Special Funding for Israeli Settlements Soared in 2015, Report Shows

All told, public construction and investment has been higher in the West Bank than in other parts of the country: 'The ongoing settlement enterprise involves high costs and a heavy burden on the Israeli economy.'

Housing sits on the development at Ma'aleh Adumim, an Israeli settlement on the West Bank, December 16, 2009. The European Union criticized Israel for listing some Jewish settlements in the occupied West Bank as special zones, saying the move is against the spirit of a freeze on settlement building.
Ahikam Seri/Bloomberg

The Israeli government spends considerably more on a West Bank settler than it does on a resident of the outlying Negev or Galilee regions, and twice as much as it does on a resident of the center, according to a report by a local think tank that examined the direct costs of the settlements to the government’s coffers.

The study, conducted by the Macro Center for Political Economics, shows that the additional budgets the government transfers to settlement residents and local governments grew 28.4 percent in 2015 over 2014, to 1.41 billion shekels ($369.1 million). The outlay per capita for the residents of Judea and Samaria came to 3,904 shekels – 14 percent more than the public spending per capita in the Negev, 28 percent more than in the Galilee, and 100 percent more than the public spending on residents of the center.

The researchers examined government funding of local government budgets, including education budgets, operating grants, and the budget segmentation of the Construction Ministry and the World Zionist Organization’s Settlement Division, as well as the cost of tax benefits given residents of those areas.

“The ongoing settlement enterprise in the West Bank involves high costs and a heavy burden on the Israeli economy and society, and it doesn’t matter if the reason is defense or civilian expenditures in the West Bank, reduced investment or the threats of boycotts,” says the report, which was written by center director Dr. Roby Nathanson and the center’s research director, Itamar Gazala, who processed data from the Central Bureau of Statistics and from the state budget.

“The statistics are based solely on precise calculations of non-classified information,” the researchers noted. “No use was made of assumptions, speculations or assessments that aren’t sufficiently grounded. This is a minimum estimate that includes only non-classified budget clauses and only a small portion of the security costs.”

In 2015 settlement residents got a total of 570.1 million shekels, reflecting higher per capita funding than the average anywhere else in the country. Residents of all settlements got an average 3,904 shekels annually per capita, 61 percent more per capita than residents elsewhere, who got 2,364 shekels. Jews living in the far-flung settlements east of the separation barrier, meanwhile, received 6,165 shekels annually, a whopping 158 percent per capita more than residents elsewhere. Residents of the center get only 1,958 shekels annually.

Settlement residents also get 500 shekels more per capita than residents of the Negev, and 900 shekels more than residents of the north, even though those are defined as national priority areas.

Give us a tax break

At the end of 2015, the government decided to substantially increase the number of communities whose residents get income tax breaks to 407 communities, as a result of which the Knesset Finance Committee adjusted the tax break for each town. The Macro Center found that including 30 additional settlements on the list of communities eligible for tax breaks cost the government 42 million shekels, divided among only 17,000 residents.

As a result, residents of settlements like Kiryat Arba and communities in the Dead Sea area, which are between 75 and 100 kilometers from Tel Aviv, are getting the same tax breaks as cities like Acre, which are more than 100 kilometers from the center.

“The tax break for Kalia [a kibbutz near the northern Dead Sea], which is half an hour from Jerusalem, is the same as for Nahariya, an hour-and-a-half from Tel Aviv,” the researchers wrote.

The report also noted that over the past 17 years, home construction in the settlements in terms of built area has increased 105 percent, from 4.85 million square meters in 1998 to 9.97 million square meters in 2015. The researchers pointed out that home values in the settlements continue to rise, and that an evacuation of some or all of the settlements, assuming each family got $400,000 in compensation, would cost between $4 billion and $10 billion, depending on the scope of the withdrawal. Continued expansion of the settlements would only raise that cost in the future, they noted.

In other findings, Nathanson and Gazala examined the rate of exports to Europe and the extent of foreign investment in Israel and concluded that at this stage, international attempts to boycott Israel have had almost no impact on the Israeli economy. With that, they wrote, “We are paying for our policy in the territories with the loss of opportunities to tighten relations and attract new investments, more than with the loss of existing economic benefits.”

One of the most significant budgets for most local governments in Israel is the “balancing grant,” a sum transferred by the Interior Ministry to help the cities and towns provide services. In 2015, the Interior Ministry transferred 2.7 billion shekels to all the local governments. In addition, the ministry transferred 250 million shekels in development grants to help build public buildings and repair and develop infrastructures.

Of this sum, 361 million shekels were transferred to Judea and Samaria, nearly 1,000 shekels per resident, almost three times the average grant to other residents of the country, which came to 335 shekels per resident. The two locales that got the most money per resident of any local government were the Arvot Hayarden Regional Council and the Ma’aleh Efraim Regional Council, both in the West Bank. Of the 50 towns that received the highest balancing grants, 11 were settlements.

Here too, preference for the settlements over the peripheral areas was blatant. The per capita aid to a resident of Ma’aleh Efraim was three times what a Kiryat Malachi resident received. The settlement of Kedumim got 2,053 shekels per resident, while in Netivot the grant came to 1,081 shekels per resident.

The government is investing considerable sums in new construction in the settlements as well. The Construction Ministry budget for new construction in the West Bank (primarily in Ma’aleh Adumim) has risen 95 percent for 2016 compared to 2015, totaling 93.8 million shekels.

Similarly, the average public construction in the West Bank over the past few years is 0.61 square meters per capita, twice as much as in the south (0.3 square meters per capita) and three times as much as in the center (0.22) and in the north (0.17).

“There is substantial state intervention in the housing market in Judea and Samaria compared to other areas,” the report states. “This is evidence of an effort to draw additional people to Judea and Samaria. This is blatant when compared to the Negev and Galilee areas, which the government has specifically declared it is trying to develop and attract population there.”

All told over the past 20 years, public construction – projects initiated by the Construction Ministry – has been significantly higher in the West Bank than in other parts of the country.