Battle-scarred and late in coming, Finance Minister Yair Lapid’s 2015 budget was presented to the Knesset and passed its first reading on Monday, a document running into thousands of pages that lawmakers received and began to debate – without getting it 48 hours in advance as is customary.
The 390-billion-shekel ($103.1 billion) spending package, including a record 66.4 billion shekels slated for defense spending, was delayed by weeks due to last summer’s Gaza war and infighting over military spending and the size of the deficit.
The treasury worked hard to prepare it in time for it to reach the Knesset in early November, winning a one-time waiver from the attorney general to give legislators their customary 48-hour advance copy.
The Knesset has less than seven weeks to approve the budget before the end-of-the-year deadline. But, expecting a fight over the spending package as well as the accompanying Budget Arrangements Law, Lapid warned he would not back down.
“The Knesset in its entirety must understand that we won’t agree in any way to changes in the budget that would lead to any further reductions in social spending,” he told his Yesh Atid faction Monday.
“This budget won’t be completed with any broad cut in spending for education, welfare, health or internal security. I would prefer not to pass the budget than to hurt anything important to the citizens of Israel,” he said.
But already lawmakers were weighing removing key reforms in the Arrangements Law. Late Monday, the finance minister was in talks with the coalition’s MKs, led by chairman Zeev Elin and Yariv Levin, chairman of the Knesset House Committee, who are seeing to remove a clause requiring the Jewish National Fund to hand over 1 billion shekels next year to the government.
The Knesset House Committee is looking to remove clauses in the Arrangements Law that would impose restrictions on private medicine and tax medical tourism. The panel also wants to remove clauses pertaining to a planned program of privatizing government companies over the next two years, a measure that is supposed to raise 15 billion shekels, along with a long-term program to reduce the size of the civil service.
Critics have said the budget, prepared hastily and lacking transparency, offers no strategy for helping a slowing economy or addressing Israel’s growing income inequality. But Lapid defended it.
“The budget before you today is first and foremost a social budget. It’s a budget that deals with the real problems of the middle class and the weaker segments of the population,” he told the Knesset, insisting the budget was straightforward and clear. “We stand by every clause you have in front of you. . We are trying to play by new rules.”
In fact, the biggest spending item next year is for defense – 52.6 billion shekels coming from taxes and another 7.8 billion from defense sales. In addition, defense is due to get a special allocation of 6 billion shekels under an agreement Lapid reached with Prime Minister Benjamin Netanyahu.
The defense budget doesn’t include spending on security arms like the Mossad, Shin Bet security service and Border Police. In addition, there is the reserve budget, which covers classified security spending. That item will grow a record-breaking 64% in 2015, to 4.7 billion shekels.
The next biggest item is education, which is due to get 47.1 billion shekels, with higher education receiving 9.4 billion shekels.
The third largest item is repayment of debt, which is expected to reach.
The budget allows for tax breaks of various kinds that would amount to 260 billion shekels next year, a 1.7% increase over 2014. If Lapid’s plan to exempt many first-time home buyers from the 18% value-added tax is approved by the Knesset, that will deprive the treasury, it estimates, of another 2 billion to 2.4 billion shekels next year.