Drugs Court Twice-a-week trash pick-up By Raymond Hainey The PLP's debut Budget has increased spending by $17 million -- but with no increases in major taxes.

And Finance Minister Eugene Cox said the Budget -- which broke through the half-billion dollar mark -- was crafted to spread the wealth of the Country down to the man in the street.

He told the House of Assembly that Budgets were more than just facts and figures.

Mr. Cox said: "While delivering broad-brush statements it's too easy to paint over life's cracks and crevices through which the individual falls.'' And he added: "In extolling the above-average achievements it's too easy to ignore those who exist below the average, who do not reach the above-average household incomes, who do not have enough to pay the average rent and who cannot afford the above-average increases in health care costs.'' Mr. Cox said: "It's the job of this Government to implement economic policies which will present opportunities for all to advance and to benefit from the economic success of Bermuda.'' And he set out the store-front for the next five years of PLP rule on the Island.

Mr. Cox said: "Government expenditures will be focused on improving the quality of life for all Bermudians.

"To ensure a healthy population we will determine adequate standards that are applied to housing structures and to housing availability.

"Expenditures on public safety will ensure that neither the elderly, nor our visitors, are afraid to walk our streets because of fear of confrontation.

"Investment in health care will support the transfer of some of the benefits of economic growth to the sick.

"There will also be adequate safety nets in the form of improved social assurance programmes to support cases of genuine need and to provide help to the vulnerable.'' But he predicted the Budget deficit would be slashed in half compared to the prediction in the 1998-99 document.

More than $511 million will be spent out of the Country's current account in the coming year -- around $36 million up on the last United Bermuda Party Budget projection.

And -- mostly as a product of the Island's booming offshore sector -- income pouring into Government's coffers is set to go up to more than $550 million, an increase of $20.3 million on the 1998-99 Budget predictions.

Mr. Cox explained the expectation of increasing revenue, which it is hoped will also be boosted by more tourists, allied to strict controls on spending and a tougher line on tax collection meant Government did not have to levy new taxes or increase existing ones.

And the Auditor General will get an extra $318,000 for secondments and a full-time "value for money specialist'' to keep Government on its toes.

The bulk of the new cash will go to education and training, health and social services, with smaller amounts being devoted to law and order and easing the housing crisis.

But he denied Government was gambling today based on uncertain future income and a growth rate of 4 percent in the economy in the new financial year.

Cox promises stringent fiscal standards Details of Revenue Projections Mr. Speaker, our pre-election platform was quite specific in stating that a Progressive Labour Party Government will not introduce income tax. In various statements to the media and to the Chamber of Commerce I have also made it clear that this Budget will not see the raising of taxes. While there will be some limited fee increases, this Budget will be financed from the healthy growth in the economy that will generate revenues from the existing tax base.

It is estimated that the economy will generate some $551.7 million in Government revenues in 1999-2000, based on an expected 2.0 percent real growth in Bermuda's Gross Domestic Product (GDP). The international business sector is expected to lead the way together with continued strong capital outlays in the construction sector, both by private enterprise and Government. Government will also be increasing its total expenditure in the community despite restrictions on Departmental allocations. Efforts by this Government to rescue tourism are expected to bring a halt to declining visitor numbers in the coming year and the Department of Tourism's sales force has a target of increased visitor arrivals in the year 2000. Retail sales overall in 1998 performed better, but the historic weakness in tourism and the impact of the current tax structure have to be studied carefully for their effect on the future growth of this sector of the economy.

Mr. Speaker, in the election platform the Government pledged to conduct a review of taxation in Bermuda before deciding whether to make any changes in the structure. In addition to the retail sector, hotel owners have made a case to me that their cost structures need relief and the printing industry has given me a well-researched paper on its financial position. I have listened to the printers as a local industry, and have indicated publicly that I am prepared to meet with the hoteliers and the retailers in my consideration of Bermuda's tax structure. I have met with the consultant who began the review of Bermuda's taxes and have asked him to perform additional work in his study area to assist me in my review. In due course his recommendations will be made public together with Government's response. The Government will fulfill its commitment to a tax review but the time available since the election has not been sufficient to complete such an exercise as at this date.

Nevertheless I wish to announce some limited changes in the Customs Tariff, some of which are designed purposely to simplify the clearing of goods through the Customs process. A Customs Tariff Review Group was established to examine inconsistencies in the Tariff and recommended some administrative changes.

These will not affect the revenue position.

However, in addition to those changes and in accordance with our platform, I intend to support the initiative to promote the use of computer technology and to encourage our students to become fully computer literate. Accordingly in furtherance of our commitment to further develop its resources, it will be made clear that the programme to permit schools to import portable computers for issue to their students at a duty rate of 5 percent extends also to the Bermuda College. The Tariff will be further amended to permit specialised equipment required to adapt a standard vehicle to use by handicapped persons, to be imported free of duty. The Tariff will be clarified to ensure that company annual reports printed abroad will no longer be able to be imported duty free as periodicals, but will in future face a 15 percent tariff rate. At the same time a range of items used in the manufacture of printed products in Bermuda will enjoy a tariff reduction from 22.25 percent to 15 percent. This includes graphic arts film, printing plates, chemicals and commercial bindery supplies. The SPCA will receive a $7,500 grant to offset the duty on a new van, and at the same time consistent with our commitment to the environment, the duty on electrically powered marine engines will be reduced to zero.

Mr. Speaker, the Government has taken a careful look at the state of Government finances and has found that a steadily increasing amount of national indebtedness incurred under the previous Government. This has resulted in a significant amount of our current resources having to be set aside to pay for our borrowings. Debt charges for 1998-99 are estimated to be some $9.62 million, and contributions to the sinking fund established to retire the debt were $3.33 million in that year, resulting in a total of $12.95 million set aside for debt. While the proceeds of the borrowing appear to have been appropriately invested in the capital stock of the country, it is also appropriate that a prudent look be taken. Much of the borrowing has occurred in the upswing of the economic cycle. Should the cycle turn down and Government revenues be adversely affected, the debt costs will have to be met, possibly at the cost of other programme funding. It is important that we borrow within our means and not see borrowing as a revenue source for consistent deficit budgeting. In the 1999-2000 year we envisage paying approximately $13.4 million in sinking fund contributions and debt charges, with $17.7 million having to be borrowed to meet capital outlays of $58.3 million. However by the end of March, 2000 with net total of utilised Government loans and guarantees standing at $169.5 million, we expect to have remained within the legislated debt ceiling of $185 million. Borrowing cannot be relied on annually as a revenue source.

Mr. Speaker, the Government supports the continued economic development of Bermuda and recognised both in its platform and in the Throne Speech the need to develop the Island's domestic and international computing capabilities in this regard. Accordingly, we will continue to promote the development of the Island as an e-commerce centre and will ensure through the use of experienced consultants that this technology facilitates new business development and increased productivity in existing businesses. It is through growth in our economy that additional revenues can be earned by the Government without the need to impose excess taxes, or incur excessive debt.

Mr. Speaker, it is appropriate that 1999 sees the introduction of new Financial Instructions. This is the set of internal directions that all accounting officers in all Government Departments are required to work by.

They follow extensive work by the Accountant General's Department and provide an appropriate platform on which this first PLP Budget is to be launched. We pledged fiscal discipline in all matters and to rule out pockets of sloppiness. Following appropriate training for all Departments, I look forward to new and better standards of internal administration and accountability in Government's financial affairs as a result of this initiative.

The 1999-2000 Budget is a landmark. It represents the first Budget under a PLP Government and clearly establishes a prudent and responsible fiscal approach to the country's affairs. We expect to see tighter administrative procedures in the implementation of the budgetary provisions than have existed under previous Governments as we govern by the stringent standards of fiscal responsibility that we were elected to practise.

Mr. Speaker, this Budget establishes clearly that the PLP has formed a Government to follow through on the promises made in its pre-election platform and in the Throne Speech. The country can feel confident that this Government's hands are at last at the wheel.

In closing, I wish to thank my colleagues for their assistance in the construction of this Budget, Madam Premier for her direction and also the technical officers of the Ministry of Finance for their significant and very professional help and support during the past three and one half months that I have been able to work to produce this Budget.