Government's system of taxation and spending reflects "its strong grasp of macroeconomic fundamentals'' and needs to be placed in its proper perspective before a full understanding can be reached, a Minister said yesterday.

And calls for cuts or "fat trimming'' in the budget may sound good but ultimately they are unhelpful because they are unspecific.

Finance Minister Grant Gibbons was reacting to a story in Saturday's edition of The Royal Gazette .

In that article, the Bermuda Branch of the Institute of Directors -- a group of bankers, insurance agents, retailers, lawyers and accountants -- asserted that Government spending must be cut and taxes reviewed or future generations will be saddled with huge debts. But Dr. Gibbons, who is in the final stages of preparations for the 1997/98 budget which will be released next month, said the report's tone was alarmist.

"Bermuda's borrowing is very much in control at the present time,'' he said.

"There were a number of large products which clearly required some capital spending.

"But I think most Bermudians would not suggest that we should not have built the incinerator. The alternatives were pretty awful.'' Similarly, he said the old Casemates Prison needed to be replaced and the Educational system required restructuring to phase in the Middle Schools, improve the Berkeley Institute and construct the Cedarbridge Academy.

"I think most people accept that you have to put spending into your children and young people,'' he added. "Otherwise you give up the future.'' However, Dr. Gibbons was far from dismissive of the report or its findings because he agreed it contained constructive criticism and areas for further study.

"I think the Institute of Directors is saying that there will be a problem if Government borrowing and spending continues at the present level.

"And that is fair to say. But I don't think there is any intention of keeping it at the present level.

"Capital projects tend to go through cycles to some degree. We have had quite a few in the last couple of years but I think Government recognises that capital spending has to be kept under control and will be kept under control.'' Currently Dr. Gibbons said that Government keeps all borrowing to below ten percent of its annual gross domestic product.

That figure is conservative he said, when compared to the United Kingdom at 60 percent of GDP, Canada at 98 percent of GDP and Japan which has a limit on its borrowing of 90 percent of GDP.

Moreover, Dr. Gibbons said Government already contracted much of its work to private agencies.

He said the airport, and recycling were just two examples.

Furthermore Dr. Gibbons said it was untrue to say that Goverment's borrowing had increased from nothing to $172 million in ten years. The correct figure he said was $135 million -- roughly seven percent of GDP.