A story in Saturday's paper incorrectly stated that Government announced a Budget of more than $500 billion. It should have read more than $500 million.

The first-ever Progressive Labour Party Budget could drive Bermuda onto financial rocks, Shadow Finance Minister Grant Gibbons warned yesterday.

Dr. Gibbons said the new Budget appeared harmless at first glance -- but he added that a failure to take account of world trends and spending more without tax increases could be a disaster course.

He added: "There may be some people who are relieved that nothing foolish has been done -- but inactivity and slowness could have a real cost for Bermuda.

"Even though inaction is reassuring, inaction, particularly at this point in time where Bermuda is in the context of financial services and electronic commerce, it could be really damaging to us in the long run.'' Dr. Gibbons also warned that extra spending could fuel inflation -- making the Island less attractive to tourists and international business -- and hit Bermudians'spending power as well.

And he slammed the PLP's financial blueprint for relying more on political rhetoric than hard financial facts.

Government announced a Budget of more than $500 billion -- a near-$36 million increase on the original UBP estimate for 1998-99.

The PLP also allocated an extra $17 million in extra spending -- all without raising taxes.

But Dr. Gibbons said that the last UBP Budget spent marginally more on "people Ministries'' -- like health and social services and education -- in percentage terms than the PLP did this time around.

He added: "Last year's United Bermuda Party Budget allocated 55.9 percent of total current account expenditure to spending on people.

"In comparison, the Budget just presented by the Progressive Labour Party allocates 55.8 percent to the same people-orientated departments and Ministries.'' And he said: "There has been an awful lot of political rhetoric about spending on people -- but we had a higher percentage of spending and we did it spending less money overall.'' He added: "This increase is almost three times last year's increase, almost four times the rate of inflation and almost four times the projected rate of gross domestic product growth -- alarm bells should be ringing.'' Dr. Gibbons was speaking just after delivering his debut Budget reply to the House of Assembly.

He told MPs that the UBP had "always focused on the economic fundamentals that make spending possible, rather than the spending itself''.

And he said: "Without paying attention to the fundamentals, without positive economic indicators and economic growth, fewer funds are available to pay for education and training, health care, housing, public safety, transportation and community and cultural development.'' Dr. Gibbons admitted that economic statistics "may not mean a great deal to the average man and woman when things are going well''.

UBP replies to the Budget ECONOMIC DIPLOMACY Mr. Speaker, The United Bermuda Party is concerned that there was only a passing reference in the PLP Budget Statement to the conduct of economic diplomacy.

Recommendations and positions taken by the OECD, the European Union and the US Treasury, as well as decisions made by Her Majesty's Government, will have serious, long-term ramifications for Bermudians and the way we do business.

The carefully crafted position papers and complex discussions carried on by the United Bermuda Party Government in partnership with the business community need to be proactively pursued in order to ensure that Bermuda is differentiated satisfactorily from less well managed jurisdictions.

Bermudians need to be informed of the status of these discussions, and there has been no substantive statement on progress to date by the PLP Government.

Their Budget Statement fleetingly refers to international agreements the PLP Government would sign "to prove its willingness to be a full participant on the world scene.'' The Bermudian people and the business community need to know what these agreements are and what opportunities there will be for discussion prior to signing them.

Decisions made by external international bodies regarding Bermuda's financial and regulatory affairs will have a significant impact on this island's prosperity. Only an irresponsible Government would keep its citizenry in the dark on such important issues.

Mr. Speaker, The costly issue of environmental remediation at both Morgan's Point and Southside remains unresolved. Prompt action by the United Bermuda Party Government led to the cleanup of both the Canadian base at Daniel's Head and the UK base at HMS Malabar.

Now that a Congressional agreement to fund cleanup of the former U.S. bases in Canada has been completed, we are in a good position to pursue our own environmental claims for the former US military baselands, particularly since the Canadian sites share a historical tie with Bermuda. Active lobbying by the United Bermuda Party Government with members of Congress and the US Navy to make Bermuda's case must now be carried forward by the PLP Government before the window of opportunity closes. Otherwise, Bermuda's taxpayers will foot the massive bill for the cleanup and suffer missed opportunity costs as development projects are delayed by unresolved issues of environmental contamination. The PLP Government must act directly with the decision-makers in Washington, and it must act soon to capitalise on the strong position the United Bermuda Party Government left for them.

E-COMMERCE Mr. Speaker, Today, as never before, we must take steps to protect what we have while moving forward in bold and creative ways. Electronic commerce and information technology, especially applied in sectors such as tourism, finance, insurance, retail and services, suit Bermuda well and create jobs and entrepreneurial opportunities for both small and large businesses. With adequate training and educational programs, every Bermudian can benefit.

The potential for e-commerce is enormous. Customers of just one of the US Internet service providers, America Online, spent $1.2 billion in the one month leading up to Christmas, 1998. E-commerce business worldwide is expected to grow from $5.1 billion in 1998 to between $350 and $900 billion by the year 2001. Speaking at the recently concluded World Insurance Forum, technology expert James Martin said that e-commerce was about to rewrite the face of all industries.

That is why it is essential to move rapidly and deliberately on areas of enormous opportunity for Bermuda, such as e-commerce. Many countries are ahead of us, and the importance of e-commerce has only belatedly been understood by the PLP Government, who first treated it with suspicion. Precious time has been lost in moving forward with the development of a legislative base that legitimizes and protects e-commerce and that makes Bermuda an attractive jurisdiction for this business.

A superb working partnership between BIBA, the United Bermuda Party Government and Bermudian consultants produced a September, 1998, Policy Statement on e-commerce. Among other objectives, the United Bermuda Party Government's action plan called for draft legislation supporting e-commerce development to be completed by December, 1998. This critical momentum has been allowed to dissipate. The PLP Government has chosen to issue a request for proposals to draft legislation, rather than proceeding with arrangements already in place involving the Attorney General's Chambers and the original Bermudian consultants. This is a disappointing development, seen by many in the business community as delaying unnecessarily the implementation of this critical legislation.

TOURISM Mr. Speaker, For most of the century now coming to a close, tourism has been the principal foundation of our economic success. However, it is an industry that has seen substantial change and development worldwide. Resort development is slowing generally with some signs of contraction. Competition is intense, and some regions slip while others boom due to favorable exchange rates and available air service.

Visitors to our Island have many choices, and many destinations compete for their business. Although a multitude of factors influences vacation travel, value for money and the quality of the product itself are critical. We agree with the perspective put forward in the October, 1998, report entitled "Building New Competitive Advantages to Restore Bermuda's Tourism Community'', published by the Monitor Company and the community steering group CAG. This report should be required reading for all who live and work in Bermuda.

The broad partnership of Monitor, the United Bermuda Party Government, the unions and the hospitality sector has been critical in defining a shared vision of what the Bermuda product and visitor experience should become.

Marketing is only one of many elements that must work together. Delivery of the product that Bermuda promotes is most critical. Work with Monitor has now reached a third phase, and progress in specific sectors from watersports to transportation is outlined in their report. We are pleased that this Budget allocates a further $500,000 to the Monitor effort and that the PLP Government now seems to understand the importance of partnership and public/private sector cooperation.

It is essential that this cooperative effort continue on a broad basis, particularly in the hotel sector, which requires the more efficient, productive and flexible use of human resources. In last year's Budget, we directed attention to high labour costs as a percentage of sales in Bermuda hotels. Bermuda's hospitality industry needs profits to reinvest in their product in order to compete.

Mr. Speaker, Another area of great importance and concern is the upgrading of existing hotels and the development of new resort properties. The United Bermuda Party Government supported this effort in last year's Budget with a zero-percent-duty initiative. Since then, the upgrading of Elbow Beach Hotel has enhanced the quality of hotel accommodation available to our visitors. The purchase of the Princess Group by Canadian Pacific also augurs well for the quality of our tourism product.

The United Bermuda Party Government brought over $350 million in potential investment and one thousand hotel rooms to the table over the last few years in tourism development proposals. This was achieved, in part, by proposing new and more flexible financing strategies and by restructuring policies for physical development and marketing.

Unfortunately, many of these opportunities now appear to have disappeared through a combination of inaction, lack of understanding and inappropriate management by the PLP Government. This reverses the United Bermuda Party Government's investor-friendly development policies, which were intended to generate a rebirth of our accommodation product. Indeed, it appears to contradict the PLP Government's own Budget Statement that "...we understand the need to maintain an investor-friendly policy environment''.

In June, 1998, Parliament approved a lease with Destination Villages to build an eco-tourism resort at Daniel's Head. This allowed the Bermuda Land Development Company to proceed with final negotiations for this project, which should have been completed by the end of January. Although the PLP Government has still not announced final approval for Daniel's Head, we hope that the negotiations conclude quickly and satisfactorily. This project will bring many benefits to Sandys and will increase Bermuda's appeal to the environmentally sensitive visitor.

We are, unfortunately, less optimistic regarding the more recent handling of Morgan's Point. The challenges presented by this project are significant. The size of the development, its financial complexity and the significant environmental issues faced should not be underestimated. The Bermuda Land Development Company and Morgan's Harbour Group made significant progress in the summer and fall of 1998, principally through the addition of a highly credible financing and development team to the project. Recent PLP Government demands that houses built on the site be affordable to ordinary Bermudians further complicates these negotiations.

It must be apparent to most observers that trying to locate affordable housing in a designated resort area is inappropriate and could severely compromise the viability of the project. The original plans called for over 300 homes that would be available to both Bermudians and non-Bermudians. Adding affordable housing to what is primarily a tourism product demonstrates a lack of understanding of what major investors expect in resort development. We feel it would be entirely more sensible to separate the issues of affordable housing and resort development. Accept that the major benefits of Morgan's Point will be job creation and increased tourism revenues. Spread affordable housing throughout the island.

Morgan's Point is an extremely important development for our tourism product and for our economy. It is the first major new tourism resort in 28 years. It represents a long-term investment in Bermuda of over $240 million, hundreds of jobs in the construction industry over a sustained period and significant business opportunities for small and medium-sized contractors. It would be inexcusable to have the project fail through poor management by the PLP Government.

The developer of the Club Med property in St. George's put the project on hold until the results of the General Election were known. This redevelopment, which represents a real opportunity for St. George's and Bermuda, now appears to be in question. We understand the option-to-lease agreement expired in January and has not been renewed. We question whether the PLP Government is serious about proceeding with this critical $30 million redevelopment in St.

George's. Given the importance of this project to St. George's and Bermuda's tourism product, the United Bermuda Party hopes it is not too late for it to be saved. Two other redevelopment projects -- the Elbow Beach initiative at Belmont and the construction of a new business hotel in Hamilton -- have been delayed due to protracted negotiations with the nPLP Government.

Air service to Bermuda is critical to our future success. In the fall of 1998, the United Bermuda Party Government completed its air policy review report, which sheds light on strategies for improving Bermuda's air service. We call on the PLP Government to release it so that its recommendations can be discussed publicly and implemented.

The United Bermuda Party Government produced, in conjunction with the community, a five-year strategic plan for tourism, called "Tourism 2000''.

This plan provided a road map for the redevelopment of tourism, which had begun to bear fruit. A newly created Bermuda Tourism Authority was to have managed this effort. This organisation would have created a competitive entity involving the private sector, reducing bureaucracy, facilitating rapid decision making and keeping up with world tourism trends. We invite comparison of this initiative with the PLP Government's "Rescue Mission'', which did not propose any structural or organizational change. Similarly, the PLP Government's "National Tourism Action Plan'', due within 100 days of the election, has not been delivered as promised.

INTERNATIONAL BUSINESS Mr. Speaker, Recent data from the Archer Report, the Bermuda Monetary Authority and the Registrar of Companies indicates that the very strong growth of international business in 1997 continued into 1998 under the United Bermuda Party Government. Spending in Bermuda by international companies grew from $631 million in 1996 to $743 million in 1997. More importantly, 80 percent of this expenditure came from the 3.3 percent of registered companies with a physical presence in Bermuda. In 1997, international companies directly employed 1,528 Bermudians and supported some 13,000 jobs.

Although the number of international businesses with a physical presence is small, they impact Bermuda's infrastructure in areas such as housing, transportation and education. In last year's Budget, the United Bermuda Party Government recommended that a study be undertaken to assess this impact in order to identify the limits to sustainable growth and to better understand the infrastructure needs of the industry. A working group was established and had begun their analysis. We call for the completion of this study.

Bermuda's exempted insurance sector is facing many challenges, including intense competition and soft markets with downward pressure on premium income.

This has led to major consolidations, geographical expansions and vertical integration to better compete for business and grow earnings. We must recognise that this is not business as usual.

Bermuda has the opportunity to continue to grow as a global centre for the headquarters of worldwide insurance organizations, but the PLP Government must act quickly to seize this opportunity. It must tailor its approach to employment, training, immigration and regulatory policies to reflect the needs of the industry. Otherwise, Bermuda faces the slow dispersion of business to competing jurisdictions.

Capital deployment in the insurance industry is a key issue. The most recent figures from the Registrar of Companies show that in 1997 capital and surplus in the Bermuda insurance market was $48.4 billion. Total assets exceeded $111 billion. The trend toward convergence of the insurance and capital markets and the strategic importance of asset and investment management services will demand a more diverse set of workplace skills and support services for the insurance industry.

The full integration of insurance and financial services must be allowed to proceed in Bermuda. It will require new thinking and a new approach to our regulatory and legislative framework and a further dismantling of embedded protectionism in these sectors. Government must move now to understand the changing nature of this industry and the role that Bermuda can and must play in the global financial marketplace.

FINANCIAL SERVICES Mr. Speaker, The PLP Government has been slow to demonstrate its commitment to progress in the financial services area. For example, the Minister of Finance has not yet gazetted a commencement date for the Investment Business Licensing Act, which Parliament passed in June, 1998, and the Governor signed during the summer.

This delay is unfortunate and leaves consumers without protection. In addition, it has postponed recognition of the Bermuda Stock Exchange by the Financial Services Authority, the U.K.'s premier regulatory body.

Another example is the Deposit Taking Business Bill, which was given a first reading in the House in June, 1998. During the summer and early fall, the United Bermuda Party Government worked closely with the Bermuda Monetary Authority and the private sector to refine this piece of legislation. This bill is important, not only to demonstrate Bermuda's adherence to the Basle Core Principles, but also to update the banks and deposit company legislation.

The bill will give the larger banks, who do more than half of their business outside Bermuda, the ability to strengthen their capital base. This flexibility, which was denied the Bank of Bermuda with the defeat of their private banking bill, could mean the difference between success and failure for a financial institution operating in the global marketplace.

Concluded in Monday's newspaper