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The Knesset Finance Committee yesterday passed the 2008 state budget and the Economic Arrangements Law, after agreeing a number of changes with the Treasury that will cost NIS 1.3 billion.

The Knesset plenum is scheduled to vote on the Economic Arrangements Law tomorrow, and on Thursday it will vote on the 2008 budget.

The changes made by the committee include: cancellation of the imposition of National Insurance Institute (NII) payments for housewives, worth NIS 450 million; cancellation of the cost-of-living freeze for NII allowances, NIS 125 million; cancellation of the 4 percent cut in allowances; an additional NIS 150 million for the Law to Encourage Capital Investments; long school days for 11th and 12th grades, NIS 250 million; NIS 150 million more for the drugs in the health basket; and cancellation of a NIS 50 million cut in the fund for demobilized soldiers.

These sums will be offset by a cut in the budget and use of unspent funds.

The committee session opened only after an agreement was reached between the Finance Ministry's budgets director Kobi Haber and MK Avishai Braverman (Labor), who had demanded raising spending in 2008 by 2.5 percent more than the 2007 budget, instead of only 1.7 percent.

Instead, it was decided to establish a team lead by Braverman that will formulate proposals by April 2008 on raising the budget deficit. These recommendations will be presented to the treasury in advance of the 2009 budget deliberations. Braverman said he is pleased with the agreement: "Israel needs a budget that is more responsive to the periphery."

The agreement with various coalition factions: Labor, Shas, Pensioners and Yisrael Beteinu was reaffirmed, including the cancellation of a number of proposed decrees against welfare spending worth NIS 755 million.

It was also agreed with Haim Oron (Meretz) that life-saving drugs will be removed from the health funds' supplemental insurance policies in return for a NIS 370 million addition to the health basket for these drugs over the three-year period 2008 to 2010. However, members of the Clalit and Maccabi HMOs who have already started paying for the drug coverage in the supplemental insurance will continue to receive the drugs without any time limitation. Others with the additional insurance will receive the drugs for 15 months.

The drug basket in 2008 will now be NIS 450 million instead of the treasury's proposed NIS 300 million. Another NIS 50 million will be added to the health basket for vaccinations and population growth.

The budget for capital investments under the auspices of the Investment Center will rise to NIS 300 million in 2008, instead of the proposed NIS 150 million.

The Finance Committee agreed to another compromise over spending on municipal elections: funding will be set at NIS 42 per voter instead of the present NIS 49. The treasury had asked to reduce this figure to NIS 34 per voter, but MKs presented a united front against the cut in campaign funding. The compromise will save NIS 50 million.