Government?s Budget for the coming year was in line with expectations ? a jump in revenues last year meant that the wish of business leaders for no significant tax increases was granted.

At the same time, there was some concern from the business community over projected debt and worries that spending continues to escalate faster than revenue growth, leaving little to be set aside for costly capital projects in the pipeline.

?It was very much as expected,? chairman of the Association of Bermuda International Companies, David Ezekiel said, of the 2006 budget. ?One never knows, but people were pretty confident there would be no increases? in the major taxes put on businesses.

Mr. Ezekiel said while the outlook on the economy was generally good, it didn?t mean there were not issues.

?Containing costs would free up funds for many of the pressing issues on the Island, the most obvious one being housing and certainly education,? he said. Government set aside $25 million to go to building more housing under the 2006 budget.

?Department by department one needs to control costs,? Mr. Ezekiel said, saying this could be done by zero-based budgeting, something that Government has said it was using in past years, or any other method. ?Personally, how one gets there is not the concern. As long as there is vigilance and as long as there is an effort of containing costs, that really is what is important.?

And he added that Government costs were a ?continuing concern?.

?Given the size of our economy the cost of Government is high and one hopes that we don?t have a situation where expenses just rise to meet income.?

Since the Government came to power in 1998, revenues have increased 42.5 percent while expenditure has jumped 65 percent, the budget figures yesterday showed. Mr. Ezekiel said costs were also high under the previous Government.

Government continues to be the biggest employer on the Island. It employed 5,232 last year and projects that to increase to 5,357 staff during the coming year.

?One of the things we are concerned about is the level of debt,? Raymond Medeiros, a partner with accounting firm PricewaterhouseCoopers, said in an interview following the new budget being revealed.

Mr. Medeiros said while revenues had been strong, debt was something to be taken seriously as it would have to be repaid over time and there were no guarantees that the rosy economic picture would endure over the repayment period. He added that Government?s borrowing was ?prudent? in that it was earmarked for capital projects and not current expenditure, but maintained that any significant increase in debt caused concern.

Finance Minister Paula Cox said yesterday that Government?s projected debt level for 2006 of $236 million remained well below the statutory debt ceiling of $375 million. And she said Government does not plan to raise the ceiling in 2006, a move well-received by the business community.

Government debt is forecast to increase $85 million this year, although Government last year borrowed less than it projected: $44 million, or just over half what had been estimated.

On a gross basis, the outstanding estimate of debt at the end of the fiscal year could reach $285.3 million, or equal to debt of $3,800 per capita.

?That may be significantly better than other countries in the Western world but we have a more fragile economy,? Mr. Medeiros warned.

The debt level per capita about ten years ago was in the region of $2,000 a person, Government?s figures showed.

Geoffrey Hunter, also a PwC partner, said Government was operating under good circumstances, and should take this time to start planning for future expenses.

?Benevolent circumstances exist within the economy, and the Government is the beneficiary of an expanding tax base.?

Government?s six percent jump in revenues in 2005 was a ?windfall? Mr. Hunter said, to be handled with care. ?That has allowed them to spend more; I would say that with great wealth and good fortune comes responsibility.?

Under the budget estimates for 2006, Government projects it will take in $835.6 million and spend out $790 million. After paying $11.7 million in interest on debt, and a further $3.8 million into the sinking fund, a kind of pre-payment on debt, there is $29.5 million left for capital projects. Government estimates it may borrow up to $126 million more for capital costs leaving a projected budget deficit of $96.6 million.

Charles Gosling, past president of the Chamber of Commerce, said Government may be in a position this year to put aside some money if the current account ends in a surplus. There have been broad calls from the business community for Government to start setting aside funds now for future capital projects.

Mr. Gosling said he had some concerns over whether Government?s actual spending at the end of the year would be higher than it currently estimates now. ?There are gaps here that may be appearing on later on in the year. It is important that [all expenses be part of a budget statement.?

At a post-Budget press conference yesterday, Works Minister Sen. David Burch indicated that the cost of environmental clean-up at one of the former US naval sites, now called Morgan?s Point could be an additional cost that Government may have to shoulder outside current Budget estimates. He said if that turned out to be the case, and if Government could afford it, he would make a supplementary request for additional funds.

Government?s handling of capital projects was also something business leaders felt could be better managed, both on current projects like the new Berkeley school, and for the future, with the need to put aside money for future projects, including the building of a new hospital at a cost of $700 million or more.

Accounting firm Deloitte & Touche, in a 2006 budget bulletin issued yesterday, said the pricetag for the new Berkeley School continued to rise. ?The senior secondary school (Berkeley) was never mentioned by the Minister [in the budget and, therefore, would appear to require minimal further funding in 2006/2007, despite newspaper reports of the need of significant remedial work,? Deloitte?s bulletin said. The Mid-Ocean News yesterday reported that an independent audit of the Berkeley site had found numerous safety violations that could put students in harms way if not remedied before the site opens for classes.

In a graph, Deloitte showed how the project ? now at a cost of $125 million ? was double the lowest bid for the project of $62.9 million, and 84 percent higher than the accepted bid of $68.1 million.

?There is no indication that this will be the final cost and no discussion of the arbitration due to commence shortly.?

Government faces a dispute with Pro-Active, a construction firm that was dismissed from the project. Government set aside an additional $3 million for the project in this year?s Budget.