Netanyahu: Budget Cuts Won't Harm Education and Social Services

Prime minister to decide whether to raise VAT by 1 percent or raise the tax on alcohol and cigarettes.

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Prime Minister Benjamin Netanyahu said Wednesday that decisions that would be made at next Monday’s cabinet meeting regarding budget cutbacks in 2012 will not affect the education and welfare budget.

“At Monday’s cabinet meeting, we will introduce real measures to show the whole world that we are going to meet the deficit target,” Finance Minister Yuval Steinitz said on Wednesday.

Speaking before the Knesset plenum, which passed the second and third readings of the law to increase the 2013 deficit to 3 percent of GDP, Steinitz asserted that the “economic and budgetary responsibility of the government and of the Knesset is the sole and principal line of defense of Israel’s citizens and its economy. As a result of approving these steps, we won’t be seeing mass unemployment like they have in Spain and Greece.”

Earlier in the day, a special meeting was held in the Prime Minister’s Office on the budget cutbacks and tax hikes in 2012. Prime Minister Benjamin Netanyahu will be making a decision soon regarding how tax revenues will be raised – either by increasing VAT by 1 percent or by raising taxes specifically on alcohol, cigarettes and jet fuel. Finance Ministry officials favor a rise in VAT.

During the meeting, Netanyahu said that “managing the national economy is like running a household. You have to balance expenses and income. You can’t spend money on everything. You must choose. In the past year, we chose to invest in stopping the infiltrators, and to a large degree we succeeded in stopping the wave [of migrant workers] that was inundating the country.

“We decided to spend money on firefighting, including aerial firefighting. We are also dealing with security challenges, in light of the shifting reality. All of which costs money. We cannot spend on these things and on everything else, too,” Netanyahu said.

Netanyahu said that the decisions that would be made at next Monday’s cabinet meeting will not affect the education and welfare budget. “First of all, we will balance the budget and not deviate from it.

“The second thing is to maintain the overall income framework, because in so doing we ensure that the Israeli economy wontn't be affected by the global crisis. We will adopt a responsible policy, so that there will not be hundreds of thousands of unemployed,” the prime minister said.

Steinitz said that the measures to be discussed Monday will increase the state’s revenues by billions of shekels. Some of these measures will be immediate, while others will be implemented in 2013.

“We will introduce a basic package that sends the message to the whole world – to the ratings firms, to investors, to the international arena – that we mean what we say. We raised the deficit target from 1.5 percent to 3.0 percent and we will take every measure to meet this target," he said.

The meeting was attended by Prime Minister’s Office Director-General Harel Locker, Netanyahu’s economic adviser Professor Eugene Kandel, and all of the senior treasury officials, including Steinitz, Director-General Doron Cohen, Budget Division head Gal Hershowitz, and Accountant-General Michal Abadi-Boiangiu.

Prime Minister Netanyahu, left, and Finance Minister Steinitz. Credit: Emil Salman

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