Party Tensions and Social Protests Top Knesset New Session Agenda

Summer's burning issues will be on the minds of MKs as they return to work.

While the public was busy protesting over economic issues, the Knesset members were on vacation. The tent protest over the cost of living broke out shortly before the Knesset summer break began, but the MKs decided against delaying their vacation.

Now, the Knesset is scheduled to begin its winter session in a week's time. On the agenda will be a host of burning economic issues that arose over the past several months, including the recommendations of the Trajtenberg committee for economic change. Despite Prof. Manuel Trajtenberg and Prime Minister Benjamin Netanyahu's demands, the Knesset members are not expected to happily agree to pass the Trajtenberg reforms in one go. Some reforms are expected to raise objections from coalition parties, including Shas and Yisrael Beiteinu, while MKs are expected to want to expand on others. Meanwhile, the tycoons and their lobbyists are expected to harshly oppose some of the reforms proposed by the committee addressing economic concentration.

protest - Olivier Fitoussi - October 23 2011
Olivier Fitoussi

Here are some of the big issues the Knesset is expected to address, as well as their prognoses.

1. Building more houses

The Trajtenberg committee called for greatly expanding the housing supply by getting another 196,000 apartments approved for construction and another 200,000 on the market within five years. Of these, 20% would meet affordable housing standards.

The Finance Ministry favors this, while Shas and other coalition members are conditioning their approval on measures to increase the availability of public housing. The measures are considered likely to pass, with some changes involving public housing.

2. Tax reform

The Trajtenberg committee wants to raise taxes on the highest wage earners, creating a new marginal tax bracket of 48% that would kick in after NIS 40,231 a month; increase corporate taxes by 1% to 25%; increase tax on interest, dividends and capital gains by 5%; raise the ceiling for national insurance and health tax payments; and cancel the increase to the gasoline excise tax planned for January 1.

These measures have broad support within the coalition, and are expected to pass.

The committee also wants to cancel plans to reduce marginal income tax rates. While Finance Minister Yuval Steinitz supports this, the Knesset Finance Committee wants to leave the reductions in place for people who earn less than NIS 21,000 a month. The reform is expected to pass with this revision.

3. Cutting import duties

The committee examining food prices, formed after the protest over cottage cheese prices, recommended reducing import duties and limits on items including food.

The Industry, Trade and Labor Ministry and the treasury support this move, but many government ministers oppose it - as does the agricultural lobby. The reform is expected to pass with changes to protect local consumers. Ultimately, the question is whether the altered reform will reduce prices as intended.

4. Scaling back yeshivas

The Trajtenberg committee recommended limiting state-funded studies at yeshivas for married men to no more than five years per student, cutting state funding for foreign yeshiva students, and forcing Haredi schools to teach the core curriculum.

The finance and industry, trade and labor ministries support this, while the ultra-Orthodox parties, including Shas and United Torah Judaism, oppose. Knesset sources say this is the main issue the ultra-Orthodox have with the Trajtenberg proposals, not the housing reform; the Haredi parties reject these claims. Ultimately, these reforms are expected to be carried out slowly, with the Haredim hoping they'll be able to foil them before they're fully implemented.

5. Boosting competition

The committee examining economic concentration recommended breaking up control pyramids, forbidding a given owner from controlling both financial companies and nonfinancial companies, strengthening regulators and corporate governance, and limiting executive salaries, among others. Its financial recommendations will be submitted by the end of the year.

Netanyahu and Steinitz support its recommendations, while Knesset sources say they expect the tycoons and big business to launch a full frontal assault against the proposals. Ultimately, the fate of these reforms will depend on Netanyahu and Steinitz's strength in the face of the onslaught.

6. Capping CEO salaries

The Neeman committee recommended against intervening directly with executive salaries at publicly held companies, and instead called for addressing the issue by improving corporate governance. It recommended that companies controlled by pyramids would need to have executive salaries approved by most of the minority shareholders. Netanyahu is expected to bring these recommendations up for a vote along with the concentration committee proposals.

Netanyahu, Steinitz and Justice Minister Yaakov Neeman support this proposal, while the business sector opposes it. Here, too, the reform's fate depends on the ministers' steadfastness in the face of lobbyists.

7. Women's retirement

Steinitz wants to raise the retirement age of women from 62 to 64, in keeping with a committee's recommendations.

The move has the opposition of the Knesset Finance Committee and women's groups. However, the Finance Ministry believes women's retirement age will be updated automatically in keeping with current laws, with no need for Knesset approval.

8. Letting the Knesset control water rates

The Knesset Finance Committee wants to regain its control over water prices, and also proposes offering discounted rates to people with disabilities. It also wants to supervise electricity rates, with the goal of reducing them.

The Finance Ministry opposes this proposal. Ultimately, its fate will depend on whether it draws public support.

9. More free channels

The Knesset Economics Committee will soon be asked to rule whether the number of public TV channels should be expanded from the current five to a proposed 18. This proposal has the backing of the finance and communications ministries, but has raised opposition from cable company HOT and satellite TV company Yes, since it is likely to cost them customers. It is considered likely to pass.

10. Cell phone exit fines

In 10 days, the Knesset plenum is scheduled to discuss a bill that would ban cell phone companies from charging customers when they cancel contracts.

It has the support of the Knesset Economics Committee and Communications Minister Moshe Kahlon, while the cell phone companies object. It is likely to pass, since the Knesset recently approved a law banning HOT and Yes from charging such fines.

11. Pension fees

Knesset Economics Committee chairman MK Carmel Shama-Hacohen has said he intends to tackle the fees money managers charge to handle the public's savings, including pension funds, provident funds, managers' insurance funds and mutual funds.

While the financial sector is expected to fight any such steps, public pressure is expected to force companies to lower management fees.