Bermuda residents received another sweetheart deal yesterday as Finance Minister Eugene Cox announced that they will face no new taxes or tax increases for the upcoming financial year.

"Our economy is on a recovery curve and we have no intention of slowing its acceleration away from the economic abyss of 2001," Mr. Cox told the House of Assembly yesterday.

He credited the economy's resistance to the adverse effects of the September 11 attacks on the United States to tax rebates to certain businesses given last year and Government's decision not to raise taxes.

Bermuda also saw a rise in international business, particularly in the insurance sector and some modest improvements in tourism.

As a result of economic growth, the tax revenues had increased by over $31 million. Much of that increase came from Customs Duty ($5.2 million), Payroll Tax ($12 million), Stamp Duty ($5 million), Land Tax ($2.4 million) and Passenger Tax ($2.5 million).

Government's final budget before the general election, which must be called by November this year, provides a total of $25 million in new money for current account programmes. Much of that money will be spent on boosting educational, youth and training programmes such as the Summer Student Employment programme, the Special School and the National Training Board.

And the departments with the largest budgetary increases are the Ministry of Community Affairs and Sport, which gets 17 percent more money for next year, and the Education Ministry which came in at 11 percent more.

"As a responsive Government acting in the best interests of all the people, we understand that our focus must be on the young," Mr. Cox said. "On the eve of our coming into office, the Progressive Labour Party stated: `It is one thing to recognise and speak of the potential of youth, but it is another, more challenging proposition to nurture and develop it. Most parents, and countries, wish the best for their young'.

"Mr. Speaker, that is why we have focused on programmes to provide increased opportunities for Bermuda's youth. We must do everything that we can to ensure that our young people no longer feel that they are priced out of living in their own country, or that they must go abroad - and stay abroad - because Bermuda does not welcome them.

"We need our young people. They are vital to our future."

Pensions benefits will be increased by three percent, and come August contribution rates will rise 4.25 percent.

Also included in the Budget are funds to lobby threats to the international business sector from foreign governments' policies, almost a quarter of a million dollars for consultant accountants in "key ministeries" and more money for fighting financial crime.

The prisons department also gets more money for its training programs and $9 million have been allocated to the Health Ministry for rest homes and improvements to St. Brendan's hospital and Teucer House.

Mr. Cox also announced that a new Unemployment Insurance Fund was still a work in progress. He said the priorities in crafting the Budget were to "strengthen social cohesion" and to "stabilise and rejuvenate business activity."

Government plans to spend $625 million for the year 2003/04, $39 million more than this year's estimate.

And an additional $104 million will be spent on capital projects, bringing the total spending plans to about $724 million.

Revenue is expected to be stronger than this year's as a result of "moderate economic growth and will likely come in at around $650 million, the Minister said. While Government expects to have spent $400,000 more than originally projected, it should have close to $32 million extra in its coffers by the end of this fiscal year, Mr. Cox revealed.

And he plans to borrow a record $78 million, to be spent on capital projects, to make up the remaining gap between expected revenue and spending plans.

But Mr. Cox stressed that the borrowing marked the first time that his Government had increased Bermuda's debt, that the Island owes less money now than it did when the Progressive Labour Party took office, and that low interest rates made it a good time to borrow.

He cited strong credit ratings from ratings agencies Moody's and Standard and Poors as independent evidence of Government's "judicious and prudent" management of the public debt.

The general reaction from the business community was to welcome holding the line on taxes but to criticise what they said was an overly optimistic view of short term economic performance given the threat of imminent war in the Persian Gulf.

Business homed in on the fact that spending increases far outstrips the rate of inflation and increases in Government revenue. "With this our fifth Budget, Government has included funding to continue our vital reform and development work in all areas, but most particularly in education, training, health care, senior care, housing and public safety," the Finance Minister said.

"Government's pursuit of these social policy objectives will result in improved student performance, a better trained workforce, more accessible and affordable health care, adequate housing for those who need it and improved public safety."

Mr. Cox ended his statement to the House with kudos to the voters.

"Bermudians have an extraordinary resilience and we are blessed. Yet, for the first time, we are finding our voices, we are speaking our minds," he said.

"We hold our leaders to a searching microscopic scrutiny and are not shy to criticise Government when we disagree with any action or policy. Mr. Speaker, we, as Government, appreciate such candor and we are not unduly sensitive to constructive criticism, for it hardens our resolve to do better to live up to all that is expected of us.

"We understand that a thinking and educated electorate voted us in on November 9, 1998 and we trust the common sense and considered judgement of that same electorate to maintain their faith in us to continue to serve this community well into the future."