Shinui proudly announced to the media this week what it had "changed the order of priorities in the budget" when it transferred NIS 700 million to objectives "that are not sectorial, but for the common good."
The targets are, indeed, good ones: more money for higher education, newly released soldiers, science, culture, art, immigrant absorption, environment, health care, and fighting road accidents, as well as tax breaks for middle-income earners.
But one small detail is missing from Shinui's announcement. Where does the NIS 700 million come from? Where were the millions cut? The government announced that the sum will come from an across-the-board cut in government ministries.
From our investigation, the budget for the Industry Ministry's chief scientist, for example, will be cut by 6 percent, i.e. less spent on R&D, less investment and fewer jobs. Another example: The Housing Ministry saw its budget for "social neighborhood improvement" decreased, meaning spending on community centers will be hit - less for the needy and the weak.
For every "change in the order of priorities," there is an economic and social cost.
While MKs were arguing over the disengagement plan, the Economic Arrangements Law managed to get through with its reform agenda. The tired MKs put up no fight and the media isn't interested. The result is good for the economy, because some important reforms have been passed into law:
1. Encouraging capital investment. Until now, the machers would meet with their colleagues in the Idustry Ministry and "persuade" them to transfer millions of shekels to one food plant or another. This deviant system is now finished. The Investment Center no longer has "an opinion." The criteria for a share of the NIS 300 million in state support are clearly laid out. Similarly, the tax breaks are to be approved by the tax authority, and to win such breaks, the plant must export at least 25 percent of its output. This knocks the big guys - Osem, Elite, Strauss, Tnuva and Tara - out of the running.
2. Research and development. Know-how that has been supported by the state can now be exported legally, and not through subterfuge. The exporting company will pay royalties for such to the chief scientist in proportion to its support for the project.
3. Transferable numbers. Each citizen will have one phone number that he can take with him when he moves from one phone operator to another, which will boost competition and drive down prices.
4. Digital radio. The current analog system is outdated. The approved digital spectrum will allow high quality broadcast of 50 radio stations across the country, improving public service and competition.
5. Electricity Authority. The authority to grant licenses for electricity generation and distribution has been awarded to the Electricity Authority, which will cut bureaucracy and encourage competition with the Israel Electric Corporation.
6. Water. The price charged for water will rise in the coming year until it reflects the average cost of supply. The subsidy on water to farmers will end.
The budgets department did not manage to pass all the reforms they wanted. There's still no VAT in Eilat, no taxation on advanced training funds (keren hishtalmut), and no fifth Kupat Holim health maintenance organization. But the reforms that did get through are of the utmost importance. They are the true engines of growth for the economy.
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