Steinitz: Broad Coalition Ensures Fiscal Discipline

Knesset finance chief affirms 2013 cuts inevitable.

Finance Minister Yuval Steinitz told TheMarker yesterday the government will maintain budget discipline next year, bolstered by the broad coalition that came to life earlier this week.

The centrist Kadima party joined Benjamin Netanyahu’s cabinet, a move Steinitz said will keep a lid on populist legislation.

Yuval Steinitz.
Olivier Fitoussi

Steinitz admitted that the 2013 budget required tough decisions, but said the economy was in good shape.

He noted that 44,000 jobs were added to the workforce in March. He said the jobless rate was rising because new job seekers were entering the labor market.

Meanwhile, the chairman of the Knesset Finance Committee, Moshe Gafni ‏(United Torah Judaism‏), confirmed to TheMarker that there will be cuts in the 2013 budget. But he vowed that the poor would not take the hit.

“We’ll see to it that the Knesset eliminates some of the cuts that the Finance Ministry proposes,” he said.

Gafni added that he expects the Finance Ministry to push for additional budget cuts. “As it has been up to now, ultimately it’s the Knesset that decides which cuts pass and which ones don’t,” he said. “Very intensive hearings will be held in the Finance Committee, and we’ll try to strike a balance to the greatest extent possible and make things easier for the people.”

The Finance Ministry’s perspective is always financial, Gafni said.

“We’re not a for-profit company. We live in a country and need to consider the weaker population, just as every family takes the weak into account and helps them more than those who manage on their own,” he said.

“The state budget should also reflect this value − that we’re dealing with a country and not a company. So we’ll do whatever possible to limit and prevent harm to the weak.”

Netanyahu’s decision to bring Kadima into the coalition was motivated largely by his concerns about passing the 2013 budget, Gafni said. He noted that Finance Ministry officials began discussions with him weeks ago on the budget.

Among the provisions being considered are an increase in value added tax from 16% to 17%; tax increases on cigarettes and other tobacco products; across-the-board cuts worth NIS 6 billion to NIS 7 billion at ministries; a freeze on certain recommendations by the Trajtenberg committee on socioeconomic change; cuts at the Defense Ministry; and a freeze on certain planned additions to the higher education budget.

It is also possible some of the measures will be implemented in July or August this year instead of 2013.

Gafni promised to counter any Finance Ministry proposal that would hurt the poor or middle class. “There are several pieces of legislation that are stalled for nothing, such as the tax on the wealthy, an additional tax bracket and other areas from which the money can be taken instead of again and again increasing VAT and indirect taxes,” he said.

“There’s no reason in the world to hit the poor time and again, when every time they’re hit, it’s tough compared to those who earn very high salaries.”

Although Gafni admitted that international economic problems were affecting Israel, he said he does not always accept the Finance Ministry’s numbers at face value. The ministry tends to paint the situation in extreme terms, but as elected officials, he and his colleagues have an obligation to strike a balance, he said.

He acknowledged the need to provide funding to finance the budget, but questioned why the poor should suffer as a result.

Gafni voiced opposition to populist measures that hit the wealthy, businesspeople and corporations. But he said that when the choice came down to measures affecting the rich or the poor, the rich should be the ones who pay.

Sources close to Gafni said they expect the budget debate to include red herrings that can’t realistically be implemented. Examples include imposing VAT on fruits and vegetables and scrapping the VAT exemption in Eilat.