Among Israel's Drastic Budget Reforms, Significant Measures on ultra-Orthodox

Economic Arrangements draft would slice funding for yeshivas that don’t teach core subjects, force army to sell airwave frequencies.

The government plans to push through serious reforms that would change the country’s economic priorities via the Economic Arrangements Bill accompanying the budget, according to a draft of the bill that reached TheMarker.

Many of these reforms were halted by previous governments due to pressure from various interest groups.

The planned reforms include halving financial support for yeshiva high schools whose students do not take matriculation exams; lowering prices for drivers by increasing competition among garages and importers; privatizing Israel Aerospace Industries based on a valuation of NIS 10 billion; penalizing local authorities that don’t transfer their water utilities to subsidiaries; combining weaker municipalities in the periphery to form larger, financially stronger regional governments; and forcing the Defense Ministry to sell off airwave frequencies so that the country’s communications networks can adopt 4G technology.

The draft also calls for using day-care subsidies to encourage employment; making employment a condition for receiving a discount on municipal taxes ‏(arnona‏); increasing competition among food manufacturers, in part by doing away with import barriers; and making government regulation and bureaucracy more efficient.

The proposal, which Finance Minister Yair Lapid presented to Prime Minister Benjamin Netanyahu on Monday, comes alongside a Finance Ministry plan to hack government spending by NIS 26 billion for this year and next.

Tuesday, Lapid acknowledged that the middle class would foot part of the bill for these reforms.

“If we want to build true, supportive systems for education, health and welfare, we need the Israeli middle class’ tax money,” he told a conference in Tel Aviv. “Only if the middle class works and is paid well will we have enough money to help the weak. And I tell you that working Israelis will pay this money gladly, when they feel that their money isn’t going to wipe out tycoons’ debt and isn’t going to sectors that have taken over the public coffers, but rather truly to help the weak. They’ll put their hands into their pockets without hesitation.”

He acknowledged that it would be a fight to enact the reforms. “I know that what you don’t get moving within your first 100 days may never happen,” he said. “Now is the time to wage the war of the working man, because he has been neglected for too many years. Now is the time to turn the ship.”

Regarding the specifics of the reforms, he said, “If tens and hundreds of thousands of healthy people aren’t working and are living on stipends that they received via immoral political agreements, then we’ve sold out the interests of the working man, and we need to change that. If small, powerful groups control our ports, our public services, we need to change that. If a working mother pays NIS 1,000 more for day care than a mother who doesn’t work, then someone’s undermined us.”

The Haredi ‏(ultra-Orthodox‏) population has one of the country’s lowest employment rates and lowest matriculation rates. The draft thus calls for halving government support for yeshiva high schools that do not teach core subjects and whose students do not take matriculation exams, while increasing support for yeshivas that increase the hours devoted to these subjects. This portion of the draft has yet to be discussed with Education Minister Shay Piron, but he is known to support introducing core subjects to Haredi yeshivas.

The bill also seeks to encourage employment among Haredim by conditioning day-care subsidies on both parents working. Often, Haredi women work while the men do not. Municipal tax discounts would be conditioned on employment as well.

As for the defense establishment, the draft calls for forcing the Defense Ministry to transfer airwave frequencies to the public and making it pay for the frequencies it uses. It explains that this move will help Israel develop civilian technologies and enable more efficient use of frequencies. Enabling frequencies to be used for 4G networks will speed up data transfer rates, and this will have both social and economic benefits, it explains.

All developed nations have started unrolling 4G networks, it notes, arguing that the latest cell phones already support 4G, and Israel will fall behind technologically if it doesn’t jump on the bandwagon. The main barrier in this regard, it adds, is the fact that the Defense Ministry is hogging airwaves that could be used for 4G.

The ministry will be paid NIS 100 million or more for giving up its 2,500 megahertz frequencies, the draft says. In the past, the ministry was offered NIS 300 million, but it turned down the offer, saying it was too low.

Lior Dattel, Hila Weissberg, Daniel Schmil, Itai Trilnick, Lior Dattel, Amitai Ziv, Hila Raz and Nati Tucker contributed to this report 

Olivier Fitoussi