Accounting firm PricewaterhouseCoopers' (PWC) criticism of the country's Budget has been denounced by the Finance Minister Eugene Cox as "alarmist" and lacking in substance.

And, responding to criticism on the level of debt planned for the coming year, Mr. Cox says that the last time Bermuda had a recession, the Country's debt was almost doubled by the United Bermuda Party (UBP) with no adverse effects to the economy.

PWC's yearly Budget Bulletin warned of "serious damage" to the economy as a result of the Government's level of spending.

The Minister said that while the firm's synopsis of the Budget Statement was generally accurate, he was disappointed with the quality of its opinion about the impact of the Budget on the economy.

"The PWC commentary lacked analytical depth and was largely composed of vague generalisations that, quite frankly, were rather more alarmist than thoughtful. I think that the public would have expected comments of greater substance from a major accounting firm," he said.

The Minister said that PWC's call for belt-tightening leading to a reduction in government expenditure could be more specific.

"Does PWC wish to see cuts in law enforcement? Cuts in the education budget? Cuts in health care services? Fewer bus drivers or fewer clerks at TCD? Fewer staff processing work permits? No unemployment insurance? Reductions in social assistance? A less vigorous defense of Bermuda's economic interests in the global arena? A reduction in grants to community organisations? Cuts in some other policy area? I suggest that it would be more helpful if comments about Government's spending decisions were specific, informed and well-reasoned. These criteria are a necessary condition for constructive dialogue about policy priorities."

PWC, as well as Opposition Leader Grant Gibbons made much of the fact that the Budget unveiled Friday allows for $75 million in borrowing.

At a post-Budget Statement press conference Friday Mr. Cox defended the borrowing by saying it represented an investment since all of it is capital expenditure, or, as he put it, "hard assets". He said the overall debt was still well within the $250 million ceiling imposed by law and also cited Moody's Investors Service's strong Aa1 credit rating.

He said many developed countries have debt loads of up to 30 percent of GDP, while Bermuda's debt was a mere seven percent

Government projects capital spending in the coming year at $109 million, the vast majority of which $104 million represents works in progress. That, combined with estimated current expenditure of around $572 million, will leave a deficit of some $85 million after estimated revenue of $609 million is taken into account.

PWC's Budget Bulletin, posted on its website along with the text of the Budget, pointed out that the borrowing will increase the Country's debt load by 56 percent. It says the increase in current account expenditure is greater than the rate of inflation and the business community was hoping to see "an actual reduction in the current account expenditure" as well as Government putting off some capital spending for another time.

About 40 percent of the capital expenditure money will be spent on education, with the rest going toward law enforcement, buses and ferries and roads and bridges.

The Minister reminded PWC that the Progressive Labour Party Government inherited $164 million debt from the previous administration. Moreover, he said, Government had reduced the outstanding net debt - excluding minor guarantees - from $147 million in 1998/99 to a projected $129 million for the 2001/02 fiscal year. "Therefore, the proposed borrowing in 2002/03 marks the first real borrowing by the PLP Government."

Regarding the scale of the increase in government debt, the Minister said that a previous UBP administration nearly doubled outstanding Government debt in the early 1990's recession.

The Country's debt burden increased by some 84 percent between 1990/91 and 1992/93, when Government debt leaped from some $56 million to approximately $103 million.

"Given recent comments from another quarter, I wonder whether this was an example of `borrow and spend'", Mr. Cox continued, referring to the Opposition Leader's criticisms.

"But, I digress; let us get back to the main issue. The point here is that there was no damage to the long term prospects for Bermuda's economy then, and it is illogical and inconsistent with all existing empirical evidence to suggest otherwise now."

He added : "Our credit rating is strong and has been affirmed at Aa1 by Moody's, and double-A by Standard & Poor's, at a time when many other country ratings have been either lowered or put on watch.

"In the same way that individuals borrow to acquire valuable assets such as property and housing units, a prudent and sensible Government will borrow to finance the development and acquisition of hard assets that help to assure the community's future wellbeing. I am curious to know who would be alarmed with this approach."