Government revenue for the financial year 2001-2002 is estimated to be $25 million short, the Finance minister announced yesterday.

Eugene Cox said there was a shortfall of $25 million of revenue, or four percent, against the revenue forecast for this year of $627 million in preparing this year's budget and he predicted Bermuda is likely to see no growth for the next to six to nine months.

And Mr. Cox also hinted businesses would see some relief during the slowdown, in the form of a payroll tax reduction, but that would need legislative approval.

Parliament reconvenes on November 2.

Speaking at a press conference yesterday, Mr. Cox attributed a decrease in revenue, or Government income, to the economic downturn following the terrorist attacks of September 11. Mr. Cox said:"It bears repeating that the economic outlook now is more pessimistic than it was prior to September 11."

Mr. Cox remained optimistic that this drop of $25 million or "some" four percent in revenue would not lead to further Government borrowing. Mr. Scott said there were various measures expected to offset the shortfall adding: "There is no risk of increased borrowing."

But shadow finance minister Dr. Grant Gibbons told The Royal Gazette Government should have acted before events of September 11, as the economic outlook was already grim.

"It would be prudent, for the finance minister, to plan for the worst," Dr. Gibbons said.

Mr. Cox said the Government had started the year with "a good cash flow," adding that prior to September 11 there was moderate but steady growth.

Mr. Cox put the rate of growth between two and three percent before the attacks, even with taking into account the expected further decline in tourism.

Mr. Cox has now trimmed that estimate to nought, saying: "The Ministry of Finance has reassessed the economic outlook for the next two to three quarters (with) minimal to no growth with the possibility of a moderate decline in economic activity."

Mr. Cox reasoned that the US is now in recession - and that similar effects were now evident in Bermuda.

Mr. Cox said rhetorically: "Do we know for certain how long the economic difficulties will last? No, we do not know."

But, he added that with the Island's close links to the US and Canada, Bermuda may be looking at a two quarter recession - based on predictions of the US government.

On aid to Bermuda businesses - especially those impacted by a further drop in visitor arrivals - Mr. Cox said the Government is "taking a measured, analytical approach that is based on broad consultation...these circumstances are seriously challenging and any precipitous actions would be ill advised".

Mr. Cox did say that in an effort to help businesses stay afloat, Government is actively looking at "temporary relief to those segments of the business community, especially to small enterprises, that have been bruised badly by the hard impact of the September 11 event".

Although not committing to a timetable for implementation of the tax relief effort, Mr. Cox said he hopes it will be tabled on November 2, and implemented as soon as possible.

Preliminary discussions on the matter with the Attorney General's chambers were said to have already taken place.

When asked if this relief was aimed at the retail sector, Finance Ministry Permanent Secretary Donald Scott said it would be primarily targeted at small business, which would incorporate some retailers.

The payroll tax reduction is not aimed at hotel and guest properties, which Mr. Cox said have already received significant aid through the Hotel Concessions Act.