Lapid Warns Israel Against Populism as Knesset Prepares to Vote on Budget

Finance Minister Yair Lapid urged lawmakers to pass his proposed budget, which includes controversial austerity measures, to confront the budget deficit.

As the Knesset opened debate Monday on the budget for the rest of the year and all of next year, Finance Minister Yair Lapid warned lawmakers not to avoid responsibility for addressing the government's widening budget deficit.

Lapid told the Knesset that he and his colleagues at the treasury had decided to do what he called "the responsible thing" and reduce the country's "overdraft" as quickly as possible.

The combination of lower-than-expected tax revenues and increased government spending has created a yawning deficit of roughly NIS 40 billion. The budget bill Lapid is pushing calls for spending cuts and tax increases to address the issue. The bill is being presented to the Knesset for a vote on first reading but is subject to changes in committee before the final budget is approved on second and third readings. The law requires that the budget be approved by the end of July.

The proposal before the Knesset, which includes the Economic Arrangements Bill of related legislation, would, for example, cut child allowances to large families and, for the first time, introduce a tax on housewives not employed outside the home.

Nonetheless, Lapid expressed his commitment to the weaker segments of society, saying they are not being ignored. He also cited efforts to curb the underground economy and unreported income.

"At the same time, a society [must be maintained] that is friendly to the business sector, that doesn't act according to the populist ill winds blowing on the street and more than once in this house," Lapid told the Knesset.

In addition to an increase in the value-added tax rate from 17% to 18%, which went into effect earlier this month, the legislation provides for a uniform NIS 140 monthly child allowance per child rather than higher allowances per child for larger families. It also calls for increases in the personal-income and corporate tax rates and imposes National Insurance Institute payments and health care taxes on housewives who do not work outside the home.

It also provides for a new tax on homeowners trading up to more expensive homes and cuts government funding to ultra-Orthodox schools that do not teach core subjects, such as English and math.

The leader of the Knesset opposition, Labor Party chairman Shelly Yacimovich, called the proposed budget an "organized, brutal assault" by Lapid and Prime Minister Benjamin Netanyahu against 99% of the population.

"No one escapes it, not the disabled elderly, small and medium-sized businesses, university students, the poor, the middle class, whoever they may be," she said, adding a number of other examples of those purportedly hurt. "No one escapes other than Lapid and Netanyahu's social milieu, very wealthy companies, big money and those with paychecks in the millions."

Outside the Knesset building, some 100 party and social activist gathered to protest the budgets, shouting slogans, like "There's no future with Bibi and Lapid" and "Bibi, Bennett, Lapid are destroying our future."  They were joined by opposition lawmakers from the Meretz and Labor parties, among them Labor MKs Isaac Herzog and Avishay Braverman.

The vote on first reading is expected to come early Tuesday morning due to a filibuster planned by the opposition. The budget will then go to the Finance Committee for further consideration.

Debate on the Economic Arrangements Bill will be split among committees, and most of the bill will also go to the Finance Committee. Members of the Finance Committee have already announced their opposition to some of the austerity measures, including a hike in the income-tax rate by at least 1.5% for wealthy taxpayers.

There is also opposition in the committee to the tax on those trading up to more valuable homes and new taxes to be paid by housewives.

Michal Fattal