euro
         compatibility as part of the ongoing modernisation of public sector systems. As
         computers and other systems are there to help meet a policy or business need,
         this guidance is also aimed at new policies and business processes.”

6.3      Business or project managers must be able to justify to their SROs and to DFP
         any decision not to make a system euro compatible.

6.4      As new ‘business change’ and IT projects are planned, approved and
         implemented in advance of any government decision to join EMU, they should
         have built in the appropriate level of euro compatibility. This will ensure that the
         risks to a successful changeover are reduced, by developing euro compatible
         solutions in advance, and so minimising the need to redevelop the change at a
         later date.

6.5      It is not simply a case of deciding whether or not to make a business process or
         IT system euro compatible subject to value for money criteria. The complexities
         surrounding a definition of euro compatibility dictate that it is more appropriate
         to consider the extent to which the business process or IT system is euro
         compatible. There are 2 basic levels of euro compatibility:

                  Currency neutrality – capability to operate in any single currency at any
                   one time. Note that this may not provide the capability to change from
                   one currency to another. Organisations would also need to consider
                   whether currency neutrality offered sufficient capability to meet business
                   needs during a transition period; and

                  Full euro compatibility – capability to provide full functionality
                   appropriate to the timing of a policy, process or system and the services
                   that the policy, process or system would need to provide.

6.6      The full guidance on euro compatibility and the various planning scenarios are
         set out in the HM Treasury publication “Euro Compatibility: a guide for


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        managers” published in January 2004. Electronic copies of this guide are
        available at www.euro.gov.uk, or from your Euro Co-ordinator.




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7       COMMUNICATIONS POLICY
7.1     DFP, in conjunction with NI Departments and the appropriate business areas,
        will be responsible for communications on general awareness and cross-cutting
        issues. However, business areas may wish to communicate, both internally
        and externally, information that is specific to their business.
7.2     HM Treasury is developing an Integrated Communications Plan which is due to
        be published in Autumn 2004. Following on from this, DFP will develop a NI
        Communications Strategy which will cover the following events:
           the announcement of a Referendum on whether to join EMU;
           the announcement of the Referendum result;
           the start of any Transition Period;
           the introduction of services to businesses at Retail Transition;
           E Day; and
           the withdrawal of sterling at S Day.
7.3     From the Communications Strategy each Department will be able to produce
        individual Communication Plans for business areas so that information within
        each Department and with external customers can be co-ordinated. There will
        be opportunities to share communications (and costs) between Departments
        and business areas.
7.4     The decision to hold a Referendum [D Day] will be the trigger to activate
        mobilisation plans for the Euro Programme. EMU is a very sensitive issue and
        until the announcement of a Referendum result, all external communications
        will remain reactive. It is very important that we are not seen to have prejudged
        any Referendum result. However, as part of our preparations, we will consult
        stakeholders on our changeover plans that will be implemented in the event of
        a decision.




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8       TRAINING POLICY

8.1     Training packages will be developed in conjunction with the Business
        Development Service Centre for Learning and Development, Departmental
        Training and Development Units (see NI administration Changeover Plan). The
        training will be delivered centrally by Business Development Service (BDS),
        Departmental Training and Development Units (TDUs) or by external providers.

8.2     It is anticipated that the training will cover 3 levels of need:

                 general awareness training for all staff;
                 more detailed training for front office/customer-facing staff; and
                 specialist training for finance/accounts staff.




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9       LEGISLATION POLICY

9.1     The Maastricht Treaty laid the basis for the introduction of the euro and
        monetary policy that is now covered in the Treaty of Rome. The detailed legal
        framework for the euro area countries is contained in three European
        Regulations, which are directly applicable in those Member States.

9.2     The Regulations contain the conversion rate for participating currencies, the
        conversion and rounding rules, the timetable and the “no compulsion, no
        prohibition” rule covering use of the euro during a Transition Period.

9.3     We expect and assume in our preparations for any changeover that the UK
        would be subject to similar legislation should we join EMU. Details on the EU
        Legislation that would be applicable in the event of a UK decision to join EMU
        are given in Annex A.

9.4     The Regulations allow little leeway and so most scope exists in relation to
        issues that EU law does not cover. Certain issues are the subject of
        Commission Recommendations, but these have no legal effect. The
        Regulations make no mention of what facilities, precisely, Member States’
        authorities should afford the public before the end of a Transition Period.
9.5     EU laws do not touch directly on systems that are inward facing. Data held in
        internal systems may be held in national currency units or euro, whatever the
        original currency of the amount captured. Even where the data must
        subsequently be made available for the purpose of a criminal prosecution, the
        fact that the relevant amounts have been converted would not render evidence
        inadmissible. Evidence can be given to show how conversion was effected and
        what the original amounts would have been. Although the ends to which
        defence teams might go to try to find a nuisance value in this should not be
        underestimated.

9.6     The majority of the rules within the Regulations are not capable of derogation.
        This means that the Member States must accept them without any scope for
        modification to suit national requirements. Examples are the rounding and
        conversion rules and no compulsion, no prohibition. It is safest to assume that
        whatever the Regulations provide cannot be departed from, unless legal advice
        confirms the contrary.

9.7     We understand that HM Treasury is to introduce omnibus legislation that will
        enable euro amounts to replace £ Sterling amounts (using the agreed fixed
        exchange/conversion rate) in legislation without the need to amend each piece
        of legislation. However, where the conversion results in an euro amount that is
        unworkable and must be smoothed, then it will be up to the responsible
        department for the service to bring forward amending legislation.

9.8     In Northern Ireland, we will need to consider whether the HM Treasury omnibus
        legislation will apply to all situations in NI and if separate equivalent legislation
        needs to be taken through Westminster or NI Assembly.


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10     PUBLIC SECTOR CONSUMER CODE OF CONDUCT

10.1    HM Treasury is working towards developing a consumer protection framework
        and in drafting consumer codes of conduct for sectors across the economy.
        The Public Sector Consumer Code of Conduct has been finalised and
        published in the Report on Euro Preparations in April 2004. It is set out in full
        underneath.

Overall Aim

To ensure that consumers can be confident that they would be treated fairly during
any changeover. Consumers would be provided with adequate, targeted and easily
understood information to help them through a changeover, and a contact point if
they felt that standards of service were not being provided in accordance with this
code. The public sector would be expected to show a strong lead in best practice
during a changeover.

The details below cover the minimum standards that would be met by all public
sector service providers. Implementation would naturally depend to some extent on
the nature of the service provided and the relationship with the consumer. Some
public sector service providers might wish to provide additional or earlier euro
facilities.

This code outlines how a public sector service provider would act in the different
phases of a changeover.


WHAT HAPPENS AND WHEN?

Up to T (before joining EMU)

There would be no immediate change to transactions between the service provider
and the consumer. Payment for services would continue to be in sterling; euro cash
would not be legal tender in the UK. This applies to cash payments and non-cash
payments. Amounts would continue to be displayed in sterling.

Service providers might choose to accept payment in euro, but would be under no
obligation to do so. Service providers who accepted euro payments might apply their
own exchange rate and a handling charge, but the terms would be made clear at the
point of transaction.

T to E (from the start of the transition to the introduction of euro notes and
coins)

From at least four months before E day, euro information should be shown alongside
sterling. Amounts should be converted at the official six-figure conversion rate, which
should be clearly displayed. The converted euro value would then be rounded to the
nearest euro cent to give the legally equivalent euro value, in accordance with the EU
conversion and rounding Regulations.

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Service providers would continue to be under no obligation to accept euro cash. If
they did, they could continue to apply a handling charge, but the terms must be made
clear at the point of transaction.

Electronic euro payment services would be introduced gradually during the
transition period. Payments made in euro at, for example, a point of sale (PoS)
terminal, would be automatically converted by the banks to sterling for customers with
sterling accounts. There would be no additional charge and the same clearing period.

As soon as a service provider offered any form of euro service, notices should be
displayed at customer interfaces, including websites for internet transactions, to
indicate which forms of payment (if any) would be accepted in euro, and from what
date. The official six-figure exchange rate and any handling charge applied should
also be made clear.

If change were given for a euro transaction, it could be either in euro or sterling to the
legally equivalent value.

From at least four months before E day, where it is customary to issue a receipt for a
payment, this should show both the sterling and euro equivalent amounts if the
issuing equipment was capable of doing so. If that was not technically feasible, the
amount shown should continue to be in sterling until E day and in euro thereafter. In
the latter case, alternative means (such as a conversion table) should be available to
allow customers to convert the total amount.

The euro sign (€) or currency indicator EUR should precede the euro price (e.g. €7.25
or EUR 7.25) and be clearly distinguishable from a price displayed in £ sterling.

E day (the introduction of euro notes and coins in the UK)

From E day, prices should be displayed in euro. Wherever prices are displayed now,
including in information and promotional materials, sterling price information should
continue to be displayed until at least the end of the dual circulation period when
sterling notes and coin would cease to be legal tender (two months after E day).
Service providers might continue to dual display in sterling after this point if they wish
to offer this service to customers, but it is recommended that this should not continue
longer than 18 months after the introduction of euro cash.

For payment in cash, customer service interfaces should accept either sterling or euro
until the end of the dual circulation period. For payments accepted in sterling, the
fixed conversion rate must be applied. No handling charges would be applied for euro
or sterling payments.

Coin-vended services, such as parking meters, would not need to accept both sterling
and euro. However, all machines should be clearly marked to indicate to users
whether they accepted, euro only or sterling and euro. For a very short time after E
day operators might still have some machines accepting sterling only, but they should
be converted to euro as soon as possible and within the two month dual circulation
period.


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Coin-vended services might require a euro conversion to be smoothed to an
operationally practical value. Any smoothing of converted euro amounts in the public
sector should not disadvantage the citizen. Smoothing should be avoided where at all
possible (so, for example, if GBP1 bought 60 minutes of parking time, €1 might buy a
different number of minutes, so that the price per hour would be the same in both
currencies).

Change tendered in cash transactions for services should be in euro only.

From E day, all non-cash transactions should be in euro only, except that cheques
drawn in sterling that pre-date E day would continue to be valid for up to six months
from the date of issue.

Throughout a changeover

The needs of vulnerable groups, such as older people, the visually and hearing
impaired and those with learning difficulties, should be taken into account.
Service providers should consult with representatives of vulnerable groups to develop
a suitable method of addressing these needs.

All staff dealing directly with the public should be fully trained and able to give
straightforward and relevant information about services during a changeover.

The “consumer confidence” euro logo would be displayed at all points of transaction
and provide a customer service contact number for euro enquiries.




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ANNEX A: EU EURO LEGISLATION

(Note: This was drafted for the first wave of countries joining the euro in 2002
but is still relevant)

A.1     This Annex summarises European Union legislation relating to the euro. This
        should help inform policy owners in preparing for the possible entry. The UK
        would negotiate the terms of EU legislation appropriate to any future application
        to join EMU.

The Treaty Provisions

A.2     The Maastricht Treaty laid the basis for the introduction of the euro. Monetary
        policy is covered by Articles 116 (formerly Article 109e) to 124 (formerly Article
        109m) of the Treaty of Rome. These include the convergence criteria that
        Member States must satisfy in order to be eligible for entry to the euro zone
        (Article 121 (formerly Article 109j), together with Protocol 21).

European Regulations

A.3     The detailed framework can be found in three European Council Regulations
        (EC), No. 1103/97, 974/98 and 2866/98. These Regulations are directly
        applicable in Member States i.e. they have the force of law without the need for
        national legislation to implement them.

A.4     The first of these Regulations (1103/97) provides for ECUs to be converted to
        euro at the rate of 1:1 and for continuity of contracts. Most importantly, it lays
        down rules for rounding and conversion between euro and national currencies
        (including triangulation) as follows:

        Article 4(1)    The conversion rate shall be expressed as 1 euro = x (where x
                        is the appropriate amount of the national currency, i.e. 1 euro =
                        the equivalent amount of sterling). The conversion rate shall be
                        to 6 significant figures.

        Article 4(2)    The conversion rate cannot be rounded or truncated when
                        carrying out conversions.

        Article 4(3)    The conversion rate must be used for conversions to or from
                        the euro. Inverse rates must not be used.

        Article 4(4)    This provides for triangular conversions from one participating
                        currency to another (converting to the euro as an intermediate
                        step) with rounding to a minimum of 3 decimal places

        Article 5       These are the rounding rules. Amounts must be rounded up or
                        down to the nearest cent/sub-unit of the national currency, with
                        one half being rounded up.



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A.5     The second (974/98) confirms that the euro will become the currency unit of the
        participating Member States from 1 January 1999, that those national
        currencies will be treated as sub-units of the euro for the duration of a
        Transition Period (which ends on 31 December 2001), that the euro may be
        used for scriptural payments from 1 January 1999 and that euro notes and
        coins must completely replace national versions by no later than 30 June 2002.

A.6     In addition, this Regulation lays down the ‘no compulsion, no prohibition’ rule,
        whereby, in the absence of express provision to the contrary, debtors are free
        to pay in euro or national currency during a Transition Period as they choose.

A.7     From the end of a Transition Period, all references to national currencies in
        legislation, contracts etc. must be treated as if they were references to the euro,
        without the document or legislation needing to be amended. Specific Articles
        within the Regulation of interest are:

        Article 6       National currencies are subdivisions of the euro during a
                        Transition Period. Where in a legal instrument reference is
                        made to a national currency, this reference will be as valid as if
                        reference were made to the euro unit according to the
                        conversion rates.

        Article 8       The “no compulsion, no prohibition rule” provides that a debtor
                        can choose to pay either in euro or in national currency, but the
                        creditor’s account must be credited in whichever currency that
                        account is held, with any conversion at the conversion rates.
                        Where necessary, the banking system will convert national
                        currencies to euro and vice versa. National rules on set-off will
                        apply, with any conversion at the conversion rates.

        Article 14      After a Transition Period, references to national currencies in
                        legal instruments must be read as references to euro, in
                        accordance with the conversion rates and rounding rules.

        Article 15      National currencies will remain legal tender until 30 June 2002
                        at the latest (6 months after the end of a Transition Period).
                        National law may shorten the period of dual circulation (when
                        both the national currency and the euro are legal tender).

A.8     The third Regulation (2866/98) set the conversion rates for the participating
        countries.

A.9     Regulation 1103/97 is currently applicable in UK while we would need to
        negotiate similar provisions as covered by 974/98 and 2866/98.




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    ANNEX B:            BIBLIOGRAPHY

1st Report on Euro Preparations – Getting ready for      H M Treasury      July 1998
the euro

2nd Report on Euro Preparations – The Euro now in        H M Treasury      February 1999
business

3rd Report on Euro Preparations - The Euro now in        H M Treasury      November 1999
business

4th Report on Euro Preparations                          H M Treasury      November 2000

5th Report on Euro Preparations                          H M Treasury      November 2001

6th Report on Euro Preparations                          H M Treasury      July 2002

7th Report on Euro Preparations                          H M Treasury      November 2003

Spring 2004 Report on Euro Preparations                  H M Treasury      April 2004

Outline National Changeover Plan                         H M Treasury      February 1998

Second Outline National Changeover Plan                  H M Treasury      March 2000

Third Outline National Changeover Plan                   H M Treasury      June 2003

Euro Compatibility – A Technical Guide For               H M Treasury      November 2001
Managers In Central Government

Euro Compatibility: a guide for managers (2nd Edition)   H M Treasury      January 2004

Managed Transition Plan [version 5.0]                    H M Treasury      June 2003

Lessons from the Changeover in the Euro Area – a         H M Treasury      July 2002
summary of reports by private sector organisations in
the UK

Practical Issues arising from the Euro                   Bank of England   December 2001

Practical Issues arising from the Euro                   Bank of England   May 2002

Practical Issues arising from the Euro                   Bank of England   November 2002

Managing Accounting Currency Conversion to the           BASDA             June 1999
Euro (1st Edition)

NI administration Euro Changeover Plan                   DFP               29 June 2004
                                                                           (draft)




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