Mr. Speaker, the overall budget for the Ministry of Health and Family Services will rise to $124.2 million in 2001/2002 from $111.7 million in the current year. This is a gain of 11.2 percent, well above the 7.2 percent rise in Government total current account expenditure. This Ministry ranks as Government's largest provider of public goods and services to the community.

Hospitals are allocated an additional $7.2 million, of which nearly $6 million represents an increase to inpatient and outpatient subsidies at King Edward VII Memorial Hospital. The balance is largely absorbed by increased operating costs at St. Brendan's Hospital. The Department of Health is allocated an additional $818,000 to fund the cost of additional posts, job regrades, increased operational costs at the Orange Valley School and the Opportunity Workshop. The new posts include one Public Health Nurse, two Community Health Nurses, a Team Co-ordinator and a Co-ordinator of Speech and Language Services. There is also provision for a consultant to Environmental Health.

The Bermuda Housing Corporation receives a non-recurring increase of $1.2 million in its grant to stabilise its cash flow position until the Corporation begins to receive rental income from its new additions to the housing rental stock. Once the rental revenue streams from these units begin, it is anticipated that the Corporation's grant will revert to its former level of approximately $2.5 million. Government's support of the Bermuda Housing Corporation underlines our commitment to provide adequate housing for low income families in Bermuda.

The Department of Financial Assistance is allocated new funding of $695,000 in 2001/2002. The welfare and well-being of our senior citizens is of paramount importance and accordingly $400,000 of the new funding is directed to higher levels of financial support for the Parish Rest Homes. An additional $250,000 was added to the social assistance budget.

The Ministry of Education is allocated a total of $91.7 million in 2001/2002, a seven percent increase over the previous year. Of this amount, $1.3 million is new funding in the Department of Education for additional staff in the public school system at the preschool, primary, middle and senior secondary levels. New funding in the amount of $694,000 is allocated for the restructuring of the primary school curriculum. The new staff at the primary school level will support the reduction in class size at P3 levels, which will improve the student-teacher ratios in P1, P2 and P3 to 15:1. The smaller class sizes will allow primary school teachers to provide enhanced individualised instruction and to cater to different learning styles. A sound primary school education provides the foundation for later learning and this Government is committed to ensuring that the standards achieved will be of life-long benefit to our young people.

Mr. Speaker, respect for the law and the safety and security of our community is another high priority for this Government. Accordingly, the Ministry of Labour, Home Affairs and Public Safety is allocated $74.3 million in 2001/2002, an amount that is eight percent above the 2000/2001 level. New funding in the amount of $2.2 million is needed to launch the Alternatives to Incarceration (ATI) initiative, a new programme approved by Government last year. The ATI programme will reduce the number of people sentenced to terms of imprisonment by providing the Judiciary with viable and effective alternatives that include accredited drug rehabilitation programmes, counselling services and other support programmes. This initiative is not intended to provide a soft option to prison, rather it focuses on rehabilitation and restorative justice while retaining prison as an option of last resort with tough and mandated remedial programmes for inmates.

Police services in the eastern parishes will be enhanced with the relocation of the newly equipped Police Station at Southside. In addition to the $1 million investment in plant and equipment, $451,000 of new money is allocated for operations including a Police barracks for the residential accommodation of Police officers.

New funding is allocated for an increase in the number of Reserve Police Officers, training of Reserves and payment for their services. The new funding for this purpose is $395,000.

Government's commitment to training is also reflected in new money for the Police budget in 2001/2002 with $105,000 allocated for succession planning and executive development, and $124,000 for local and overseas training.

Mr. Speaker, Government is allocating new funding to the Prisons Service in 2001/2002. Altogether, $1.4 million of new money is provided. Fifty percent of this amount is for additional staff including 12 Prison Officers and four Case Workers. The sum of $384,000 or 28 percent of the new funding is directed toward rehabilitation programmes within the Prisons and in the community to provide follow-up for inmates after release.

While on the subject of law enforcement, I should like to note that the Judiciary is allocated new funding in the amount of $830,000 in 2001/2002. Two Assistant Justices will be added to the Supreme Court at a cost of $234,000 and Phase II of the Court Reporting modernisation will be implemented.

The Ministry of Finance is allocated $80.1 million in 2001/2002, an increase of 5.4 percent. The Ministry will continue the implementation of the zero-based budgeting initiative that was announced by this Government one year ago. To lay the groundwork for this initiative, the Ministry has this year assisted in placing Financial Controllers in strategic areas of Government.

Two departments were chosen to pilot the process and prepare their 2001/2002 estimates on the basis of zero-based budgeting principles. The full effect of zero-based budgeting will materialise over the next few budget cycles.

Mr. Speaker, in the Ministry of Transport, the budget of $46.7 million is essentially unchanged from the previous year. Moreover, I wish to note savings in the amount of $393,000 due to reduction in contractor costs for meteorology and crash fire rescue. These savings in Airport Operations helped to limit the overall increase in the Ministry's current account allocation for 2001/2002 to less than one percent.

The Ministry of Tourism is allocated $37.6 million in 2001/2002, an increase of only two percent. This allocation includes $4 million of new funding for a range of programmes and new promotional services. Some of the significant items included in the new funding are: incentive awards for travel agents ($612,500); media support programmes for the new air service strategy ($1.1 million); a niche marketing programme ($500,000); on Island project initiatives in association with the Bermuda Experience Network ($150,000); and continued support for overseas appearances by the Bermuda Regiment and local entertainers ($304,000). The Department of Tourism is also sponsoring the Society of American Travel Writers Annual Convention at a cost of $500,000.

Existing Tourism expenditures were trimmed by $3.3 million to accommodate the new programme funding requirements -- a result of the zero-based budgeting principles that have helped to shape this year's overall budget.

Mr. Speaker, the new programme funding in the Tourism budget for 2001/2002 reinforces the Government's commitment to help our vital tourism industry reposition itself as a dynamic sector in the global tourism market. With the implementation of the Hotel Concession Act 2000, our efforts are bearing fruit and we will continue to work to maintain the "buzz'' that Bermuda is back in business as a premier tourism destination.

The Ministry of Environment, Development and Opportunity is allocated $26.9 million in 2001/2002. Within the Ministry, the Department of Cultural Affairs is allocated $648,000 in new funding. Just over 50 percent of this amount, or $336,000, is directed to Bermuda's participation in the Smithsonian Folklife Festival during July, 2001, in Washington DC. Many aspects of Bermuda's living culture and traditions will be showcased to more than one million people from around the world at this prestigious event. The full cost of our participation is estimated at $750,000. In addition, Government's grant to the Bermuda Arts Council is to be increased by $40,000. Government will also provide a grant to the Millennium Fund in the amount of $132,000 in respect of Customs Duty on the imported elements of the Millennium Fountain. Government prefers to show duty relief in this manner as it provides concrete evidence of the Government's support of worthy and positive programmes in the community.

Mr. Speaker, in December, 2000, the United Nations Educational, Scientific and Cultural Organization's World Heritage Committee confirmed that the Town of St. George and its related fortifications would be inscribed on the World Heritage List. In recognition of this historic achievement and to assist the Town in the vital planning and high level management entailed by the designation, Government has provided funding for a World Heritage Site Management Officer in the Department of Planning in 2001/2002.

The Ministry of Youth, Sport and Recreation is allocated $6.6 million in 2001/2002, an 11.9 percent increase from the previous year. The new funding amounts to $404,600. Virtually all of the new funding will go toward providing substantive support for special needs children in the Afterschool Programme.

Approximately 27 paraprofessionals will be hired in the programme to provide a support staff ratio of 1:1 for special needs children.

Mr. Speaker, the new industry of e-commerce is important to Bermuda's future economic success. Accordingly, $200,000 in new money is allocated to the Department of E-Commerce for marketing and business development in 2001/2002.

Amongst non-Ministry Departments, the Cabinet Office is allocated $348,000 in new funding for the Central Policy Unit. The Central Policy Unit will ensure that cross-Ministry policies and programmes are effectively coordinated for maximum results. A cadre of policy analysts drawn from Government-wide staff resources will assist the Central Policy Unit in its work.

The Personnel Services Department is allocated $527,000 in new funding.

Approximately 75 percent of this funding is directed to training initiatives, including $300,000 for 12 additional supernumerary posts. Government hosted a well-attended Student Reception in August, 2000. A number of bright, young Bermudians were identified as having executive potential. These new posts will allow such students to be placed in structured training and development programmes with clear fast tracks to senior management positions in the public service.

The Statistics Department is allocated $970,000 of new money in 2001/2002, the largest slice of which is to underscore Project Literacy ($700,000). The National Literacy Project is a part of the OECD initiative to determine literacy standards worldwide.

In addition, the Statistics Department proposes to conduct an Economic Activity Survey in 2001/2002 and additional staff resources are needed for this purpose. The Economic Activity Survey provides important source data for estimates of GDP by industry sector.

Revenue Projections Mr. Speaker, for the coming year, the Government proposes to generate revenues of $627.3 million. With a combined current and capital budget of $683.1 million, there will be a residual deficit or borrowing requirement of $50 million after taking account of cash on hand at the beginning of the new financial year.

The Budget Deficit has risen partly because revenue growth has been outstripped by previously embarked on large scale and necessary capital expenditures. Government proposes to address this development by making a number of minor changes to reposition the revenue base on firmer ground and link it more closely to dynamic and growing sectors of the economy. In so doing Government will seek to ensure that all segments of the community contribute a fair and equitable portion of total tax revenue.

Mr. Speaker, the Payroll Tax is one of the few taxes that responds automatically to changes in the level of economic activity. The economy is expected to remain relatively buoyant in 2001/2002 and thus the Government does not propose to increase the rate of the Payroll Tax from its present level of 12.75 percent.

Last year, the Government introduced a number of modifications in order to provide relief to small businesses and to remove the option for exempted companies to pay the Payroll Tax on the basis of "assumed'' remuneration. The objective of these changes was to improve the equity of the overall tax system. These modifications will remain in place, except for a reduction in the cap of $250,000 on an individual's remuneration declaration to $225,000.

It was estimated a year ago that setting the cap at $250,000 would limit the impact of removing the "assumed'' remuneration option on total tax paid by exempted companies. Lowering the cap to $225,000 will help to establish a lower -- but more equitable -- equilibrium point for exempted companies in respect of the Payroll Tax.

Government also proposes to extend the $225,000 cap to local companies in order to remove any distinction between local and exempted companies in the Payroll Tax. This further adjustment reinforces Bermuda's position as a jurisdiction that taxes local and international companies on generally the same basis. Both local and international companies compete for local resources under similar market conditions, and therefore it is appropriate that they should be taxed on the same basis so as not to introduce tax advantages for either group.

Mr. Speaker, there is another area of the Payroll Tax that Government is addressing in this Budget. The Tax Commissioner is currently engaged in a thorough review of the "notional remuneration'' that currently provides the basis upon which self-employed persons calculate their Payroll Tax obligations. Preliminary analyses have shown that some groups who pay on the basis of notional remuneration make a disproportionately low contribution to the total tax yield. These groups include architects, physicians, lawyers, dentists, surveyors, engineers and taxi operators. In recent years, the gap between actual remuneration and notional remuneration has been widening with the result of reducing the optimum yield from the Payroll Tax.

The review of the notional base that is underway will lead to a change in the way the Payroll Tax is applied to self-employed professionals. This is expected to generate additional revenue of $3 million. Currently, the reported average annual notional remuneration for this group of taxpayers is about $70,000 in contrast to an actual market range of $100,000 to $150,000 for salaried professionals in the private sector. Using comparable market compensation as the basis for the Payroll Tax will also improve equity.

It is proposed to establish a flat fee of $1,500 per annum for taxi operators that will be payable in quarterly instalments of $375. Even with this increase, the fee for taxi operators will remain well below the average quarterly tax payment of $1,260 in respect of Payroll Tax. The introduction of this flat fee will generate an additional $600,000 per annum.

Mr. Speaker, Land Tax has been significantly increased over the last two Budgets and Government understands the community's general desire for no increase during the coming year. Therefore, while there will not be an across the board increase in 2001/2002, Government does however propose to introduce a new tax band at the higher end of Annual Rental Values (ARVs) with a corresponding adjustment in the marginal tax rate. This adjustment will impact only those tax payers whose residential units have ARVs of $90,000 or higher (the top two percent of ARVs) and is expected to generate an additional $1.6 million. This change will make the tax system fairer.

Passenger Taxes have not been reviewed for more than five years in respect of air passengers and it has been ten years since the cruise passenger tax was last reviewed. The air passenger tax will be increased by $5 to $25 in the coming year. The full year yield is expected to be an additional $2 million.

For the cruise passengers tax, Government plans to formally notify operators of cruise ships that the tax will be restructured and the new rates will take effect in 2002. The new structure of the tax will be based on seasonal factors and demand for Bermuda's three ports. It will also provide a discount incentive, similar to the Cabin Tax, to extend the cruise season beyond the peak period of May to August.

Mr. Speaker, when the new Customs Tariff was introduced in November, 2000, the rates of duty remained the same, except for a few tariff items. In particular, Honourable Members may recall that the rate of duty on children's clothing was reduced from ten percent to 6.5 per cent. Government proposes to change certain other rates of duty with immediate effect and to streamline some tariff classifications to reduce administrative burden on importers.

The duty on fuel imports including crude oil, gasoline, kerosene, diesel and fuel oil will be increased by five per cent and is expected to generate additional revenue of $2.7 million.

The duty on cigarettes and tobacco products and on alcoholic beverages is to be increased. The new rate for cigarettes is $0.13 cents per cigarette with an expected yield of $1.8 million in additional revenue. This duty increase will add $6 to the existing retail price of a carton of cigarettes. The duty rate on cigars will be increased to 33.5 percent with an expected incremental yield of $70,000. The duty on beer, wines and spirits will be increased by five percent with an expected incremental yield of $500,000 in tax revenue.

The Budget Statement Conclusion Cox thanks all for Budget Statement Mr. Speaker, traffic congestion is a major problem in our community. The success of our economy with generally high household income levels has given rise to a strong and sustained demand for private motor vehicles. The Government proposes to tackle the problem by improving the quality of the public transportation system and by realigning economic incentives. Ferry and bus fares will not be increased in 2001/2002. All motor vehicle licences will see a five percent increase with effect from April, 2001. In addition to this increase, Government proposes an increase of $50 for cars in Classes A to D and an increase of $100 for cars in Classes E to G. The licence fee for all classes of motor bikes will be increased by $10. The additional revenue from these increases is expected to be $2.8 million.

Mr. Speaker, Government proposes to introduce a refuse disposal charge of $35 per metric ton for commercial waste delivered to the Tynes Bay Waste Treatment Facility. This user charge will help to offset the growing repair and maintenance costs for operating the aging facility. In the near future, it will be necessary to start building a fund to replace the incinerator -- whose remaining useful life is fairly short. About $1.5 million is expected from this source.

In the telecommunications sphere, Government proposes to introduce annual licences for cellular telephones. Existing three-year licences will be able to run to maturity and will be renewable annually thereafter. The annual licence will be set at $24 in the first instance. The incremental yield anticipated from this source in 2001/2002 is $200,000.

Changes to certain rates of Stamp Duty are expected to yield an additional $1.5 million in 2001/2002. Adjustments will be made to the rate of tax applicable to conveyance or transfer of real property and the rate applicable to settlements. In respect of Heads 14, 15 and 17 of the Stamp Duties Act 1976, the rate of tax on the first $100,000 of value will be increased from two percent to 2.5 percent. In respect of Head 40, the upper limit on the third band of value will be reduced from $800,000 to $500,000. The effect will be that Stamp Duty of 15 percent will be charged on that portion of the value of a settlement that exceeds $700,000 compared to the previous threshold of $1 million.

Company fees were reviewed last year and no further changes are proposed for the coming year. However, bank licence fees will be amended to yield an additional $1 million. Bank licence fees have not been reviewed for six years.

*** Mr. Speaker, in my opening remarks I indicated that Government's vision for the future was to maintain a strong economy while assisting the transformation of our community into a land of equal opportunity for all of our people.

This Budget speaks to how this Government will continue to address the issues of education, health, housing, law enforcement and rehabilitation with enlightened policies and programmes.

Government has heard the plea of those families who need affordable housing or the chance to own their own homes. We have heard parents and teachers concerns about standards in our public education system. We have heard the pleas of returning college graduates for job opportunities in their own Country. We have heard the cry of local companies for a level playing field. We have heard the concerns of senior citizens for dignified elder care and homes with proper care facilities. We have heard the comments of the international business community about the costs of doing business in Bermuda and reassessed the impact of certain taxes.

Mr. Speaker, we listened, we heard and we responded. In raising the revenue to address the heartfelt concerns of this community, Government has also made minor changes to assure more fairness and equity in the distribution of the tax burden.

In summary Mr. Speaker , since November 9, 1998, when this Government assumed responsibility for the affairs of our Island community, we have been focused and resolute in our efforts to support continuing progress for the people of Bermuda. We have nurtured the economy, and by carefully addressing the external economic challenges ensured a sound basis for future economic growth and development.

Mr. Speaker, I wish to conclude by giving a special vote of thanks to the dedicated and hardworking staff in the Ministry of Finance for their help and support in the preparation of the Budget for 2001/2002. I also wish to thank my Cabinet colleagues and the dedicated staff in their Ministries. In addition, I wish to acknowledge many others in the community who have offered thoughtful suggestions. This Budget process has truly been a collaborative effort for the benefit of the people of Bermuda.