Government is boosting spending on housing the homeless, pensions benefits and assistance to small businesses and entrepreneurs, Finance Minister Paula Cox announced in the House of Assembly yesterday.

Ground will be broken on the new St. George's rest home, pregnant teens will have money to continue their education, and the Police service will get more officers to fight white collar and other crimes.

And St. George's residents will soon see the last of their tax bill from the Corporation.

But residents will pay more for their cigarettes, vehicle licenses and bus and ferry fees in the coming fiscal year.

And certain categories of payroll taxes and land taxes are heading north.

Ms Cox's first Budget Statement ends a two year run of zero tax increases. It calls for total spending of $775 million, of which $115 million will be spent on capital projects. A record $85 million will be borrowed.

"The thrust is now on the social agenda and on taking active concrete steps to make Bermuda the premier jurisdiction not just for incoming businesses and from the financial services aspect and regulatory focus, but also to make it a place that will be seen as unparalleled in attending to the needs of its people," Ms Cox said.

"We are not rewarding the affluent by penalising the less affluent - we are seeking to continue to allow there to be 'haves' while providing that the 'have-nots' have more,"

She told her House colleagues that key social agenda areas of focus for the new budget are "strengthening social cohesion", developing and training young people, seniors and "stabilising, rejuvenating and encouraging business activity in all economic sectors."

The big news is a nine percent increase in pensions benefits for seniors, bringing the maximum pension up to $1,000 a month, effective in August.

Government is funding the increase with a $2 million injection coming from the remains of the $11 million from the United States naval base hand-over settlement but Ms Cox did not say how the increase will be funded in the future.

She explained that some $3 million of the $11 million has already been spent on repairs to Longbird Bridge, and another $1.2 million will be spent on a housing for the homeless initiative, $300,000 on the National Drug Commission's Communities That Care project, $1 million on the Bermuda Small Business Development Corporation's venture capital programme for small businesses and a $500,000 grant will be given to the Trustees of the National Sports Centre to help complete that project.

Money for the Health and Family Services Ministry is being increased by $6.5 million to nearly $139 million.

Much of the increase ($4.1 million) will go to subsidising hospital care for the indigent, the elderly and the youth.

The rest is being allocated for therapy services at the new special school and a women's treatment facility for the National Drug Commission.

Sixty percent of the Health Ministrys' budget will be transferred to the hospitals.

The Education Ministry gets an extra $11.6 million, to boost its total funding to $114 million. Some of the extra money will go towards studying the feasibility of establishing a Performing Arts School and a Financial Services Academy, and the Bermuda Sloop Foundation gets a $50,000 grant.

Government is also providing $220,000 in new money for its character education programme, and Teen Services will get $204,000 for pregnant teens who want to continue their education while pregnant.

Money for 11 more Police officers for the Police Support Unit, totalling $700,000 and another $600,000 for five more officers for the Financial Investigations Unit has been allocated.

The Tourism Department gets no extra money for the coming year

And the Finance Minister said that a number of non Bermudians who had tried to enter the country illegally had been deported last year, and Government was boosting by 50 percent money for deportations.

Government is moving on complaints that St. George's residents pay taxes to the Corporation as well as Government land tax, with a $350,000 grant to the Corporation.

New money is also being provided to the Environment Ministry ($821,000) and the Ministry of Community Affairs and Sport ($921,000) which will take over special cultural events like the Gombey Revue, the African Diaspora Heritage Trail and Harbour Nights from the Department of Tourism.

Ms Cox said that last year's revenues will come in at $666 million - about $16 million higher than originally estimated, but spending will be over $18 million more than estimated.

Ten million of the additional spending was related to last year's hurricane Fabian, and another $3.5 million was transferred to the Bermuda Monetary Authority (BMA) to reflect a transfer of responsibilities from the Ministry of Finance to the regulator.

In future license fees from banks and deposit companies will be paid directly to the BMA, and not to the Consolidated Fund.

"It is safe to say that were it not for Hurricane Fabian, Government current account expenditure would have been within budget in 2003/04," the Minister said.

Fabian was also responsible for shortfalls in airport departure tax, hotel occupancy tax and public transportation income, all of which are down by $1 million each.

And stamp duties from voluntary conveyances and land acquisition were down by $4.5 million.

Government wants to collect $694 million next year, and borrow $81 million, to meet a current expenditure bill of $660 million and a capital spending bill of $115 million.

An additional $4 million will be borrowed on behalf of the Bermuda Housing Corporation.

Capital projects include educational plant and equipment, rest home development, ferry docks and public landings refurbishment, the start of the new Hamilton Police station and Magistrate Court complex and new buses and ferries.

Like her predecessor, Ms Cox justified the total amount to be borrowed as sound economic sense given that interest rates were low and that there was "ample liquidity" in the capital markets.

But she pointed out that a decision had been taken to keep the debt limit at $250 million, even though it can go up to ten percent of GDP ($390 million).

The country currently owes $216 million.

An estimated $666 million can be collected without any tax increases - leaving a shortfall of $28 million.

"I had hoped to avoid raising taxes in 2004/05. However that is not a realistic option, given the circumstances that we face as Government," Ms Cox said.

"Neither was it feasible to reduce service levels with the resultant loss of jobs in order to contain expenditure. As indicated earlier, the Bermudian public is demanding greater services - not fewer services."

Duty on cigarettes will be increased by $5 a carton to bring in an extra $1.6 million. Come April vehicle license fees will go up by five percent for an extra $1.3 million. And bus and ferry fees will rise for the first time since 2000 - with a five percent hike, also effective April 1 - to raise an additional $660,000.

The biggest additional revenue increases will come from an increase in the payroll tax standard rate from 12.75 percent to 13.5 percent, applicable to all firms with payrolls higher than $200,000 per year, and the payroll tax salary cap will be raised from $225,000 to $235,000.

Government expects an extra $12 million from the payroll tax changes. And Ms Cox said that land taxes are subject to changes in the near future.

"Any changes will be small and there may in some cases be small reductions," she said.

But excluded from any payroll tax rate increases are businesses affected by hurricane Fabian, including those in agriculture, hospitality, charities and small businesses.