now what Bermuda's next Budget will tell us. We can only trust that they are preparing for austerity in Government. That would appear to be the best solution because there are good grounds in some areas for increased expenditure and little room in today's Bermuda for increased taxation.

Along with little room to increase taxes, we will have a shortfall in income because of sagging tourism and the loss of revenue from the bases. Government is thus jammed between some increased cash demands which will have to be met and sagging income. The acceptable solution is economy and greater productivity in Government and cuts in Government spending.

There is no doubt that increased spending will be necessary in a number of areas, especially tourism, in order to stimulate the economy. For instance, Bermuda needs a new and more extensive visitor advertising campaign in order to compete with other destinations. We must have an enhanced and better equipped Police Service to improve our safety. The proposed changes will not be cheap but they are necessary.

The Budget will also have to contain ways to help the sagging retail sector or we are in danger of not having a retail sector as we know it today. It is difficult to imagine Bermuda without fine shopping but that is a real possibility. Bermuda's retailers are now in direct competition with the discount houses and malls of America who do not pay, in advance, Bermuda's import duties.

There are predictions that this winter will be the worst for merchandisers in memory. Because of an election and the referendum Bermudians have not been allowed an opprtunity to recover from the recession which is still very much with us. That does not bode well for after Christmas shopping. We are often concerned about continued employment in the tourist industry but merchandisers are also large employers. We think we detect in Government some contempt for large retailers.

Import duties need to be decreased to make local shopping more attractive. We cannot increase taxes on liquor, the traditional cash cow, because visitors already find drinks prices higher than US cities. We can and should, of course, push cigarette taxes to a level which deters consumption.

The last Budget was not very sensitive to the reaction of visitors and we cannot inflict more of our taxes on them. Indeed, we should be looking at ways to give visitors a break.

It seems to us that the only sensible solution is Government economy. Start by freezing senior Government salaries which is sensible because they are well above the local private sector. Start cuts in GP cars. Cut the Ministry of Education by about half. Take a hard look at Information Services and Consumer Affairs. Abolish the Bermuda Housing Corporation. Tell every area except the Police but including Tourism to cut employment costs by ten percent.

That would be a start. Will it happen? It will if this Government is serious about reform. It will not if we have "business as usual''.