Government plans to guarantee the financing of the new hospital project, which is anticipated to cost around $315 million, it has emerged.

It was announced in February 2009 that Government was seeking an international private firm to partner with Bermuda Hospitals Board (BHB) to upgrade King Edward VII Memorial Hospital.

The private firm is to pay around $260 million for the project, with the remaining $55 million footed by BHB.

On Friday, Cabinet Minister Michael Scott tabled legislation on behalf of Minister of Finance Paula Cox to help reassure potential private investors.

The Government Loans Amendment (No 2) Act 2010 seeks to amend the Government Loans Act 1978 so as to state clearly that Government has power to guarantee the debts and other obligations of third parties.

According to the explanatory memo which accompanies the bill, that power was previously only implied in the Act by words in the definition of public debt.

The new wording also states clearly what indebtedness and which guarantees are to be included in the Government statutory debt ceiling, which currently stands at $1.25 billion.

The budget in March raised Government's statutory debt ceiling from $1 billion, with Ms Cox explaining at the time: "The decision to raise the ceiling was taken to account for Government debt guarantees that are charged against the statutory debt ceiling."

Government guarantees totalled $211 million at that point, which included student loans.

Explaining the amendment legislation tabled in the House of Assembly on Friday, Assistant Financial Secretary Anthony Manders said yesterday: "This amendment is in relationship to the BHB KEMH redevelopment project. It is to give bidders certainty with regard to the Government guarantee which is a critical part of the financing of the project.

"The bidders are to submit their proposals for the project during the summer break. This amendment will greatly assist with this process. The first part makes it absolutely clear that the Government has the authority to guarantee debt of another person.

"The second part clarifies the meaning of public debt; previously this was not very clear in the Act. The definition is in line with Parliament's intent back in 1978 when the Act was drafted."

Mr. Manders added: "It should be noted that the amount counted against the debt ceiling will be exactly the same when this amendment comes into force. The amendment is to provide the certainty for KEMH bidders, nothing more, nothing less."

Shadow Finance Minister Bob Richards said he did not see any reason for the United Bermuda Party to take issue with the amendment.

"I think it is innocuous. It appears to be housekeeping legislation, although I don't even know why this needed any clarification," he said last night.