Premier Paula Cox yesterday cut payroll tax, hoping to stimulate the economy and lead Bermuda into recovery from recession.Reversing the unpopular two percentage point rise she imposed last year so payroll tax returns to 14 percent Ms Cox says she’s put about $50 million back in the hands of taxpayers for 2011/12.However, the Finance Minister conceded this would also increase Government’s debt, which has risen sharply to more than $1 billion even without the $200 million Butterfield Bank guarantee.Cuts were rife throughout all Ministries, with funding for police, hospitals and schools all taking a hit.Ten of the 12 Ministries saw their Budgets reduced, with nearly $15 million cut in Education, and many initiatives suffering in Youth, Families, Sports and Community Development.But Ms Cox said the payroll tax reduction would ease the burden on employers, keeping and creating jobs across all industry sectors.Delivering her first Budget as Premier, she told the House of Assembly: “The economic impact of the payroll tax roll-back will touch all sectors of the economy including hospitality, construction, retail, international business and local manufacturing.“The hope is that jobs will be retained and, where businesses are stronger, more jobs will be created.“The fiscal impact of the payroll tax cut will widen the deficit by [$50 million], but the overriding consideration is that businesses and workers need the assistance now to help them through the final stages of recession.“This is the essence of resetting the dial to win the future.”Police saw their budget down $7.5 million to $58.2 million, while less cash will be diverted to regular road repairs, several charities and after-school programmes.The Mirrors programme and child day care also lose funding, the Bermuda Small Business Development Corporation surrenders nearly 80 percent of its grant and the Music Festival has been axed.The National Economic Report, also tabled yesterday, showed more than 1,400 jobs were lost in Bermuda last year, meaning more than 2,000 have gone over the past two years.Ms Cox said Government is exploring incentives to benefit “job makers” who employ Bermudians, while payroll tax honeymoon periods could be offered to employers who developer workers’ skills.There was good news for civil servants, as Ms Cox pledged no public sector jobs would go, although she warned vacancies would remain unfilled in many cases. Planned overtime in the public sector will be reduced from $18 million to $11 million.Bermuda Industrial Union, Bermuda Public Services Union and Bermuda Employers’ Council all said they were pleased with the Budget.Ms Cox said she would fulfil her promise of $150 million savings by cutting $90 million from current spending and $60 million from capital expenditure.Shadow Finance Minister Bob Richards described the capital cut as “smoke and mirrors”, claiming it didn’t represent real savings.Mr Richards and Bermuda Democratic Alliance finance spokesman Michael Fahy both criticised Ms Cox for a Budget they said didn’t go far enough, saying she had missed her opportunity to get to grips with the economic crisis. There was no “sin tax” increase on alcohol or cigarettes, although Ms Cox did lift the cell phone licence fee from $5 a month to $7.Hoteliers and retailers get extended payroll tax relief, while various sectors, including retail, will get extended Customs duty relief.Projected revenue for 2011/12 is $940 million with a total expenditure target of $1.08 billion.The revised Budget deficit for 2010/11 is $224 million, surpassing the $143.5 million forecast a year ago.Government’s total debt is now $1.05 billion, up from $823.4 million last year, a rise of 27 percent; a proposed law change means this debt doesn’t include the Butterfield guarantee unless it becomes payable.