Government will see its income cut and its costs rise as the recession in the United States hits Bermuda's shores, according to Dr. Andrew Brimmer.

The Government's principal economic policy advisor said that Government would lose $24 million in revenue but would have to face increased outlays with a rise in the need for social assistance as a result of more jobs being lost.

But the Government has promised some cost cutting measures, which include slashing the Government travel budget, which will make up for some of the shortfall in income.

And he added that large capital projects, such as the Berkley Institute would not be stopped and said that several unnamed capital projects might be started to take advantage of more labour during a recession.

Dr. Brimmer said: “In the Government sector, the revenue budget for 200002 has been revised downward by some $24.0 million or by four percent due to the accelerated weakness of the tourism sector in the wake of the September 11 attacks.”

Dr Brimmer said that the projected revenue shortfall will be partially offset by a series of cost-saving measures.

He said these included: “A moratorium on non-essential overtime and non-critical furniture and equipment acquisitions. Government travel has also been cut back and funding freeze has been placed on long-standing vacant posts.”

He added: “On the other hand, even in the face of fiscal stress, a few types of Government outlays will have to increase.”

And he said that included in these were social assistance for unemployed workers who “turn to the Government for temporary help”.

He added: “Funding support for a number of high priority projects that are already underway, such as schools, will need to continue on schedule. Moreover, several critical capital projects, which have been planned but not implemented, might be activated during a recession period to take advantage of the greater availability of skilled labour and other resources.”

Dr Brimmer said that greater cost-cutting measures could be implemented if the effects of the US recession continue or get worse.

He said that the negative effects from the US had already spilled on to the Island and were more likely to get worse rather than better in the months ahead.

He added: “The Bermuda Government is fully aware of these prospects and it has already adjusted its expenditure plans accordingly. In the Ministry of Finance, the unfolding situation ins monitored daily. I also understand that the Government is prepared to adopt counter cyclical measures to ameliorate the effects on Bermuda's economy if the recession becomes more severe than is currently anticipated.”