Cabinet Budget Talks Delayed Five Days

Government is 10 weeks behind schedule into debating fiscal package

Emil Salman

The cabinet’s first meeting on the 2015 state budget – already two-and-a-half months behind schedule – is being put off for another five days to September 16 for unexplained reasons.

The delay, which treasury sources say is the longest they can recall, comes amid sharp disputes between the Finance Minister Yair Lapid and Prime Minister Benjamin Netanyahu and their staffs.

The cabinet usually holds two or three meetings every year on the budget starting in June, with the aim of sending the finalized package and the accompany budget arrangements law to the Knesset by October. This year, however, due to the tensions between Lapid and Netanyahu, the cabinet did not hold its first meeting in June; in July and August, Operation Protective Edge took priority.

On top of personal issues, the cabinet faces tough decisions on question of the defense establishment’s demand for major spending increases this year and next. That is complicating the question of how large a deficit the government can permit itself and whether it should raise taxes.

Lapid has also traded fire with Bank of Israel Governor Karnit Flug, who is urging the government to limit the budget deficit to 3% of gross domestic product, while Lapid is insisting that he will not countenance a tax hike. Slowing economic growth is complicating the matter by threatening to weigh on tax revenues next year.

Yesterday, Lapid reiterated his stand against raising taxes and said he remained committed to his plan to exempt many homebuyers from value-added tax, a program that will deprive the treasury of another 2 billion to 3 billion shekels ($560-840 million) in revenues.

“The budget will include a very big increase in education spending,” Lapid said. “Class hours during summer vacation will continue to operate and we intend to expand the project to the third and fourth grades. We plan to significantly add spending to health and welfare, and the billion shekels we’ve budgeted to Holocaust survivors won’t be touched.”

A discussion between Netanyahu, Lapid and Defense Minister Moshe Ya’alon over defense spending in 2014 and 2015 has yet to occur. Therefore, it appears that the latest delay in the cabinet deliberations is not related to a disagreement over military spending but something more fundamental, possibly the overall budget framework.

Meanwhile, MK Omer Bar-Lev (Labor), who is on the Knesset Foreign Affairs and Defense Committee, said Protective Edge was no reason for the army to be seeking an extra 11 billion shekels for 2015. “I haven’t heard so far about any task that was not undertaken because of a lack of equipment or other resources,” he said.