Base closure was driven home.

Taxes on payroll, land, alcohol, and tobacco all went up in the Valentine's Day Budget as Finance Minister the Hon. David Saul sought to cover increased costs.

Motorists faced higher fees, as did banks, deposit companies, and companies generally. Most Government fees were hiked.

Workers absorbed a one percent rise in the hospital levy, to six percent of payroll, effective on April 1.

The anticipated easing of foreign exchange and interest rate controls was also announced by Dr. Saul. And there was a major shake-up and streamlining in duties paid on items purchased abroad.

Many of the changes took effect immediately.

At a news conference, Dr. Saul said the Budget he read in the House of Assembly was "reasonable.'' Although it was delivered on February 14, nobody said it would be "a sweetheart,'' he said.

Shadow Finance Minister Mr. Eugene Cox, who will deliver the Opposition Budget Reply next Monday, said many of the tax hikes would "impact adversely on the little man''.

Bank of Bermuda president and chief executive officer Mr. Donald Lines called the Budget "a valiant effort,'' but expressed disappointment at the size of increased spending.

Current account expenses in 1994-95 are estimated to jump nearly seven percent from last year, to $358.1 million. Revenues are to jump 6.8 percent, to $385.2 million.

To justify the tax increases, Dr. Saul cited the extra costs and lost revenues the Island would face due to the closure of the US Naval Air Station.

The US Bases -- all of which are slated to be closed by September of 1995 -- contributed $35 million directly to the economy in 1992, he noted. On top of that, it would cost Government more than $10 million a year to take over the operation of the Airport, Dr. Saul said.

For the coming year, the Minister set aside $2 million just to study the effects of the military pull-outs.

At the same time, the recession which sucked $300 million from the economy over four years had slashed Government revenues by $60 million, he said.

Further, it would cost an extra $4.3 million to run the new Tynes Bay Incinerator and $600,000 more to operate the new prison.

He announced a $1.8-million road resurfacing programme, $1 million more than was spent last year.

During the recession, Government spending did not keep pace with inflation, he said. "Some things started to crack. Literally, the roads did.'' Hospitals funding would be boosted by $3 million, social assistance by $2.6 million to $8.8 million, Tourism spending by nearly $1 million, and promotion of international business by $500,000. Teachers' concerns about lost honoraria would be addressed, and the new National Drugs Commission would receive more than $1 million.

Dr. Saul put an extra $500,000 into the Government employees pension fund, trying to reduce its unfunded liability.

And he announced plans for a Joint Select Committee to recommend "any increases considered appropriate'' in MPs salaries, frozen since 1988.

Capital spending would bring total Government outlays above $400 million this year, and increase borrowing by $16.4 million, to $80 million.

Dr. Saul set aside $8 million to prepare the site at Prospect for a new senior secondary school, $5 million to start the $15-million final phase of Bermuda College at Stonington, and $6.4 million to complete the incinerator.

Over the next five to six years, school development related to Government's Education reforms would cost $114 million.

By itself, the capital programme in the schools would not cause borrowing to exceed Government's legal limit of $185 million, or even its guideline of ten percent of gross domestic product.

However, when the unknown of the US Base closure was factored in, "that could take us close'' to the borrowing limit, Dr. Saul said in an interview.

"Government's long-term capital plan will have to go under a detailed review.'' On the revenue side, Dr. Saul took an optimistic view of the recovery, banking on a ten percent rise in visitor spending and a ten percent hike in collected Customs duties, mainly as a result of an improved construction sector and increased imports.

He predicted inflation would stabilise near 2.5 percent, and forecasted a rise in GDP of close to three percent.

"There is now a growing feeling of confidence and optimism in the community, following the election and the recession, which is supported by encouraging economic statistics,'' he said. "We must continue to work hard at maintaining this momentum in order to reap the benefits of the challenges that lie ahead.'' But Dr. Saul turned to tax hikes for much of his increased revenues.

A major hit is a one percent hike in the hospital levy, to six percent, with the entire increase borne by employees.

At a news conference, Dr. Saul said the hospital levy was "a misnomer,'' because the $61.5 million it would raise this year went to the consolidated fund, not the hospitals.

Over the next year, Government would work to combine the hospital levy and employment tax into "a single, easily understandable payroll tax,'' to be announced in the next Budget.

Some would call that move "the first little wedge in the door of income tax,'' but that was "baloney,'' he said.

Residential land taxes would rise five percent across the board, while commercial land taxes would remain the same.

Dr. Saul said the average annual impact would be a $4.53 increase for the least costly group of properties and $133.09 for the most expensive homes.

The Ministry of Transport would bring in a five percent hike in the cost of vehicle licence and other fees, and work permit and most other Government fees would go up by a similar amount.

As it did in 1990, Government would offer a $20-million bond issue at "an attractive rate,'' as part of this year's borrowing strategy.

A five percent duty break on materials imported to refurbish hotels was extended another six months.

Plans for a national pension scheme would proceed, while unemployment insurance was considered, but dismissed as "too burdensome on businesses, as well as employees,'' at this time.

Following are some of the highlights from yesterday's Budget Statement: Government revenue 1994-95, $385.2 million (up 6.8%) Government spending 1994-95, $358.1 million (up 7%) Hospital Levy, up one percent to six percent Number of rates for Customs duty cut from 16 to nine Duty on Wine, $2.50 per litre (up 11%) Duty on Beer, 86 cents per litre (up 10.3%) Duty on spirits, $23 per litre (up 9.5%) Duty on cigarettes, $62 per kg. (up 12.7%) Government fees, raised by five percent Seven percent interest rate ceiling to be abolished Foreign currency borrowing restrictions lifted Ten percent Overseas Investment Tax abolished Duty free allowance changed from $250 twice a year to $200 per trip Land tax, up five percent.