The Government of Bermuda suffered a $100 million shortfall in its finances in the last fiscal year after underestimating how much it would spend and overestimating how much it would raise.

Civil servants are now being told to cut spending by 20 per cent and reduce travel costs and overtime to a bare minimum, several well-placed sources have told The Royal Gazette.

They have been informed 500 civil service vacancies will not be filled while Bermuda continues to reel from the economic crisis.

Earlier this week, the government revealed total expenditure for 2008/09 was $1.194 billion — $77 million more than it had estimated in the Budget. Of the extra spending, $45 million went on capital outlays and $32 million on current programme expenditure.

Projects allocated spending in 2008/09 included the new cruise pier in Dockyard and Port Royal Golf Course, both of which saw their costs shoot up.

Meanwhile revenues were $953 million — $32 million less than estimated, as a result of shortfalls in Customs duty, passenger taxes and stamp duty.

Government had estimated it would have to borrow $111 million.

The figures, released by Attorney General Kim Wilson in responses to Parliamentary Questions from United Bermuda Party Senator Jeanne Atherden, also show Government overestimated its revenues again for the first quarter of 2009/10, by $20 million.

However, the expenditure for the first three months of 2009/10 was in line with Budget projections and major initiatives planned for this fiscal year will not be impacted, according to the AG, who is also Junior Finance Minister.

Finance Minister Paula Cox said Bermuda was suffering scars from the global recession which will take a long time to heal.

Sen. Atherden argued Government had failed to heed Shadow Finance Minister Bob Richards’ warnings that Bermuda needed to prepare for the credit crunch instead of dismissing Mr. Richards as a scaremonger.

Sen. Wilson said in her statement: “The global recession has had a negative impact on Government revenues worldwide.

“For instance, the Minister of Finance has noted a report that revealed across OECD countries, tax receipts as a proportion of GDP fell in 2008 whereas the ratio was unchanged between 2006 and 2007.

“Bermuda has not been immune to this economic and financial crisis.”

Ms Cox said in a statement to The Royal Gazette: “Since the financial collapse of major banking institutions in the summer of 2008, governments around the world have seen revenues shrink while at the same time they have sought to provide stimulus to their economies to mitigate the ravages of the deep global recession.

“The global economy is an unfolding narrative as opposed to a finite position. The economy is not a static instrument and there have had to be assumptions made and some modelling done but the economic picture has been constantly evolving. Assumptions have had to be reassessed in light of the changing evolving circumstances.”

Ms Cox pointed to a comment from Bank of England deputy governor Charles Bean, who said in 2008: “We knew they were unsustainable and worried that the unwinding might be disorderly, though I don’t think that anyone could have guessed the course that events would actually take.”

The Deputy Premier continued: “Policy leaders do not have the luxury of freeze-framing an economic snapshot and pontificating on ‘what is’.

“‘What is’ soon becomes ‘what was’ very quickly and you have to adapt and customise your policy actions with the quickly changing tableau.

“Would I say a flawed process? No, but as one gets better data on a more current basis the calibre and quality of the policy response improves.

“Though economists state the recovery is real it does not feel that way especially since it is generally considered that it will be a jobless recovery in the early stages.

“Global output is projected to be considerably lesser than was expected prior to the crisis and this has the potential of weakening public finances.

“Though the recovery is real so are the scars from the global recession. Some will be permanent and many will heal only very slowly. The recovery will require innovation and industry. In Bermuda, our policy responses have been measured and helpful to those in need of assistance. We will come out of this recession in a stronger position.”

Sen. Atherden, who speaks on Finance in the Senate for the UBP, said: “While everybody wants to say it’s just happening, we knew it was going to happen. We said: ‘This is the way it’s going to go.’

“We are out there talking to people attuned to what’s going on. When Bob Richards said this was going to happen, the reaction was: ‘They are always negative’.

“But the fiscal area is our area of expertise. Sometimes you have to put realism over optimism.”

Sen. Atherden said with the downturn expected to remain in Bermuda for another year, people need to carefully monitor their spending and accept that they might have to take jobs that wouldn’t necessarily be their first choice.