A key element of the deadlock on the state budget was broken on Tuesday when the ultra-Orthodox parties agreed to abandon their demands for increased child allowances, in exchange for a government-subsidized savings program for children.
Finance Minister Moshe Kahlon said the program would award each child 18,000 shekels ($4,760) at the age of 18, to help pay for higher education and job training.
“We’re talking about a deep and wide-ranging social change,” Kahlon said in a Facebook posting. “The proposal requires the agreement of my friends Deputy Health Minister [Yaacov] Liztman of United Torah Judaism, but I’m convinced that the partnership being created, as we’re seeing in the struggle for social justice, will prove itself and yield results.”
The savings program will come instead of a 50-shekel-a-month increase in the child allowance, which would have cost the treasury 2.6 billion shekels in the 2016 budget — money it doesn’t have as it tries to close a gap of between 8 billion and 10 billion shekels between forecast revenues the ceiling on how high it can increase spending and the deficit.
The increase in child allowances constitutes a large part of the 8 billion shekels in spending promises Prime Minister Benjamin Netanyahu had made to lure UTJ, Shas and other parties into the coalition last spring. As long as the two Haredi parties refused to back down on their demands, other coalition partners were resisting pleas to forswear the money promised for their pet programs.
The government will subsidize the savings program, dubbed “Savings for Every Child,” which will set up as a personal account for each child. Treasury officials said the program would cost it 1.6 billion shekels annually, 1 billion shekels less than the proposed increase in allowances.
The agreement doesn’t affect another promise to the Haredi parties, to increase yeshiva budgets by 1 billion shekels annually, which will be paid out retroactive to last May.
Officials haven’t decided whether it will structured as a similar kind of fund for newly demobilized soldiers, operated through the government’s National Insurance Institute, or through commercial banks. If the latter, the government will hold a tender to award a bank or banks the right to operate the accounts, depositing at a rate of 50 shekels a month retroactive to the start of the current government last May.
Children and their families will get a quarterly report detailing the status of their account.
The only limit put on the savings will be that it can only be spent on education or job training, the goal being to ensure more social equality and narrowing income gaps in the next generation. A plan like it was originally proposed by Isaac Herzog when he was welfare minster and adopted by the government’s anti-poverty committee.
In spite of the progress on child allowance, Economy Minister Arye Dery on Tuesday threatened that his Sha party wouldn’t support the budget if the government didn’t support a plan to exempt basic food items from the 18% value-added tax.
The coalition agreement calls for forming a joint finance and economy ministry committee to study the issue.