Leading businessman Peter Everson yesterday challenged Government to ease its financial crisis by cancelling all its consultancies — saving $100 million a year.

Mr. Everson, the Chamber's Economic Division chairman, says that would be half the savings Government needs to make as it tries to get to grips with the economic storm which has rocked the Island.

Government racked up what's believed to be a record deficit for the last fiscal year, by spending $241 million more than it raised.

Mr. Everson predicts the financial problems — swollen by a $100 million shortfall due to wrong estimations at the start of 2008/09 — are merely the beginning of a downward spiral of falling revenue and rising costs.

He says Government is in line for another $100 million shortfall in the current fiscal year, as revenue is hurt by the shrinking economy, with construction workers facing a bleak winter as their industry goes into "meltdown".

Deputy Premier and Finance Minister Paula Cox however, yesterday defended Government's "prudent" course at a time of global economic uncertainty.

The Royal Gazette reported yesterday how civil servants have been told to make cutbacks of 20 percent and reduce travel costs and overtime to a bare minimum.

And with Government unlikely to want to trim a growing payroll by firing civil servants, Mr. Everson said: "If the Government had the steel to cancel all consultancies then that would save about $100 million per annum which is about half of what they need to cut.

"This would then reduce the number of direct civil servants that they need to eliminate by attrition."

He said that for the past seven years Government has failed to heed business leaders' advice to build a surplus during the boom years — instead spending all its windfall revenues.

Mr. Everson was speaking after Attorney General Kim Wilson revealed total expenditure for 2008/09 was $77 million more than estimated in the Budget, while revenues were $32 million less than estimated.

He said that means Government needs to borrow another $109 million in addition to another anticipated shortfall in 2009/10.

"The Government deficit for the current year 2009/10 is likely to be far higher than detailed in the Budget in February," Mr. Everson said.

"The Bermuda economy has been shrinking this year. Fewer jobs, fewer guest workers all lead to lower Government revenues.

"Each time a guest worker leaves the Island it is not just the loss of one job but less rent paid to a Bermudian landlord, one less customer in the supermarket, one less customer for a cell phone operator etc.

"Thus Government revenues are still falling. However, Government expenditures are dominated by wages and salaries to the more than 6,000-plus people on the Government payroll.

"These are not falling but rising. Add in expense overruns on capital projects plus interest on the Government debt and the current year is likely to be on course for another $100-plus million overrun in addition to the budgeted deficit."

Mr. Everson said Government would not want to go down the road of firing people to save money.

"Bermuda is still in a recession and the appetite of the Cabinet to fire their supporters is likely to be minimal," he said.

"Cancelling public building works while the construction industry is in meltdown is also unlikely to be popular. This winter could be the first in recent times that substantial numbers of Bermudian construction industry workers cannot find full-time employment.

"Or to view it from a different perspective: this is a Government that has bought votes by spending more public money without any thought as to where that money comes from. FutureCare is a great example.

"Now that the music has stopped they need to identify another strategy to keep them popular with their grass roots supporters. This won't be easy.

"Increasing taxes on businesses is the usual 'go to' move but will (a) be hugely unpopular; and (b) probably will not raise enough cash.

"If payroll tax rises significantly, to say 20 percent, then it will raise the cost of doing business in Bermuda and thus directly harm the prospects for international business.

"So it is not a pretty picture. Business leaders have been telling the Government that this would come to pass for more than seven years. Government was urged to build a public surplus during the boom years but this plea fell on deaf ears and instead Government just spent all of the windfall revenues and more besides."

Deputy Premier and Finance Minister Paula Cox said the $32 million revenue shortfall and $77 million expenditure over-Budget did "not necessarily mean an added borrowing requirement".

Ms Cox said: "The bulk of the Government spending, whether in healthcare, education, tourism, is on infrastructure and a social dividend to the benefit of Bermuda and her people.

"I do not believe that the inference is that in a recession the Government should fire people to add to the unemployment that would be inconceivable and irresponsible.

"The better view is to be judicious in hiring persons surplus to the Government's requirements but to retain those who are employed on a full-time basis throughout the recession."

The Minister said less than $25 million was spent on overseas consultants.

"While much is said re: consultants, and there is the tendency to ascribe that the line item for professional services of $100 million represents overseas consultants that it inaccurate and mischievously misleading," she said.

"As stated on innumerable occasions, professional services covers all Government contracts for cleaning, security, legal aid, Works and Engineeering maintenance, contracted services for the Department of Airport Operations, HIP portability claims, war pension awards, and other locally contracted services.

"About $25 million is estimated to be overseas consultancies and up to a few weeks ago, our figures indicated that $16 million of that had been spent on overseas consultants in this fiscal year."

Ms Cox said: "During difficult times, there are redoubled efforts to exercise greater spending restraint. However when times were brighter economically we used the surplus to invest in infrastructure and progressive initiatives to better the lives of our people."

Ms Cox said the latest Fitch report had praised Government as maintaining "a prudent fiscal policy framework".

"When you see what is happening on the global front in terms of the economic landscape you can see that Bermuda is weathering the storm. Though we too are susceptible in the main we are staying the course and still providing the value-added public services that are required," she said.

"The coming year will be fiscally as tough and challenging as 2009-10. However, if we work together as one team and hold to the fiscal discipline, our community will be served well by our collective and prudent policy action."