The Knesset Finance Committee on Wednesday approved the government’s plan to limit the rise in government spending, increasing the growth ceiling of the 2015 budget by a modest 2.6%.
The budget cap grew 3.8% between 2011 and 2012, and the growth rate remained the same last year.
Coalition spokesmen said the smaller increase was intended to help reduce the national debt and prevent a drastic tax hike. MK Nissan Slomiansky (Habayit Hayehudi), chairman of the committee, said the 2.6% budget cap was responsible because it would interest payments the state has to make on the national debt, which he deemed a waste of money.
“Limiting government expenditure will prevent Israel from ending up in the situation of several European economies” that ran into trouble “in the wake of unrestrained government spending,” Slomiansky said. He said the Finance Ministry had assured him that reducing the growth rate in the budget would not adversely affect social services.
But opposition MKs fiercely objected to the proposal ahead of the committee vote, arguing that the slower growth in spending would hurt families who rely on government assistance.
Labor Party leader Shelly Yacimovich said the fiscal change will lead to a dramatic cut in the health, education and social services budgets, and constitutes an indirect tax on anyone who will have to pay for those services out of their own pocket.
“There is no economic logic to the new formula," she said. “It is totally fictitious and was invented to justify a cut that isn’t necessary at all in government outlays." She said the new cap would gravely hurt the poor and cost the middle class some 7 billion shekels ($2 billion).
“It’s hard to believe, but given Lapid’s policies, I miss Steinitz,” added Yacimovich, referring to the former finance minister.
MK Moshe Gafni (United Torah Judaism) predicted the new cap would mean “less for the handicapped, less for health, less for welfare and even less for the middle class.”
Coalition members said that while government spending might be popular, it always ends in higher taxes and painful cutbacks.
“We really don’t want to deteriorate to the situation the country was in during the 1980s, with triple-digit inflation,” said MK Reuven Rivlin (Likud).