Bermuda's business community yesterday expressed grave concerns on Government's projected level of spending for the next fiscal year following yesterday's release of the Budget.

A call for careful monitoring of actual revenue and expenditure came from the Chamber of Commerce, including the Chamber's Association of Bermuda International Companies (ABIC formerly known as the International Companies Division or ICD) and the Bermuda International Business Association (BIBA).

And accounting firm PricewaterhouseCoopers (PWC) raised alarm bells over Government's budgeted expenditure for the next fiscal year.

Hours after the Budget was released the firm issued a statement underscoring its concerns: "While many will be relieved that this Budget contains no new taxes ... we believe there are real reasons for concern about the long-term impact on Bermuda's economy.

"Although the Minister of Finance claims to have achieved a real decrease in Government expenditure, we note that current account expenditure, excluding debt service costs and sinking fund contributions has increased 3.2 percent, a figure in excess of inflation. In addition, the significant capital expenditure programme leads to a record overall Budget deficit of over $85 million and an increase in Government debt of $75 million or 56 percent."

The PwC statement said many in Bermuda's business community were looking for "Government belt-tightening leading to an actual reduction in current account expenditure."

It continued: "While the social importance of the new programmes introduced is not disputed, reductions and efficiencies in other areas should have been given priority. We also question whether some of the capital expenditures could have been deferred to a time when the construction industry is not as stretched, reducing the impact on the deficit and debt and maintaining employment levels in that sector."

In conclusion, PwC said the trend set by Government in recent years is alarming: "It is difficult to understand how this level of Government expenditure can be sustained without serious damage to our economy. Government expenditures as a percentage of GDP have increased from 18 to 22 percent since 1998. This trend should cause alarm."

Chamber of Commerce president Charles Gosling although saying the overall reaction to yesterday's Budget had been "reasonably happy" he also pointed to concerns on the level of current account expenditure.

Mr. Gosling said: "The lack of phone calls (since the Budget's release) shows a certain amount of approval for what has been tabled." But he said there is concern on the projected current account expenditure in a period of flat or negative growth. In spite of depressed economic conditions Mr. Gosling said Government was "just going along with increases".

And Mr. Gosling said he was disappointed at the lack of direction from the Budget not only this year, but over the last several years: "One would expect to get a sense of where the Country is going to go. You don't see a focused direction for the country in this Budget."

Of Government's Budget objective "to strengthen social cohesion in our community", Mr. Gosling said: "I would expect feel-good, social issues to be covered in the Budget. But that's it; these are issues, not direction."

Mr. Gosling said he remembered when in years past, and from previous Finance Ministers, a direction for the Country was categorically laid out with revenue projections from specific sectors over a number of years: "There are no long-range projections here. Apart from $1 million being set aside for unemployment insurance, the debate between employers, employees and unions will be a one year debate. There is nothing here to form the basis of planning, nothing to move us toward a common goal."

Mr. Gosling added: "We need more back-up on why the economy is behaving the way it is."

Mr. Gosling did praise Government's decision to continue the special payroll tax provisions through the end of September: "Certainly retailers will approve of the continuing relief. We had asked for this to be extended through the first quarter, and that it is continuing through the end of September is certainly helpful. But we also have to take in to account the projected declines in passenger arrivals and hotel occupancy levels."

Mr. Gosling said given the current decline in visitor numbers, the relief is "something that is necessary".

On whether or not businesses will be able to "steer a successful course" as Mr. Cox attested in his remarks on the relief extension, Mr. Gosling said: "For businesses, the major factor will be how much their business has reliance on tourism."

ABIC head David Ezekiel said: "The Budget announced by Minister Cox was not entirely unexpected given the uncertain economic times in which we live, particularly in relation to our tourism and retail sectors."

But Mr. Ezekiel added: "We would have expected to see some further belt-tightening on the expenditure side given that revenues are projected to be flat and the 3.2 percent increase in expenditure is higher than the current inflation rate.

"One expects however that the Minister is hoping that some pick-up in the hospitality area will provide increased revenue over the 2002-2003 year. We note that the capital expenditure still remains at a high level, resulting in a sharp increase in borrowing, but this is always a difficult area when there are planned capital projects that have either started or are about to start. While the increase in borrowing has to cause some concern, we note that the overall level of borrowing is still well below Government's self-imposed limits," he said.

Speaking to the international business sector, Mr. Ezekiel said: "We noted with some disappointment, but little surprise, that the payroll tax cap (of $225,000) was left unchanged. We would expect however that once the economic picture becomes clearer and with hopefully some pick-up across the economy, this item will be kept under review in the future."

In conclusion, Mr. Ezekiel said: "We understand that this is a difficult time in which to frame a Budget and would expect that all items of expenditure will be kept under review and fine tuned based on developments within the key sectors of our economy."

BIBA chairman Jeff Conyers said the budget for 2002-03 appears "reasonable" as long as the Finance Minister ensures that levels of revenue and expenditure are kept under control.

Mr. Conyers said: "The obvious worry is that one should pull in the horns as it is a hard time."

But he added that Bermuda had been fortunate in that there have been a number of new company formations despite the economic downturn.

Mr. Conyers said there are issues in the Bermuda economy "but the overall point of view is that things are balanced out between revenues and expenditures".