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Labor Party MKs are demanding to increase government spending next year by 2.5 percent, the same level as forecast for population growth.

The cabinet has decided that spending will grow only 1.7 percent in 2008, meaning that per-capita government spending will shrink.

Led by MK Orit Noked, a member of the Knesset Finance Committee, other MKs from Labor are expected to become more extreme in their demands to increase social spending as the budget debates, and votes, pick up to demonstrate their social-welfare orientation.

Many MKs predict that the next elections will be moved up to the middle of 2008 and that Labor will demand numerous changes in economic policies before then.

Labor is looking for a way to separate - and differentiate - itself from Kadima in the voters' minds, and hearts, before the next election.