THE BLOG

A Spanner in the Works

23/04/2014 16:32 BST | Updated 23/06/2014 10:59 BST

Modern life depends on IT. Usually we are barely aware of it. But when it goes wrong we know all about it.

When bank computers crash (as seems to be happening every other month at the moment) we can't get money out of the hole in the wall; we're left red-faced as our shopping is left at the till; our pay doesn't reach our account; our direct debits are missed causing a whole world of pain. If the glitch is not fixed pronto, life gets very difficult very quickly.

If government IT systems fail it affects us all, not just the customers at one bank. Benefits and pensions cannot be paid; taxes cannot be collected; hospitals and schools cannot be paid for.

Fortunately, such problems are relatively rare. Once up and running government IT systems work nearly all of the time. Problems typically occur when governments try to change systems. Vivid examples are Universal Credit, NHS IT and Obamacare in the States.

Things are tough enough for folk right now. So when an important chunk of people's income depends on government IT systems, we should be wary of anything that might destabilise them. We need to be especially wary of actions that might destabilise all of them all at the same time. Losing the UK pound and using a separate Scottish currency or the euro would do just that, both in Scotland and in the continuing United Kingdom.

The UK tax and benefit systems pay out and collect taxes in pounds sterling because that is the currency of the UK. If Scotland goes it alone, the Scottish Government has said it hopes to keep using the UK systems. If we assume an agreement could be reached (which is certainly not guaranteed and most likely involving a hefty annual charge), a change in currency would be a potentially fatal spanner in the works. Let me explain why.

There would be no straightforward one-off conversion of the systems to a new currency because the continuing UK would continue to use the pound. If the systems were to continue to be shared, they would have to process transactions in two currencies, sterling in the continuing UK and either the euro or a separate Scottish currency here in Scotland. The conversion rate would not be set once but would change from micro-second to micro-second. The systems would also have to determine which currency should apply for each pension payment and tax collection.

There is an alternative approach. The systems could be split in to two separate copies: one for the continuing UK and one for Scotland. Splitting the systems would bring its own challenges. For example, clearly identifying in each database which records should belong to the Scottish system, which to the continuing UK system and which might need to be duplicated in both systems.

It is unlikely that the systems could be converted in less than the three years it took for the simpler euro conversion. Given the scale and complexity of the task, it is more likely to take over five years. The consequences of a serious failure of the tax and benefits systems cannot be contemplated. People will not stand for unpaid pensions and while they might be more sanguine about uncollected taxes they will be less happy with the consequences of closed hospitals and schools.

The costs of the conversion itself will run to many hundreds of millions. There will also be the ongoing costs of duplicating much of the UK tax and welfare systems.

While the systems are being converted to support a new currency it would be unwise and impractical to make large scale changes to these systems for other reasons. Indeed, others have already said policy changes would not be possible even with a common currency. So, many of the changes to tax and welfare which an independent Scotland might like to make will have to be postponed for many years.

Finally, before embarking on such a major and de-stabilising process of IT change both Scotland and the continuing UK need to be aware that no major western country has attempted such a project before. We really would be on our own.

Don't just take it from me, the Scottish Government's own advisers warned independence pose "serious risks" to the "continuity of payments". We have a duty to those who rely on the security of the welfare state to ensure that without exception payments are guaranteed uninterrupted. Why would we want to put this at risk with independence?

If this ever were to happen, I certainly don't envy the IT guys that get landed with this project.