FINANCE Minister Paula Cox has made her first comments about how the island's new hospital may be financed.

She told the that the $500-million price tag on the new acute care facility was not yet a confirmed figure.

And she also suggested that there was "great potential for a public-private financing initiative", which might entail the new building being owned by the private sector and leased back to Government.

Ms Cox's comments were part of her answer to our questions on how the Government plans to pay for its expensive capital programme.

Meanwhile Shadow Finance Minister Patricia Gordon-Pamplin said she was concerned about inflation being generated by the capital spending in the next few years.

And she has warned the community not to expect too much in donations from the island's international companies.

The cost of a new hospital, a new Hamilton police station and courthouse and a new Causeway, as well as the housing initiative will come at a projected combined cost of more than $680 million.

Ms Cox said: "With respect to the financing of the new hospital, in addition to traditional financing approaches in Bermuda, there is great potential for a public-private financing initiative.

"It is premature to be definitive at this juncture as there are many details yet to be finalised including the factor of cost.

"The estimate of $500 million for the new acute care facility represents an order of magnitude that is yet to be confirmed based on detailed specifications and costings."

The Opposition United Bermuda Party (UBP) has previously called for an independent committee of finance experts to oversee any public-private finance initiatives, to ensure the public gets the best deal.

Minister Cox said the new police station and court building, the new Causeway and housing initiatives were already part of the Government's long-term capital expenditure plan.

"Effectively, that means that the included projects are deemed essential for the future social and economic progress and development of our community," the Minister said.

"It also means that a financing strategy is in place to fund the projects.

"Historically, capital projects have been financed largely through a combination of taxation and long-term borrowing that may take the form of bank syndication loans, bond issues or private placements in highly liquid capital markets.

"This is a sound strategy as it assists in spreading the impact of the tax and financing burden across the many generations of Bermudians who will benefit from the investment in our community's social and physical infrastructure.

"As I indicated in the 2006/07 National Budget, Government's Social Agenda requires that we do not place too heavy a tax burden or too heavy a debt burden on the people of Bermuda. We will maintain that fiscal rule going forward."

Speaking for the Opposition, Ms Gordon-Pamplin expressed concern over a lack of plans to adopt a measured approach to guard against inflation.

"I am very concerned that the capital expenditure that the Government has undertaken does not appear to come with a blueprint for how measured an approach will be taken to manage the costs," Ms Gordon-Pamplin said. "It is imperative that capital projects are prioritised and staggered so as to ensure that the construction industry is not overheated, that development is sustained, and to minimise the effect of internally generated inflation."

And she warned against too much reliance on donations for the hospital from Bermuda's international businesses.

"In many quarters of the community, the notion that our exempt companies should foot the bill for our development is being touted," Ms Gordon-Pamplin said.

"It is important to realise that while the benevolence of the international business sector is fairly well documented, the purpose of such corporations is to provide a good return on investment to their shareholders.

"To drain any significant portion of $500 million from those shareholders' funds is unlikely to be supported by those who own the money.

"We have to recognise that we can only tinkle the bell of the cash cow so many times, after which the cow will not respond."

In this year's Budget statement, the Government estimated that its total borrowing by the end of this financial year would amount to $285 million and the estimated annual cost of servicing that debt would be $11.7 million. The statutory ceiling on public borrowing is $375 million.

The Bermuda Hospitals Charitable Trust (BHCT) is a registered charity set up two-and-a-half years ago to collect funds for the Bermuda Hospitals Board (BHB). Chairman Philip Butterfield has said he hopes to raise up to $50 million for the new hospital, but said last month that the campaign "was not yet off the ground".

Ms Gordon-Pamplin spelled out the costly projects that were the cause of her concern.

"There is a TAF (Total Authorised Figure) in the Budget of $58.5 million for the police station and courthouse, $60 million for the bridge replacement, $65 million for the housing initiative, of which $20 million was included for 2006/07, but it appears that there has not even been a shovel mobilised.

"And now a further $500 million for the hospital. While the hospital funding will be the responsibility of the BHB, the Government still has an obligation to finance the debt.

"In fact, this can be seen by the Premier's ceiling placed on the amount of financing to be expended at the hospital at $500 million ? all in advance of detailed studies, civil engineering reports and detailed drawings being produced ? in fact, even in advance of a definitive decision regarding the siting of the facility."

She said it was clear that Government would have to examine its statutory borrowing limit.

"That ceiling is now set at $375 million, as of April 2005, against which there is already outstanding debt of $236 million," Ms Gordon-Pamplin said.

"The difference in unallocated debt is only $139 million, while the capital projects mentioned above are conservatively priced at $183 million, the hospital.

"When consideration is given to the overrun on the Berkeley project alone, and the manner in which projects have been handled, the picture becomes extremely ominous."