The government on Sunday approved a controversial plan to drastically reduce the scope of a neighborhood rehabilitation project, from 94 low-income neighborhoods to 37.

Housing and Construction Minister Meir Sheetrit came up with the plan as a way of coping with the ongoing cuts to the neighborhood rehabilitation budget, which has decreased from NIS 450 million nearly 30 years ago to NIS 48 million in 2006.

"In the situation that has existed until now, we allocated some NIS 300,000 to each neighborhood, which turned the neighborhood rehabilitation into a mockery," said Sheetrit.

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He said that allocating more money to fewer communities would make it possible for each of the 37 neighborhoods to receive more funding between 2007 and 2011.

However, community activists and Labor and Shas ministers, who voted against the plan, warned that it signifies the destruction of a project that began as a symbol of the government's commitment to reduce inequality.

"This is a cruel decision that points to the fact that the Olmert government is a heartless government that harms the weak sectors time after time," said MK Yoram Marciano, head of the Labor Party's Knesset faction.

Shlomo Maslawi, the chairman of Tel Aviv's Hatikva neighborhood committee and a member of the Tel Aviv city council, said the situation of the southern Tel Aviv neighborhoods, all of which will be slashed from the rehabilitation project, is worse than that of low-income towns in other parts of the country.

"Foreign workers, collaborators, immigrants in a bad situation, residents of development towns who move to the center and have no money come to the southern neighborhoods," said Maslawi. Those areas have become "the sewage pit of the entire country," he said, and the government is now "taking away what little there was."