In a major challenge to public employees' job security, Prime Minister Benjamin Netanyahu yesterday instructed his director-general, Harel Locker, to draft a bill giving cabinet ministers and their top managers the authority to fire or transfer state workers. The draft law is to be submitted to the cabinet for approval as soon as possible.

It is expected that the changes, if approved, would affect the majority of the approximately 676,000 state employees. This number includes not only 256,129 public-sector employees - in the Israel Police and Israel Prison Service, senior teachers, employees of government hospitals, ministries and other state agencies - but also 218,000 people working at public institutions such as universities, health maintenance organizations and independent agencies, as well as 202,100 employees of local government and government companies such as the Israel Electric Corporation, Mekorot Water Company and Israel Aerospace Industries.

It is clear that if the government decides to handle this hot potato it will lead to a head-on collision between Netanyahu and the Histadrut, as well as with Histadrut chairman Ofer Eini and the state employees union.

In the past the state and the Histadrut have reached agreements on reducing the public workforce in times of austerity by freezing hiring and not replacing employees who have retired, died or quit. The envisioned new law would give cabinet ministers and their directors-general the power to dismiss workers to reduce payroll spending.

Netanyahu said yesterday that the managers of the government, like those of any economic unit, must be able to fire workers.

Today, he said, government ministries have little power to make personnel changes. This is also the case in many European states and has caused them great economic damage, Netanyahu added.

At yesterday's weekly cabinet meeting, the prime minister stressed that the move is essential even if it entails confrontations with vested interests.

Netanyahu did not name these vested interests but he clearly was referring to the Histadrut and the workers' committees in the ministries. He said that although the Israeli economy has been successful in recent years despite the administrative obstacles faced by the ministries, it was inconceivable that the problems not be addressed.

This was the first time in his political career, including his first term as prime minister and his term as finance minister, that Netanyahu has tackled the taboo subject of the authority of cabinet ministers and directors-general to dismiss employees or transfer them between ministry divisions or between ministries.

It is not clear why Netanyahu chose to tackle the issue at this time. Senior government officials suggested it might be the first move in the battle with the Histadrut that could be expected if and when he tries to push the 2013 austerity budget through the Knesset. Among the proposed measures that will affect the public sector, and which the Histadrut is not expected to take lying down, are salary and benefits cuts, including a 2.5% reduction in the salaries of all public sector workers, and the postponement of some benefit payments to 2014 or even 2015.

Locker's instructions for drafting the bill do not mention another issue that affects cabinet ministers' governing abilities and occasionally makes headlines: the intervention of the Finance Ministry's budget division and Accountant General's Office in ministry business, sometimes to the point of affecting the abilities of the ministers and their directors-general to run their ministries.