A five percent pension hike, concessions for retailers and free Bermuda College education were the key planks to Finance Minister Paula Cox's fifth Budget yesterday.

Government will also arrange 500 interest-free down payment loans for first-time Bermudian home owners although there is no pledge to carry out the election promise of free public transport this financial year.

A sum of $1.5 million has been put towards paying for child care for qualified Bermudian families with children under four as the programme starts to roll out this year.

However there are a raft of tax increases including a half percent hike in payroll taxes for employers.

And large duty increases on cigarettes and boats are also in the pipeline while social insurance contributions will increase by 6.75 percent to pay for the pension hikes.

There is a ten percent increase in Police funding to stem the tide of "lawlessness" as Government again promises to boost manpower with local and overseas recruiting and now the possibility of short-term outside assistance.

Government plans to raise $985 million this year – 7.5 percent higher than last year – but it will also borrow a further $111.4 million to fund capital projects.

That brings the total level of Government debt to $465.4 million, up from $256.5 million just two years ago.

Ms Cox said Government will also increase the total amoun tof money it is able to borrow in line with the rise in Gross Domestic Product, from the $375 million allowed in 2005 to $550 million.

Current account expenditure is set at $931 million, giving a Budget deficit of $131 million.

Ms Cox anticipates Bermuda's GDP growth in 2008 will likely increase from 2.5 percent to three per cent – much higher than the 1.3 percent to 2.2 percent predicted in the UK, Canada, Japan, Italy and Germany.

Total capital spending is set at $155 million. Of that $125 million will be spent on housing initiatives, seniors' facilities, improvements to the airport and cruise docks, the redevelopment of the Port Royal Golf Course, Morgan's Point and a coordinated school maintenance programme.

The money will also be spent on initial work on the first urgent care centre, expansion of waste management facilities, remediation work at the former Club Med site and Morgan's Point, and development of the new court and police complex in the City of Hamilton.

However there is nothing for the National Sports Centre which Premier Ewart Brown said last year could be finished by 2011.

Also missing from Mrs Cox's address, despite promises in the Throne Speech two weeks ago, is a plan to substantially raise the amount of Government scholarships to help cover post-secondary education.

Mrs. Cox said Government's objective was to work towards greater "people empowerment and inclusion so that we have a fairer society with expanded opportunity".

She added: "We must reinvest in our most precious resource – our people.

"While education and skills training are important the urgent priority must be to ensure that more Bermudians are in jobs at the higher end and there are more successful productive and profitable Bermudian enterprises."

Tax breaks for businesses in the Economic Empowerment Zone will continue for another year while the concept will be exported to either end of the Island.

There is another $800,000 for a tourism office in London however airport departure taxes jump from $10 to $35 in line with fees in other similar islands.United Bermuda Party Finance spokesman Bob Richards said the Budget ignored the poor and took a very rosy view of how recession in America might affect Bermuda.

He said there had been a lot of talk about encouraging people to save but Government was not leading by example because it was spending quicker than the economy was growing.

This was going on despite the recession in the US which could harm Bermuda, said Mr. Richards, who said it was not clear the fall-out from the sub- prime mortgage debacle was over.

"There was some mild bragging about growth in 2006 without any recognition that's a result of the economy overheating.

"That will hurt those struggling people but Government didn't seem to have made that connection."

He said there was no real recognition of the struggles of the poor who made up about a third of Bermuda's society. "There is no real relief for them, none at all."

And he noted the lack of cash towards replacing the main hospital – which had a target date of 2012.

However Government has put $2.5 million towards the first urgent care centre at Southside while money for something similar in the west will come next year.

FutureCare – a programme to assist seniors without health coverage – is being contracted out this year with delivery not likely to start until 2009/10.