Civil servants have been ordered to implement "austere cost savings" — including banning first and business class travel and a freeze on hiring new consultants — for the rest of the financial year.

A four-point plan approved by Cabinet to curtail spending in the wake of a massive Budget overspend for the last fiscal year was sent to all department heads by civil service head Kenneth Dill.

Sources told The Royal Gazette last month that civil servants had been told to cut spending by 20 percent, reduce travel costs and keep overtime to a bare minimum.

Now we have obtained a copy of Major Dill's e-mail, sent on November 26, which is headed "Government Austere Savings Initiative" and details how spending must be slashed until March 31.

It reads: "Cabinet approved [at its last meeting], a number of austere cost savings measures that must occur over the remaining months of this fiscal year.

"This Cabinet decision will affect the operations of all ministries and departments of the Government. Chiefly:

• There is an immediate freeze on salary appropriations for long-standing vacant posts;

• There is an immediate freeze on requests for NEW consultants;

• Travel is to be cut back to essential business travel only for the remainder of this year; and all travel must be ECONOMY CLASS, no matter the distance; and

• You must identify 20 percent savings on your remaining budgets for operational materials and supplies."

The memo follows a directive issued to ministries at the start of the 2009/10 budget cycle to cut costs by 10.5 percent to allow new programmes to be introduced without tax hikes.

A source told this newspaper that the latest cost saving measures meant virtually "shutting up shop" for some departments.

"They are not filling posts and there are some acute shortages. There is definitely a freeze on recruitment and a freeze on spending.

"The cuts have already been effected and in some departments they are scratching their heads. Things are so bad that they don't even know from day to day where cash is coming from.

"They have taken money from social services. Some departments can't even order paper."

Government spent $77 million more than it budgeted for in 2008/9 and collected $32 million less in revenue than expected.

And the Island's fiscal deficit is said to be widening, with an estimated revenue shortfall for the first quarter of 2009/10 of $20 million, according to a recent report from the London-based Economist Intelligence Unit.

Deputy Premier and Finance Minister Paula Cox said last night that civil servants had been asked to keep to the budgetary limit for 2009/10.

She said Government was mindful of the "sobering economic reality" when it set the 2009/10 Budget and disciplined on how priorities would be funded, as it was in setting the new Budget to be delivered next month.

"The coming year will be fiscally as tough and challenging, and if we work together as a team our community will be served well by our collective action," she added.

But Shadow Finance Minister Bob Richards said Major Dill's memo was sent a year too late.

"In 2008, the Finance Minister ordered a ten percent budget cutback that was generally ignored by civil service heads," he claimed.

"This revealed a problem in the chain of command. We have seen no evidence that this has been corrected."

The Opposition MP added: "The 20 percent savings on operational materials and supplies strikes me as virtually unworkable and meaningless, particularly in light of the failure to cut budgets by ten percent in 2008.

"This 20 percent figure is a 'cost-saving measure' included for reason of political spin."

Ms Cox refuted the claim that last year's 10.5 percent budget cutback was ignored and said the strategy worked well, meaning new initiatives were launched without the need for increased taxes.

Mr. Richards said Government had disregarded the United Bermuda Party's "explicit" warnings since February 2008 to prepare for an economic downturn.

He said the annual consultant budget was too high at "close to $100 million" and was one of the reasons Government could not afford to include all seniors in its FutureCare health insurance scheme.

And he claimed Government had abused the public purse for travel. "Travel should only be essential business — at any time, under any circumstances. But this Government has got used to using the people's money for travel — all of it first class for its ministers."

Ms Cox said Government's overseas consultant budget was about $25 million.

She said the $100 million given for the 2009/10 Budget line item "Professional Services" was not limited to foreign consultants, but included security contracts at L.F. Wade International Airport, doctors' bills for war veterans, "portability payments" from the Department of Social Insurance and legal aid, among other items.

The Deputy Premier said travel was not a significant item of expenditure in the overall scheme of things.

• Do you think Government is cutting costs in the right areas? How would you like to see spending reduced in the upcoming Budget? Share your views by e-mailing newsroyalgazette.bm.