cautious with spending commitments in Friday's budget because of the threat to the Island if the United States economy slows down or goes into recession.

Shadow Finance Minister Grant Gibbons warned against increased borrowing because it will be expensive to finance if the economy slows.

And he said Mr. Cox should be wary of continuing to hit international business hard because Bermuda faces tough competition from other offshore jurisdictions.

Dr. Gibbons said the UBP was also concerned that the Progressive Labour Party's "tax and spend'' approach was leading to an increasing gap between income and expenditure, fuelling increased borrowing.

He said Government has more extra cash than expected because of the increase in revenue from increasing payroll tax to international business in last year's budget.

Because of this, he is convinced Mr. Cox has room to manoeuvre cautiously without hammering business and the public with heavy tax increases.

"The concern we have going forward is of the possibility of us entering a downturn based on the US experience,'' Dr. Gibbons told The Royal Gazette yesterday.

"Our fear is that we've seen a tax and spend government and we suspect that the spending will only continue.

"One of our major concerns is that in the last two PLP budgets we've seen an increasing divergence between revenue and total spending which has led to an increased need for borrowing.

"It will become increasingly difficult to support deficit spending, not just in terms of paying back, but in terms of debt servicing. The interest last year, around $11.5 million, was the same as the Youth and Sports budget.

"Capital spending has increased 50 percent in the last year and the warning signs of a slowdown are there in the US economy.

The Budget -- Your Views Page 4 Shadow Minister speaks out "We would expect, if not a full-blown US recession, then a slowdown in the economy to have a knock-on effect in Bermuda's economy and we expect the Minister to trim spending appropriately and phase capital projects.

"We would also not like to see an increase in taxes once again because that would make it even more of a burden on our economy if the risk of a downturn plays out.

"We'll be looking to the budget to see if it reflects the larger economic situation Bermuda finds itself in in relation to the US.'' Dr. Gibbons pointed out the increasing reliance on international business, which provides Government with around half its revenue. Thousands of Bermudians are also affected directly and indirectly by international business spending.

He sounded a warning about the dangers of looking to international business for revenue to support spending commitments.

"In the budget last year the Minister increased the burden on international business. The adjustment to the payroll tax means costs have increased enormously in some cases.

"It was clear the Minister didn't understand the implications when adjusting the parameters for payroll tax for international business.

"It is dangerous in a competitive climate to increase the cost of doing business when it is the primary revenue generator.

"This is a spending government and its pretty clear that from the natural increases in revenue and the unexpected increases like the payroll tax that the Minister should have plenty of room to manoeuvre this year if he takes a more reasonable approach to capital and current account spending than he has done previously.'' Dr. Gibbons said it was also time for the PLP to deliver on its election promises of providing affordable housing, tackling education, and turning around tourism, which he described as a "complete disaster''.

"There is a feeling in a great number of sectors of the community that the only people who have benefited from a PLP Government have been the PLP Government,'' he said.

He said the PLP had not delivered on its election pledge of creating duty-free shopping for tourist-orientated spending on goods such as clothing and jewellery.

Grant Gibbons