The Knesset Finance Committee approved this week a budget cut of more than NIS 1 billion, in part to cover the costs of this summer's war in Lebanon.

Nine coalition MKs voted in favor, four opposition members opposed the proposal and one abstained.

This was the first committee meeting chaired by Stas Misezhnikov of Yisrael Beiteinu, after he replaced Yakov Litzman of United Torah Judaism before Passover.

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The committee also approved 24 budgetary transfers within the 2007 budget as requested by the treasury. Litzman had prevented the passage of the budget cuts for his last two months as committee chairman, partly in protest over an NIS 15 million cut in the budget for yeshivas.

NIS 392 million from the cuts will be given to the Defense Ministry, another NIS 92 to other security expenses, NIS 100 million will be spent on 'strengthening the North,' and NIS 42 million was allocated for activities of the Prime Minister's Office.

Another NIS 142 million was approved as part of the coalition agreement with Avigdor Lieberman's Yisrael Beiteinu party; while an additional NIS 75 million went for 'religious Zionist projects,' including pre-army preparatory programs and National Service.

The IDF has decided that the way to fix its problems in the Second Lebanon War is to put more money into the pockets of the standing army. The new chief of staff, Gaby Ashkenazi, made the decision as part of a series of steps he will take after studying the recommendations of the various investigations conducted by the IDF on the war.

A senior officer who recently retired told TheMarker that in order to finance the pay increases Ashkenazi will order cuts in the number of headquarters staff, possibly including a reduction in the number of brigadier generals and colonels. 'The problem starts at the bottom - every senior officer has at least two vehicles; headquarters and staffs are filled with people and other resources. Not every brigadier general is fully employed, justifying such a budgetary burden on the IDF. It is possible to distribute the work better and reduce a number of posts,' said the officer.

As reported yesterday in Yedioth Ahronoth, Ashkenazi decided first to raise salaries for medium- and low-ranking regular army officers in order to raise their motivation and keep them in the army.

The raises will reach a maximum of 15 percent for lower-ranking soldiers, but senior officers will receive raises, too - though much smaller ones percentage-wise. A major general will get an increase of about 1 percent.

This will be in addition to an annual bonus of two monthly salaries for every officer in the career army.

The IDF Spokesman refused to comment on the report.

As far as is known, the increases will apply to all officers, regardless of whether they are in combat or headquarters units, at the front or in the center of the country.

It also seems that Ashkenazi plans to cover the cost of the raises within the IDF budget without asking for any additional funds from the treasury.

The IDF has cut 30 percent of its personnel in recent years and has implemented salary cuts for junior officers. However, the cuts never reached the senior ranks and also did not affect pension rights. The treasury's attempts to link approval of the defense budget to cuts for senior officers bore no fruit. According to the treasury, the real effect of the salary increases will be on pension costs in future years.

Pension costs now reach NIS 4 billion a year and are rising by an additional NIS 200 million annually - a figure referring to the situation before the planned salary increases.