Other funds will be applied to such varied items as improved communications, reserve constabulary allowance and overtime, as well as other allowances provided for under the Police Tribunal award in 1996. Two additional traffic wardens, whose time will be shared between St. George's and Hamilton, will cost some $61,000.

In support of the partnership between Government, the Corporation of Hamilton and the private sector to reduce crime, Government will contribute $550,000 to the capital cost of $1.3 million for the installation of closed circuit television in two areas of the City of Hamilton. Road safety is an important issue for Bermuda's residents and visitors alike. Therefore, $200,000 is also allocated to the capital cost of cameras to photograph speeders on Bermuda's roads, as increasing use is made of technology in the overall effort to combat crime and improve road safety.

For those who have suffered injury as a result of others' criminal activities, $50,000 is being added to the Criminal Injuries Compensation Fund, an increase of 25percent.

Mr. Speaker, changes in economic and social structures around the world impact the social fabric of communities, and Bermuda is no exception. Government recognises that the opportunities ahead in the Twenty-first Century will be unavailable to many Bermudians unless strong emphasis is placed now on strengthening the family unit and safe-guarding the well-being of the young and the elderly in particular. The Ministry of Health and Social Services is in total being allocated some $816,000 additional funding in 1997/98. This includes some $153,000 for the development of a corporate services unit in the Ministry Headquarters in order to implement forward planning and increase the efficiency of delivery of the many services provided by Health and Social Services. In addition, a further $157,000 will be allocated to support various services provided by the Department of Health. $440,000 is allocated for the Department of Child and Family Services. Government has moved to support that Department through the hiring of a Family Service Supervisor and four more social workers, who will now be able to assist families in need at an earlier stage and help to break the cycle of child abuse before it begins.

Mr. Speaker, Government's obligation under the Hospital Insurance scheme will again increase in 1997/98. Bermuda's ageing population and the required hospital care it needs at King Edward VII Memorial Hospital will cost $2.7 million more for in-patient care in the coming year, based on an estimated 3,700 more bed days for aged and geriatric patients. Outpatient services for subsidised patients will cost an additional $1.1 million in subsidy. The total increase in subsidy required for KEMH is $4.3 million, based on a rate increase of five percent. A rate increase of 4.5 percent at St. Brendan's, together with a new group home, will cause an increase in subsidy for 1997/98 of $1.1 million, bringing the total required in new money for the hospitals to $5.4 million.

The report of the Health Care Review Committee, delivered in 1996, made far-reaching suggestions for change in the funding of health care in Bermuda.

These are under review by both the Ministries of Health and Social Services and Finance. The rising cost of health care, exemplified by the 42 percent increase in the subsidy payable to the KEMH over the past five years, is impacting significantly on the operation of the Government Employees Health Insurance Fund. One of the conclusions contained in a 1996 actuarial review of the Fund was that there had been insufficient increases in the core contribution rate over the past several years. The actuary therefore recommended a substantial flat rate adjustment to the monthly premium, which was accepted by employee representatives on the Fund's management committee.

Accordingly, with effect from 1st April, 1997, each contributing member will be required to pay an additional $13 per month into the Fund.

Attendant rises based on hospital rate increases and related health care costs will take the total premium adjustment to about $20 per month. Government as employer must match this contribution, and thus $1.6 million has been set aside for the purpose.

Mr. Speaker, as the number of senior citizens in our population grows, Government is conscious of its obligations to those who have reached the end of their working years. Two initiatives will directly support them in this Budget.

The Minister of Transport will introduce legislation to provide free transportation on Bermuda's buses and ferries to those holding a special person's card. This is a very practical demonstration of the regard in which the Government of Bermuda holds the senior members of the population and is in recognition of their years of contribution to the economic well-being of the Island. This benefit will also apply to all other holders of the cards, including disabled persons.

The Government also remains committed to its course of pension reform to ensure adequate means of support to future retirees. Legislation will be introduced to provide for a Pensions Commission to implement the island-wide pension scheme, whose principles were discussed in the Green Paper on the subject. $450,000 is included in this Budget to obtain expert consultancy and to fund the operation of a Pensions Commission office.

The Ministry of Community and Cultural Affairs is to be allocated an additional $203,000 for the coming year. $45,000 is allocated to the purchase of new books for the Library, $50,000 is provided as an additional grant to the National Gallery and $43,000 to hire a business systems officer in the Small Business Development Corporation.

Mr. Speaker, of the $1.2 million in new current expenditure allocated to the Ministry of Works and Engineering, Parks and Housing, $600,000 will be spent on the maintenance of Government buildings curtailed due to Budget constraints. The Water Authority and the hydrogeology section of the Ministry's activities are to be transferred to the Ministry of the Environment, where they more appropriately belong. This results in a transfer of some $160,000 in support from the Ministry of Works and Engineering to the Ministry of the Environment.

Details of Revenue Projections Mr. Speaker, the economy grew strongly during 1995/96, and all indicators are showing that it has continued to perform well in the areas of international business and construction in 1996/97. Latest estimates suggest that Gross Domestic Product will grow by around 2 1 percent to 3 percent in real terms in 1996/97 and continue on a growth path of around 2 percent in 1997/98. Tourism is undergoing review and change, and the retail industry is continuing the process of examining its competitive position. As in last year's Budget, Government will facilitate the country's efforts to be more competitive by being restrained in raising new tax revenues. The Government recognises the importance of not placing additional burdens on the business community and letting the economy grow and naturally generate additional revenues as a by-product of growth.

Nevertheless, despite generally good economic indicators, the Government understands that in these times of change it must be very prudent in its assessment of what additional revenue the economy will generate. Accordingly, it is anticipated that underlying growth will add $14 million to the revenue base in 1997/98, resulting in a total anticipated revenue of $488.4 million, without the addition of new taxes. The review of land tax currently underway and the proposed review of stamp duties will not result in new taxes in 1997/98.

Mr. Speaker, the Government recognises the crucial role that the tourism industry plays in Bermuda's economy. The Hotels Refurbishment (Temporary Customs Duty Relief) Act was enacted in 1991 to encourage reinvestment in the physical plant of Bermuda's hotel industry. Hotels have responded very positively to this initiative, and in the past five years over $36 million of projects have enjoyed duty relief under this legislation amounting to over $6.3 million in duty exemptions. The Government welcomes this as an essential part of tourism's efforts to become more competitive. This year's Budget will broaden the Act to allow me to grant duty relief on items imported for the development of new hotel facilities for existing properties, and the expansion of existing hotel properties. This is a crucial step in supporting the industry's efforts to broaden and enhance the range of facilities that it offers our visitors.

In addition, Government will not increase rates of tax applicable to the hotel industry. This will ensure that the industry is not hindered in its efforts to enhance its competitiveness.

Part of the tourism experience in Bermuda is shopping. It is, therefore, important to support the efforts of the retail sector to become more competitive. Honourable Members will recall that tariffs on many tourist-related items have already been reduced significantly over the years.

Last year, tariffs were reduced on natural fibre and children's clothes to 6.5 percent. Certain tourist items, including china tableware, saw duty removed altogether. Continuing that trend, the duty on articles of leather including handbags will be cut from 22.25 percent to 6.5 percent. The duty on decorative glassware, statuettes and ornamental ceramic articles and real and imitation jewellery will also be lowered to 6.5 percent with effect from today as Bermuda moves toward a lower standard tariff. The duty on clothing of natural fibre will be reduced to 2.5 percent, and the duty on artwork will fall to the same rate as that applicable to antiques, at 8.5 percent. These duty reductions are expected to reduce the revenue collected by over $1.2 million.

Certain very high-value items of jewellery and precious stones generally have not been brought to the Island for sale, except on a very limited basis, because of the effect of duty. Accordingly, the Customs Tariff Act will be amended to permit such items to be imported on a deposit-entry basis for a maximum of 30 days, in order to effect a sale. If the goods remain in the Island after that time, duty will be charged.

Needless to say, it is important that prices are correspondingly lowered on all goods in order to generate improved sales performance.

To enable the tourism industry to take better advantage of our marine environment, the duty on boats which the Director of Marine and Ports and the Collector of Customs are satisfied will be used only for commercial tours or commercial diving purposes will be lowered to 10 percent. At the same time, fittings for all vessels will be consolidated under the same duty rate of 33.5 percent.

As part of these changes in duty, which are expected to show a gross loss of revenue of $500,000, boat owners generally will enjoy a cut in duty as the rate of duty on private vessels is lowered from 55 percent to 33.5 percent.

Government's role as a partner and facilitator to enhance tourism's competitiveness is clearly demonstrated in this Budget. No new taxation is being imposed on the industry, the Hotel Refurbishment (Temporary Customs Duty Relief) Act is being broadened, and duties in key areas are being reduced, in some cases very significantly. These reductions facilitate the efforts of hotels and other tourism-dependent businesses to improve their products and competitive position. At the same time, a broad strategic examination of the industry is under way, supported financially in this Budget and implemented through a partnership between Government and the private sector.

Mr. Speaker, Government will also use the Budget to support the local manufacturing industry. The printing industry has conducted a thorough review of its operations and has accepted the need for change. To facilitate the efforts of printers to compete more effectively, Government considers it appropriate to assist by eliminating the duty on paper for printing at a cost to revenue of $170,000. The duty rate on machinery and equipment imported for use in the printing industry will be lowered to 15 percent to encourage investment in modern equipment. Changes will also be introduced in the Customs Tariff Act that will reduce the cost of imported items for local manufacturers of paint. Mr. Speaker, these measures are all designed to enhance the competitiveness of local industry and thus support employment and Bermudians' ability to add value.

Mr. Speaker, the Government is conscious of the need to preserve our environmental resources. Accordingly, changes will be made within the Customs Tariff Act to enable the Bermuda Hospitals Board to switch to more environmentally friendly fuel at no additional cost.

Revenues from Payroll Tax have remained robust since the tax was introduced in 1995. Government has continued to monitor its impact, and it has been noted that its effect on cultural organisations in Bermuda has been unduly onerous, as most of them operate on a non-profit basis and must seek donations to function. Accordingly, an amendment to the Payroll Tax (Rates) Act will be laid before this House to place such non-profit cultural organisations in the lowest tax category, where the rate is 4.5 percent. While tax is applicable on the organisation, the full amount of the liability may be recovered from its employees, thereby ensuring that the organisation is not obligated to raise charitable funds in order to pay taxes.

Mr. Speaker, this Budget will not increase the rate of payroll tax applicable to any other employer.

The licence fees for motor vehicles were not altered in my last Budget. In accordance with established policy, the Minister of Transport will propose that they be raised at a rate equivalent to the rate of inflation over the past two years, and thus it is expected that fees will rise on the 1st of April by five percent. My Honourable colleague will introduce legislation to this effect, to be dealt with in this current sitting of the House. The cost of bus and ferry fares will also rise by an average of five percent in a move to offset the impact of inflation, as they have not been adjusted for the past two years.

Changes in staffing and systems are contemplated in the Registrar of Companies Office to enhance service to both international and local companies.

Consideration has been given to the fee structure currently applicable to insurance companies. As a result, legislation will provide for reductions in annual fees for captive insurance companies, but there will be an increase in the fee charged to Category Three and Four companies and to non-resident insurance companies. At the same time the fee structure generally for insurance companies will be clarified and rationalised to make clear the fees paid by companies which carry on composite business.

Amendments will be introduced at the same time to ensure that the special tariff arrangements enjoyed by Cable and Wireless will be extended to Bermuda's other international telecommunications carrier, TeleBermuda International. A revised license fee for TeleBermuda will be introduced through an amendment to the Government Fees Regulations.

Mr. Speaker, the Ministry of Finance works continuously to manage Bermuda's economy for the benefit of all Bermudians. These efforts go far beyond the preparation of the annual Budget. A review of Bermuda's laws pertaining to intellectual property and copyright is already under way in order to prepare for the development of a potentially new sector of our economy. The Office of the Registrar General is working with a consultant from the Commonwealth Secretariat on this issue.

In 1997/98, the Ministry will direct attention to regulations for collective investment schemes as well as initiatives to strengthen our foreign sales corporation business. In recognition of the rapidly growing financial services market, it is intended that a bill will be introduced to license and regulate the provision of investment services.

Having solicited and received input from the business community, the Ministry of Finance and the Bermuda Monetary Authority will work with the Ministry of Labour and Home Affairs and Public Safety and the Attorney General to finalise tough new legislation to control money laundering.

During the past year a committee composed of members from the Ministry of Finance and the Bermuda Monetary Authority met representatives of the private sector to identify obstacles to the incorporation of international business.

As a result, a list of recommendations has been submitted to Cabinet, and it is anticipated that legislative changes will be considered by Government and the business community in order to streamline the incorporations process.

Mr. Speaker, we have heard calls in recent months for tax reform, and some interesting proposals have been put forward. It has always been the goal of this Government to administer a tax system that is fair to present and future generations of Bermudians, that encourages economic growth and that generates enough revenue to meet the legitimate needs of its citizens. Indeed, our tax system is admired by the United States and Commonwealth countries, who envy our simplicity and comparatively easy administration.

It has been the policy of this Government to review Bermuda's tax structure on a continuous basis. In 1994, a study of tax options by an outside consultant indicated that customs duty was an efficient and well-understood form of consumption taxation. It also recommended that the hospital levy and employment tax be combined into one simple payroll tax, and this was done in 1995. The independent assessment of land tax begun in 1996 and the review of Stamp Duties to begin in 1997 will be completed this year.

In view of the changes that have already been made in our tax system and the structural changes that are occurring in our economy, I feel it is appropriate to initiate an external, high-level review of the components of our entire tax structure. This review must, of course, take into account the changes to our tourism industry that will flow naturally from the Monitor study and other initiatives. In this way, Bermuda's tax structure -- which has served us so well -- can be adjusted and refined, in gradual but meaningful steps, to meet changing economic conditions in the short term and lay a solid foundation for continued prosperity.

It is important to note, however, that it has been and will continue to be this Government's policy that income tax would not be in Bermuda's best interest.

Mr. Speaker, the 1997/98 Budget outlines Government's economic plan to meet the challenges and seize the exciting opportunities of the twenty-first century and a new global economy. It is, fundamentally, a Budget about people, not numbers. By investing heavily in education and training, we prepare our young people and adult workers to develop appropriate skills and take advantage of the opportunities inherent in the digital revolution. By directing significant resources toward the health, welfare and safety of our citizens, we strengthen our families and the fabric of community life. By imposing no new taxes, Government takes less out of the economy, helps to maintain a low rate of inflation and assists Bermuda's businesses to improve their competitiveness.

The 1997/98 Budget also expresses a vision of a changing role for Government in the new world order, where Government facilitates positive change and creates partnerships for progress. To this end, Government has acted to enhance its existing partnership with international business. It will also act as a partner with the private sector to rethink and reposition Bermuda's tourism industry, which faces challenging conditions. This strategic exercise will draw strength from the common purpose and involvement of all community groups with an interest in this vital sector of our economy.

Mr. Speaker, this Budget is one in a long line of Budgets that demonstrate this Government's practical and prudent approach to managing Bermuda's economy. This ability of Government to manage its economic affairs successfully is increasingly important in the new global economy, where international business and financial assets can move almost anywhere, almost instantly. Without this international credibility, Bermuda's local economy is deprived of its ability to grow and provide jobs and opportunity for its citizens.

In closing, Mr. Speaker, I wish to acknowledge the significant contribution to the preparation of the Budget by the officers and staff of the Ministry of Finance as well as other Government ministries. Their knowledge, experience and professionalism are invaluable and will help to ensure Bermuda's economic prosperity in the global economy and exciting new century ahead.

HOUSE OF ASSEMBLY HOA