Public services could be provided by private-sector firms set up by ex-civil servants, an audience of business people heard yesterday.

Erica Smith, executive director of the Bermuda Economic Development Corporation, said: “With the potential restructuring of the Civil Service and the potential for redundancies and loss of jobs, maybe there is a way to incentivise entrepreneurs so privatisation comes into play.”

And she suggested that some services could be hived off with a new area of the private sector coming up with plans to “create a business and create jobs”.

Ms Smith was speaking during the panel discussion at the annual Chamber of Commerce budget breakfast meeting, sponsored by professional-services firm PwC and held at The Pier on Hamilton’s Front Street.

She was speaking after panellist and Chamber of Commerce president John Wight said that the overall budget had increased compared to the previous year — and that the Ministry of Finance “could have done more” to share the sacrifice more evenly.

Mr Wight said that he was “disappointed” that the general services tax, which would tax the provision of services as well as goods, had not been implemented this year.

He added: “The Chamber was supportive of the Minister’s continuing goal to balance the budget ... however, we feel certain changes could have been made to make more fair and equitable for everyone.”

Bob Richards, the finance minister, who delivered the annual budget last Friday, told the meeting that Government had shed nearly 650 Civil Service positions, 12 per cent of the total, through non-replacement of posts and early retirement.

He said that his Ministry dealt with requests to hire new staff “every day”.

Mr Richards added: “I can tell you that this situation can’t continue and Bermudians will have to accept the services the Government provides, Government will not be able to provide in the future.

“If they do insist we provide these services, the size of Government will have to go up to provide these services.”

And he said that the $38 million earmarked for the America’s Cup was a one-off and would not be repeated in next year’s budget.

Mr Richards added: “Take that out and we’re doing a very good job on spending. The next year, that $38 million is not going to be there. We are having some success in reducing Government expenditure and the cost of running the Government.”

He added that steps were also being taken to increase accountability in the public sector would “improve productivity and we are looking forward to making that happen.”

But Mr Richards said Government was “heavily unionised” and that it took “a great deal of effort” to implement changes.

Nathan Kowalski, chief financial officer at Anchor Investments and the fourth panellist, said that industries like online gaming, if brought to the island on a tax-free basis, would not mean the sector was not contributing to the economy.

He explained that the industry would bring people to the island, who would contribute to the island through their salaries and spending on goods and services.

Mr Wight added that the island’s 60/40 rule, designed to ensure businesses were majority owned locally, needed to be examined in the light of current economic conditions.

He said: “We definitely have to have the debate because we have enough businesses in the community that need a capital infusion.”

Mr Richards said that Government had “enabled” massive hotel development at Morgan’s Point, brought the America’s Cup to Bermuda and set in train the redevelopment of the airport with in a public/private partnership with a Canadian developer, all of which were direct foreign investments.

He added that he was a proponent of “relaxing” the 60/40 rule which was “a big inhibitor to foreign direct investment in Bermuda.”

Mr Richards told attendees: “I think that 60/40 is a problem but something that we need to have some clarity of thought and clarity of approach from yourselves.”

And he pointed out: “Without the relaxation of 60/40 in telecommunications, we would be in the stone age, so that’s worked out well.”

He said afterwards that Government would welcome discussions with business on the future of the 60/40 rule.

Mr Richards added: “If we could get consensus with local business on that, we’d be happy to oblige. It’s a complicated issue — it’s built into Bermuda almost since the beginning of time. To undo that takes care and consideration.”