Taub Center: 2006 economic growth did not reduce social gaps or help the weak

Israel's macro-economic achievements in 2006 failed to narrow social gaps or reduce poverty, the Taub Center for Social Policy Studies in Israel concluded in its annual report. The report will be presented on Tuesday at the Sderot Conference for Society.

The report concludes that actual state budget expenditures in 2006 were 6 percent below the budget passed by the Knesset, and that 2007 is also expected to end with under-spending, after only 67 percent of the appropriated budget was spent in the first nine months of this year.

Taub Center researchers called on the cabinet to increase the resources allocated to education and health in the 2008 budget.

The report also shows that since 2002, the ratio of national expenditures on health and education to GDP has been dropping, and households are having to make up the difference. This is deepening inequality in Israeli society, while defense spending has risen 3 percent since the start of the decade.

The report's chapter entitled "Government Expenditures on Social Services in 2006," written by former Finance Ministry director general Yaacov Lifshitz, emphasizes that the budgetary restraint applied in recent years, which was intended to aid economic growth by freeing up resources for the private sector, came mostly at the expense of social services budgets.

Lifshitz says the 2007 and 2008 budgets do not provide an adequate response to the worsening situation of society's weaker parts.

The increased economic activity that started in mid-2003 has brought about significant improvement in Israel's macro-economic situation, which recently has started to appear in socioeconomic measures. But in light of these improvements, the distress of the weaker parts of society is particularly conspicuous - they have not benefited from the trickle-down effect of the economic growth. According to Lifshitz, in order to help these populations, they must receive direct, focused resources.

The Taub Center further explained that despite the government's statements, the share of social expenditures relative to GDP in the 2006 budget actually went down, for the fifth year in a row.

The percentage of social spending also continued to drop as a share of disposable government spending (spending without debt repayments). For the first time since the start of the millennium, social expenditures make up less than half of all the available state budget.

Between 2002 and 2005, social spending dropped 11 percent in real, inflation-adjusted terms. The updated 2007 budget shows a significant rise in such spending, but the actual expenditure figures raise questions as to whether the growth is actually reaching those who need it.

The Taub Center determined that the proposed 2008 budget reflects even lower levels of spending on social services.