Senators voted against the creation of a new general Government fund last night, declaring it unconstitutional.

However, despite their protests, the bill could be passed in two months anyway, as it is a taxation bill which the Senate cannot prevent from reaching the Governor, who will sign it into law.

The bill was passed by the House of Assembly earlier this month to hold money given by the US Government for the termination of the Baselands agreement as well as corporate donations which are not targeting other areas of Government.

The Senate had to delay the bill on Monday when independent Senator Walwyn Hughes said it was unconstitutional.

The bill, known as the Public Treasury (administration and payments) Amendment Act 2005, appears to conflict with section 94 of the Constitution which covers the Consolidated Fund.

Last night both Sen. Hughes and Senate President Alf Oughton voiced concerns about the bill.

Sen. Hughes observed that the Constitution declares money can only be put into a fund separate from the Consolidated Fund for two reasons: if it is money raised (by, for example, the Bermuda Monetary Authority) and is to be used for operational costs of that organisation, or if it is to be put into a fund established for ?any specific purpose?.

However, Sen. Oughton also pointed out, that the bill itself declares the fund is for donations ?that do not have any specific purpose? ? a fact that Finance Minister Paula Cox noted in the House of Assembly.

Sen. Hughes said the Ministry of Finance has claimed the fund does indeed have a specific purpose ? that is, that it is being created to hold any charitable donations which have been given to Government which do not belong anywhere else in the Consolidated Fund.

?I don?t see that as a specific purpose,? Sen. Hughes, a former Financial Secretary himself, said, adding he believed ?specific purpose? meant what the money was to be used for.

Sen. Oughton agreed: ?There is no specified purpose here as far as I?m concerned.?

Opposition Leader and Shadow Finance Minister Grant Gibbons has also raised fears over why the fund was needed.

He said: ?Why would a company want to give money to Government with no specific purpose? It has a connotation of a pay-off of some sort or looking for a favour down the road.

?The legislation leaves a lot of potential for abuse.?

He said it looked like a slush fund which could be spend with little accountability.

?I don?t understand why the money would not just go into the consolidated fund where there is a reasonable degree of accountability.?

Dr. Gibbons said the new general reserves fund had less accountability than the consolidated fund as the Finance Minister could simply withdraw from the fund and tell Parliament months or even years later.

The Act requires the Finance Minister to send a financial report of the fund to the Auditor General seven months after year end while the Minister is only required to table the report of both the Auditor General and the Accountant General before the Legislature ?as soon as practicable?.

The bill has caused Government problems all along.

In the main budget speech Finance Minister Paula Cox said the new General Reserves Fund would hold money given by the US for maintenance of Longbird Bridge as well as corporate donations such as the $1 million donated by HSBC for housing.

But when the bill was moved in the House of Assembly she said that cash would go straight to Bermuda Housing Corporation as the bank had specified a purpose.

Ms Cox then said the fund would only take donations which didn?t have a specific purpose.

Last night all Government senators voted for the bill, while all independents and Opposition senators voted against it. ?It doesn?t pass,? Sen. Oughton said ? ?but it doesn?t make much of a difference.?