Herzog, Kahlon, Bennett Share Their Views on the Economy

Party leaders lay their economic and social agenda at TheMarker’s annual finance conference.

Ofer Vaknin

The timing of the TheMarker’s annual finance conference in Tel Aviv on Tuesday, less than a week before Tuesday’s Knesset election, inevitably made it a forum at which several party leaders laid out their positions on economic and social issues. Leaders of three of the parties participated: Zionist Union leader Isaac Herzog; Naftali Bennett, the current economy minister, who heads the Habayit Hayehudi party; and Moshe Kahlon, a former Likud minister who now heads the Kulanu party.

Herzog promised his audience that if he is elected prime minister, he intends to pass an economic program within his first 100 days in office that would cost 7 billion shekels ($1.75 billion) over two years.

He said 2.5 billion shekels in financing for his economic program would come from scrapping Finance Minister Yair Lapid’s much-vaunted plan to exempt qualifying buyers of newly built homes from the 18% value-added tax, a plan that has yet to pass into law.

“We don’t intend to raise taxes,” said Herzog, adding that there would be a change of priorities if he is prime minister, and the government would not direct funds to settlements outside the major West Bank settlement blocs. He said he also planned to increase the state’s share of the gross domestic product from 39% to 40% and cautioned that the pace of the increase in defense spending should not exceed that on social services.

“Everything together can lead to growth, to improving the situation of the citizen. The goal is not just to look at the macro situation but to deal with the feeling that the citizens have that they are not getting a response to,” said Herzog. He pledged to build tens of thousands of housing units at affordable prices to benefit the middle class.

“I see the business sector as a partner in building the country. It bothers me that players in the capital market are investing more abroad than in Israel,” Herzog said, adding that one of the problems here is regulation. “I want to see you investing in Israeli high-tech and regulation is impeding you. I intend to change this. We want to reduce regulation [and] merge regulatory agencies to let the economy grow and improve and also provide returns that will enable us to achieve [our] goals.”

Herzog also spoke of changing the atmosphere in the country, from harshly critical to optimistic.

He said Bennett’s plan to annex Area C, the area of the West Bank including the Jewish settlements that is under full Israeli control, would directly threaten Israel’s international standing, including its ability to function in the global economy.

“In the past six years, the economy has served just the few and it’s essential in the next four years that it serves the many, so that each and every family feels less pressure on themselves,” Herzog said.

The job market must also be reformed, he added, saying that the major change must come through better integration into the economy of Israeli Arabs and ultra-Orthodox Jews, both of which face substantial poverty.

Bennett: Enough already

Bennett told the conference that a Palestinian state would “ruin Israel’s economy.” He added: “My brothers on the left, enough already.”

Referring to Israel’s 2005 withdrawal from the Gaza Strip, Bennett said: “Just as we said before the disengagement that rockets would go flying out of Gaza, they did fly. In Gaza we did everything that the world asked for, but one rocket on Ben-Gurion International Airport destroys the Israeli economy. Who wants to come to a country where buses blow up? I will therefore do everything to prevent the transfer of a centimeter of the Land of Israel to the Arabs.”

On the housing issue, Bennett said the problem is that there are not enough homes and the solution is to build them. “You don’t need a 0% VAT plan. On a whim, Lapid was set on this, while he decided to put a stop to the things that needed to be done, holding them hostage.”

Bennett also called it “a shame” that more construction was not carried out in Jewish settlements in the West Bank, saying that it could reduce the pressures for housing in the center of the country. If Israeli families don’t move to a settlement like Ariel, they will go to a town like the Tel Aviv suburb of Holon, where prices will rise further due to demand.

He said the solution to the high cost of living in Israel does not lie in price controls but rather in eliminating regulations that bar competing imports. Over the past decade, he said, price-controlled products have risen in price twice as fast as those items that were not under government price supervision. “Soy milk in Israel is expensive. Why? Because there’s no competition, because there are no imports,” said Bennett. Referring to Israeli regulation that bars using the term “milk” in referring to the product, Bennett said: “Only in Israel do they think that we are not intelligent, so it needs to be called soy drink so we don’t think it came from a cow.” As economy minister, Bennett said, he got 15% of the country’s regulations repealed.

Kahlon: Fighting monopolies

Kulanu leader Moshe Kahlon, a former Likud communications minister and social affairs minister, used his platform at TheMarker conference to level criticism at the country’s banking sector.

“Bank Hapoalim makes 5,028 shekels per minute just trading in money,” he said. “Everyone knows that the three [largest] banks have about 75% of the market share. Herzog, Netanyahu, Lapid and Bennett all know. Why doesn’t anyone talk about it? What monopoly would open up the economy? It would prefer to raise prices.”

Kahlon also made reference to the housing crisis, saying “what Lapid says about construction starts is not correct, nor is there truth in what Bennett says. I expect these people to say that they tried and were not successful.”

Addressing speculation about which candidate Kulanu would recommend as prime minister, Kahlon said his party had not made a pact with anyone. “I am prepared to agree [to be in a coalition] on one condition,” he said. “I am going to fight the bank monopoly [and] the Israel Lands Authority monopoly, and am going to adopt housing reform and open the market to competition.” He added that his party calls for solutions to economic problems, increased competition and reducing economic disparities.