debate in the House of Assembly on Wednesday night.

The Foreign Currency Purchase Tax Amendment Act, which was passed, scraps the ten percent tax on overseas investments.

But the 0.25 percent tax and the $25,000 personal annual limit remain. The Minister, the Hon. David Saul , said: "We have seen a definite probability that once you could remove the psychological impediment of the ten percent and allow for a free flow of capital in and out of Bermuda, we could get ourselves a third leg of the economy.

"We see Bermudians being very, very attracted by the idea of taking some part of their savings and investing them abroad for their old age, while at the same time getting cashflow in foreign currency back to Bermuda.'' Everyone in the Island would be able to benefit, not just a select group.

Bermudians would be encouraged to invest in international companies based here.

"I do see a day in this decade when investments repatriated to Bermuda will equal the earnings of foreign currency from both tourism and international companies,'' he said.

Shadow Finance Minister Mr. Eugene Cox said more detail was needed on the move.

Dr. Saul had not given much of an explanation, he said.

Government was expecting to earn $5 million this financial year from foreign currency purchase tax, he pointed out.

The whole subject needed to be revisited. For example, it was grossly unfair that the 0.25 percent tax had to paid on overseas school fees.

The Act was being sprung on the Country, he added.

Dr. David Dyer (UBP) welcomed the move, which he said could have been made some time ago. Instead, money used for foreign travel could have been taxed.

The Act would encourage more saving and help the economy. People had made investment profits even with the 10 percent tax, he said.

Opposition leader Mr. Frederick Wade said more community discussion was needed on the pros and cons of removing restrictions.

"By July we expect all the restrictions and restraints to be gone,'' he said.

Government was selling the lifting of restrictions like it was the "best thing since brown sugar''.

Only one viewpoint had been heard -- that of people accustomed to making investments.

He wanted to know how much Bermudians had invested overseas, and what the net position was after the inflow and outflow of funds.

He had met a "former officer'' of the UBP, an "elder statesman'' of the party, who had admitted only a small minority would benefit from lifting restrictions.

This did not matter, the UBP figure had said, because the minority was made up of entrepreneurs who had built the country.

Mr. Wade told MPs: "I don't believe money alone built this Country.'' Tourism was useless without workers like the smiling waitress, he said. Mr.

Walter Lister (PLP) also sounded a note of caution.

It was all well and good that people could invest overseas, but the Minister had to point out that stock markets were risky.

There was only so much capital to go around and much of it was in property, where people knew where it was.

The Hon. John Stubbs (UBP) said Bermuda's well-being would increase the more the economy was opened up.

"Fat cats'' already knew how to avoid financial restraints. Two Opposition members and a UBP member had told him how they got around restrictions.

Dr. Saul admitted there were positive and negative points to be made about the Act. Government had wrestled with both sides.

"There is a risk. But its a calculated risk. It's in Bermuda's best interest that this happens.'' New opportunities would open up for young Bermudians with finance qualifications.

Of the $5 million earned by currency purchase taxes, more than half came from the ten percent levy.

"I'm prepared to basically give up that $2.5 million in revenue because I genuinely feel that's an investment in the future.

"The rewards could be so much greater for the Island at all levels.'' He denied all restraints would be gone by July. The $25,000 limit would stay as long as Government was "mildly apprehensive''.

He anticipated a small outflow of funds after the Act took effect, but big rewards later.

He agreed "little people'' should not be in stocks and bonds but in certificates of deposit, treasuries and mutual funds.

He estimated $1 billion had gone out of the Country in investments since the Second World War.

"From a balance of payments point of view, we need a third leg.'' Government would review the tax on students travelling abroad for education.

Legislation to scrap the seven percent ceiling on interest rates was also passed by Government.

Dr. Saul said The Interest And Credit Charges (Regulation) Amendment Act 1994 would be in the best interests of all Bermudians.

He told MPs lenders tended to push rates to the ceiling, which had acted as a "psychological barrier''.

Young couples tended to pay the maximum rate on their mortgage.

Dr. Saul said the statutory rate would remain at seven percent, however.

This would provide a guidance to courts should they have to make a ruling.

Dr. Saul said Government wanted to keep downward pressure on interest rates.

"I can wager that interest rates internationally will not get into double figures in this decade.'' If rates did creep up, financial institutions had pledged to spread mortgage payments out further.

Shadow Finance Minister Mr. Eugene Cox feared for people deemed a "poor risk'' by lenders.

They could be hit by high rates.

Would Dr. Saul put a cap on mortgage rates, asked Mr. Cox.

Opposition leader Mr. Frederick Wade said he did not have much faith in local financial institutions "doing the right thing'' and helping borrowers.

Why should interest rates not be fixed? Mr. Wade also pointed out even Dr. Saul admitted house prices were unlikely to come down.

They would probably go up, and it meant borrowers would pay a great deal more for their mortgage.

Mr. Wade criticised Government for not producing a coherent paper on its intentions to revamp the financial system.

Former Cabinet Minister Mrs. Ann Cartwright DeCouto , now a UBP backbencher, asked how Government would combat usurers.

What would be done to protect the little old lady preyed upon by an unscrupulous lender? Dr. Saul , replying to questions, said there would not be a mortgage cap.

And he said Government planned to bring in a Truth In Lending Bill to protect naive borrowers.

Dr. Saul pointed out Government had the power to reintroduce the interest rates' ceiling, if necessary.

He also said there were plans to relax policies on overseas borrowing.

Government got the Bill passed 21-18 in a straight split on party lines.

The Hon. David Saul Mr. Walter Lister.