In a year-end interview with The Royal Gazette, United Bermuda Party Leader and Shadow Finance Minister Dr. Grant Gibbons (pictured right) has called on Government to lead the Country and cut expenditure in 2002.

Reviewing Government's last year, Dr. Gibbons pointed at the budget as the defining statement from Government as to how they see their fiscal and economic year proceeding.

"I think what was interesting about this past year's budget was the fact that in spite of some pretty clear indications that the US was looking at a more difficult year and possibly going into recession, the budget was an extraordinarily expansionary one. It was a budget that we termed "imprudent" and certainly the additional $74 million in spending that they were proposing was way out of line with what we in the UBP thought was reasonable under the circumstances," said Dr. Gibbons.

Government spending and the widening gap between revenue and expenditure is a challenge Government will face in the next budget, said Dr. Gibbons.

"What you are seeing with the additional $74 million and the enormous increase in spending and capital expenditure which was budgeted last year at $112 million, and with revenue clearly declining - and we know from what Dr. Brimmer mentioned in his speech that Government is looking at a $24 million shortfall this year - is that one of the challenges next year will clearly be containing expenditure and trying to maintain their revenue without putting any additional burden through taxation."

Dr. Gibbons said of Government expenditure, in the 1999/2000 budget year: "There was a last-minute effort in December and January to try and cut five percent form the expenditure budget. It was roughly a $25 million cut that they were looking to make, and the reason I mention this is because what we have seen in the last year or so is an extraordinary amount of supplementary requests coming out of that particular year."

Dr. Gibbons said the Opposition had warned Government it was very difficult to make a last minute expenditure cut stick, and said: "If you take the five supplementaries that all go back to this 1999/00 year, what you see is that in the end, $26 million was added back in to supplementary expenditure, and there were five separate supplementary requests which came to the House over the last year or so. So one of the difficulties the Government has had is making these expenditure cuts stick because departments simply come along at a later point having spent the money and then come back and get it approved after the fact. So it will be very interesting this coming year to see how Government can make expenditure cuts in the coming budget year stick."

Dr. Gibbons continued: "We have seen a lot of interesting things in this past year, but one of the things we haven't seen is the scissor man, and one of my hopes for the coming year is that the long promised scissor man, particularly in terms of Government expenditure, will make an appearance early in the new year."

Dr. Gibbons highlighted the year in tourism saying both visitor arrivals and spending had weakened considerably and said: "The stats we have until the end of June (2001) suggest a $35.4 million decline over the previous year in visitor expenditure, and in the year 2000, we saw a $51 million decline. Even if you annualise that $35 million decline you are probably looking at something like a $70 to $100 million decline in visitor expenditure in Bermuda which has obviously had a dramatic impact even before we got to September 11."

Dr. Gibbons said the statistics show that Bermuda is becoming a "tale of two cities".

"Clearly with the tourism sector weakening, and particularly in the last quarter international business and insurance seeing an upturn, you have very different effects happening in two parts of the economy and it's going to be very important that you don't have an us and them mentality and that there is a balance in terms of how Government approaches things like immigration and work permits.

"I think the general sense to put it simply is that our normal December through March layoff season in the hotels started in September. So normally, people would have had September, October, November and December as the buffer period to get them through the winter, clearly that is not there this year.

"I think its going to be a fairly grim period, particularly when we get further into the first quarter of next year, and there is very little relief," said Dr. Gibbons.

"So I think we are heading into a period in which the hospitality sector looks pretty awful. On the other hand, those involved more directly on the insurance side are going to see - and it has been described as perverse - a real benefit. The last estimate that I heard was that we are probably looking at something in the order of $15 billion of new capital coming in over a six to twelve month period."

Dr. Gibbons said he thought this would be very positive for businesses providing services to the sector such as banking, accounting, information technology and legal work, whereas, in the "tale of two cities" scenario, the hospitality side will see increasingly difficult times.

He said: "I think this will have ramifications in terms of how people in the Country feel about certain things, and issues. But it also has important ramifications for how we address these opportunities, as clearly we are fortunate to have the international business opportunity."

While it may be easy to blame some of the issues of overcrowding, school placements and traffic on the increase in international business Dr. Gibbons said: "If you had to look for a low impact business opportunity, insurance clearly would be it. The estimates that I am seeing are that you are probably looking in the order of 100 to 200 additional people coming in, for what is quite a significant increase in business which will probably have a significant impact on the broader economy just because that money will go around to some degree."

Dr. Gibbons added: "In the community as a whole, there is a much clearer sense now, particularly after September 11, on how dependant we are on outside forces, and how important it is to recognise opportunities and address challenges as quickly and effectively as we can. Given our size and the fact that we are so dependant on the US economy and the economy of the world as whole and I think that issues like direction from Government and Government working with the private sector have been historically exceedingly important, and are probably going to be more important to make sure that Bermuda continues to be a prosperous and healthy place to work and carry on business."