MPs have given the green light to a boost in Government borrowing power, raising the public debt ceiling from $375 million to $550 million.

The news comes after the actual annual borrowing figure rose from $15 million in 2005 to $88 million for 2008/2009.

Minister of Finance Paula Cox said the proposed increase in the cap still fell within the statutory limit of a maximum ten percent of the Gross Domestic Product (GDP).

Citing a "strong increase in GDP" since the figure was last raised in 2005, from $250 million at that time, Ms Cox said the hike was justified to finance "hard capital assets as investment in our nation's physical and social structure."

She told the House the GDP has been estimated "conservatively" to be $6 billion in 2008/2009, compared to $5.35 billion in 2006, commending Government's approach as a "prudent and sensible" management of the public debt.

However the proposed bill was criticised by Shadow Finance Minister E.T. (Bob) Richards as a move that "will almost max out this national credit card".

He expressed concerns that Bermuda's economy could overheat, accusing Ms Cox of failing to plan for the possibility that a recession in the US could get exported to Bermuda. "What will happen then? We will be over the credit card limit," he claimed.

However, Ms Cox pointed out that Government did not borrow any money from 2000 through to 2004 despite budgeting for doing so.

She listed borrowing for 2005 as $15 million, for 2006 as $50 million, for 2007 as $85 million and for the next financial year as $88 million.

A revenue-boosting law, the Payroll Tax Rates Amendment Act, was also given the green light by MPs.

This raises the basic rate of tax for companies with payrolls over $1 million by 0.5 percent, taking it from 13.5 percent to 14 percent.

Ms Cox said the new act would also extend the lowest payroll tax applicable to new start-up businesses in economic empowerment zones from one year to two years.

Farmers, fishermen, hotels, guest houses, restaurants and small businesses are assessed at lower rates which will remain unchanged, and the employee portion of the tax is being held at its existing rate of 4.75 percent.

Ms Cox cited four years of "strong economic growth in Bermuda" and said "in these generally fair economic conditions, a moderate increase in the standard rate of payroll tax is prudent". She explained that the new rate would yield a predicted $335.3 million in 2008/09, 34 percent of Government revenue.

Mr. Richards expressed concern regarding the potential impact on the economy, stating that a trimming of Government costs would have been preferable.