The Government expects to record a deficit of $43 million in the next financial year as David Burt’s decision to take his foot off the brake on spending will lead to a wider deficit than the $33 million deficit projected 12 months ago.

Mr Burt was unapologetic about not using anticipated increases in revenues to be more aggressive about debt reduction or to reach a balanced budget sooner.

Total revenues for the 2023-2024 financial year are projected to be $1.155 billion, up $44 million on this year’s revised estimate, with much of that increase again expected to come from payroll tax, which is estimated to pass the $500 million mark for the first time at $512 million.

That is a $32 million increase on this year’s revised estimate, and comes from a mixture of anticipated increased employment and changes to the structure of payroll tax that looks like it will raise more revenue from top earners.

According to the Budget Statement, more than 50 per cent of payroll tax ($231 million in 2021 when the total payroll tax take was $439 million) came from 14 per cent of the workforce — the 4,400 people who work in international business.

That proportion may well increase as lower earners see their tax burdens drop and high earners — who often work for international companies — pay a higher proportion of it.

The other big increase is in passenger tax, where an anticipated record number of cruise visits this year is anticipated to deliver a $7.5 million increase in levies.

International companies get hit again as their fees are expected to pay $7 million more in taxes, thanks to a new corporate regulation fee, while immigration permit fees are also expected to generate $2.2 million more as the actual fees are increased.

Stamp duties are also expected to rise by $4 million to $32 million.

However, those increases will be offset by “other revenue” which will drop from $39 million to $16 million, largely as a result of the end of the Travel Authorisation Form, which ceased with the end of the pandemic.

The revenue increases will also be matched by expenditure rises, which rise $29 million from the original $1.07 billion estimate last year to $1.103 billion. However, that estimate is lower than the revised estimate for last year, which was $1.109 million due to several unbudgeted expenditures including the hospital subsidy and poverty relief.

Much of this year’s increase is due to a $19 million projected increase in wages and salaries, which will rise from about $390 million to $409 million.

That increase is due in part to a “possible negotiated salary increases for public officers”. But Mr Burt also indicated that more hiring is likely to take place.

Although he said public service employment numbers have fallen under the PLP, he also indicated that this was not sustainable, adding that where public officers were not available, consultants and contractors had to be employed at higher cost; there is provision in the Budget to reduce the budget for outside consultants and contractors by $10 million to $49 million in the coming year.

The big increase comes in capital spending, which rises $17 million from a revised estimate of $79 million to $96 million, the highest in 13 years, according to Mr Burt.

It is that increase that really drives the deficit — before capital spending but after current account spending and debt service, there was a $52 million surplus compared with a $1 million surplus this year.

But Mr Burt was unapologetic about not aggressively seeking a more balanced budget.

He said: “The Ministry of Finance could have held ministers to the $75 million dollar capital expenditure target set last year, which would have resulted in the continued deterioration of Bermuda’s infrastructure and further delay of critical projects.

“The Ministry of Finance could have held to last year’s current expenditure target rather than increasing current expenditure to ensure that we deliver on key initiatives in the Government’s platform and Bermuda’s Economic Recovery Plan to improve the lives of Bermuda’s residents.”

He added: “Yes, in theory, I could be presenting a balanced budget on behalf of this Government today, but if we had made that choice, there would be more unpaved roads in Bermuda; our hospital would likely default on its government-guaranteed debt; critical infrastructure would go unfixed; the Government would not be able to build more desperately needed affordable housing; the airport would be at risk of being shut down due to the inability to fund the firefighters necessary to keep it open; the Tynes Bay Waste-to-Energy Facility would fail; and we would go back to landfilling at the Pembroke Marsh.“

Mr Burt maintained that the Government would still hit its target of a balanced budget next year, arguing that economic growth and the investments being made now would ensure it happened.

But the target is now smaller. A year ago, the projected surplus for 2024-25 was $8 million. Now it is $2 million.

Mr Burt also admitted that the budget deficit this year will be wider than projected.

A year ago, a deficit of $70 million was projected, but the most recent estimates put it at $77 million, which Mr Burt blamed on a $15 million unbudgeted increase in the subsidy for the Bermuda Hospitals Board and an additional $10 million in spending on inflation and Covid-19 relief.

Those expenses drove expenditures up $35 million at $1.09 billion.

On the revenue side, the war in Ukraine took its toll directly and indirectly, with aircraft register fees down $17 million, $11.6 million was foregone in duty to freeze fuel prices and the elimination of duty on essential goods cost the Government $700,000.

That offset a $34 million increase in tax revenue, which came largely from stronger-than-expected payroll tax receipts, which were $26 million higher than projected at $480 million and passenger taxes, which were $7 million stronger at almost $20 million.

Those revenues contributed to revenues of $1.11 billion, a substantial improvement on the $1.08 billion estimate from a year ago.