Passing the Budget: Netanyahu's Government Is Saved, the Israeli Public Be Damned

Kahlon, Ya’alon, Dery, Litzman and Gafni won hefty budgets for their constituents, and the threat to the coalition was repelled. Ordinary citizens have less reason to be happy.

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Prime Minister Benjamin Netanyahu and MKs vote on 2015-2016 budget. November 19, 2015.
Prime Minister Benjamin Netanyahu and MKs vote on 2015-2016 budget. November 19, 2015.Credit: Emil Salman
Zvi Zrahiya
Zvi Zrahiya

Prime Minister Benjamin Netanyahu, Finance Minister Moshe Kahlon and the rest of the coalition can breathe easier Thursday morning after the Knesset voted on the second and third readings of the 2015-16 state budget and accompanying Arrangements Law. With the budget safely legislated, the coalition has a measure of stability — that is, until the next crisis.

Who are the budgetary winners and losers?

1. Netanyahu

Win: He managed to pass the budget and secure his survival in power, as failure to pass the bill would have caused the government to fall.

What next? If aren’t any coalition crises, Netanyahu’s next obstacle will be passing the 2017 state budget by March 31 of that year. That is a long awy away in politician time, but Netanyahu will try to expand his coalition soon by turning to Zionist Union.

2. Moshe Kahlon

Win: The finance minister won passage of the budget, including reforms in the food industry, real estate, natural gas and pensions with a narrow coalition. Kahlon even boasted on Monday at his faction’s meeting that he had reached a “historic agreement” with the defense establishment, including major efficiency measures and increasing transparency. In the wake of the coalition agreement with Kulanu (and Habayit Hayehudi), conscript soldiers’ salaries will rise 50% in January. He also passed in the Arrangements Bill the recommendation of the Sheshinski II Committee to tax windfall profits on natural resources.

What next? Netanyahu, who at first lobbied to remove the Sheshinski II recommendations from the bill, is likely to award Israel Chemicals tax breaks worth 400-500 million shekels ($102.5-$128 million) for investments until the end of its concession, barring Kahlon’s objections.

Shas Chairman Arye Dery, who serves as periphery, Negev and Galilee development minister, is lobbying for a value-added tax exemption for public transportation for all as well as water and electricity for the lower income groups, all against Kahlon’s objections. Netanyahu is likely to favor Dery on this issue, after the latter agreed to quit the Economy Ministry, clearing the way for the gas framework to be finally approved as the prime minster so badly wants

Kahlon, who won 10 seats in the Knesset, has to supply the goods to his constituents. He pledged to lower the cost of living and implement banking reform like separating credit card companies from the banks. The chunk of these missions remains ahead of him.

Kahlon, whose Kulanu party won 10 Knesset seats in the March election, must deliver the goods to his voters. He pledged to lower living costs and to introduce banking reforms like requiring banks to sell their credit-card companies. Most of these promises are still just that.who were the winners and what did they get?

Army fudge?

3. Moshe Ya’alon

Win: Defense Minister Moshe Yaalon won a key agreement with the Finance Ministry to increase defense spending in return for taking efficiency measures, increased fiscal transparency and army pension reform.

What’s next? Knesset sources expect that despite the deal with the treasury, the defense establishment will try to fudge some of the provisions and demand more money later.

4. Arye Dery

Members of the Knesset Finance Committee discuss the state budget, November 15, 2015.Credit: Olivier Fitoussi

Win: In a Shas caucus on Monday, Dery boasted of his accomplishments in the budget negotiations: raising child benefits (together with Knesset members from United Torah Judaism), raising the minimum wage to 30 shekels an hour in a single step, building 700 public housing units (together with Kulanu) and the VAT changes.

Dery and his UTJ partners can be proud of the coalition agreements, which rolled back budget cuts to ultra-Orthodox institutions. And Dery received an additional 300 million shekels for his ministry, that he can dole out as he pleases, in exchange for quitting the Economy Ministry.

What’s next? The battle over 0% VAT isn’t over, and will be taken up again after the budget passes. In contrast to earlier predictions, it now seems that Dery will not be put in charge of a more important ministry. According to some Knesset sources, Dery will likely receive additional allocations to his ministry by way of compensation.

5. Yaakov Litzman and Moshe Gafni

Win: The health minister and Knesset Finance Committee chairman, respectively, fought alongside Shas for the reversal of the “equal burden” law, which levied criminal sanctions on Haredi draft dodgers. The provision was postponed to 2023 and will probably change again before then. The bill to delay the sanctions passed its first reading on Monday, with a commitment to complete its passing within a week.

Litzman, who fought child allowance cutbacks, struck a deal with the treasury to increase allowances and create a national child savings plan.

Litzman and Gafni (with Dery) undid the budget cuts to yeshivas and other Haredi religious institutions made by former Finance Minister Yair Lapid. Gafni also got funds transferred to ultra-Orthodox institutions on his recommendation.

The treasury agreed to Gafni’s demand for a 500-shekel bonus for withdrawing the funds deposited in the agreed-upon national savings program at age 18, and a 1000-shekel bonus for withdrawal at 21. Gafni also induced the treasury to cut Housing Ministry mortgage rates for eligible citizens by 0.5%, to 2.5%. In exchange, Gafni gifted Kahlon the state budget, including the Arrangements Bill (save a tax clause to be debated next week).

What’s next? Litzman and Gafni will need to ensure implementation of the savings program and the allocation of funds to Haredi institutions.

6. Naftali Bennett

Win: The minister of education got his wish in the coalition agreements, and received more money for the Education Ministry and religious-Zionist institutions. The government approved his demands for an additional 33 million shekels for guarding schools in East Jerusalem and 45 million shekels in 2016 for the World Zionist Organization settlement division. As per Habayit Hayehudi’s demand, the Knesset passed on Monday the first reading of a bill anchoring the status of the settlement division.

What’s next? The cabinet will discuss next week the recommendations of a team of ministry directors general that was established before the coalition agreement between Habayit Hayehudi and Likud, which expands the authority of the settlement division. The Housing Ministry and other ministries oppose the recommendations. Bennett will have to fight against the suspension of construction in settlements.

Narrow interests

7. A host of MKs

Win: Yuli Edelstein, David Bitan and Miki Zohar (Likud) and Bezalel Smotrich (Habayit Hayehudi) diverted millions of shekels to narrow interests like settlements and yeshivas. It’s not for nothing the treasury caved in to these MKs. They hold key positions. The treasury depends on Knesset Speaker Edelstein and Knesset House Committee chairman Bitan because of their ability to split the arrangements bill. They also need Zohar, who is a central coalition figure on the Knesset Finance Committee and is supposed to drum up a majority for the coalition.

What’s next? The MKs will need to make sure they get the money.

8. The public

Win: After getting a new government that promised to reduce housing prices and to fight the cost of living, VAT was reduced 1% in September and the budget includes few cuts.

Lose: Since the beginning of the year, the state has operated according to a monthly budget based on the 2014 version. New contracts were limited and required approval and new work plans and reforms were not implemented.

As if that weren’t enough, despite politician promises not to make major cuts, a few hide among the budget’s thousands of pages, like an across-the-board cut of 0.7% to fund the MKs caprices that will hurt the public. And while MKs removed from the Arrangements Bill a proposal to toughen criteria for unemployment benefits for people under 35, in the same breath they approved reducing pension tax benefits to 24,200 shekels per month from the originally proposed 28,000 shekels.Thus the public, which is still strangled by rises in the cost of living, sees the politicians reaching into public coffers and forking over