Finance Minister Moshe Kahlon.
(photo credit: MARC ISRAEL SELLEM)
Finance Minister Moshe Kahlon on Monday presented his budget for 2015-2016 to the Knesset Finance Committee, promising that the plan would boost economic growth.
“The budget addresses all the problems: the housing crisis, the cost of living, and the slowdown in growth,” he said, promising that the proof of the budget’s policies would be in the pudding. “We will be evaluated in 2016,” he said.
Recent economic data showed that Israel’s economy grew just 0.1 percent in the second quarter of the year, raising fears of a possible recession or a deterioration in Israel’s fiscal position.
Kahlon drew comparisons with his plan and the 2015 plan his predecessor Yair Lapid failed to pass last year, saying that he lowered the deficit target from 3.4% to 2.9%.
However, most of 2015 will have passed before the new budget goes through, and the budget has been operating on the basis of the 2014 budget.
The lower growth projections also mean that the 2.9% deficit will lead to an increase in Israel’s overall debt burden, the first since the global financial crisis hit in 2009.
“You’ve shattered the fiscal rule in a way that there is no longer a fiscal rule, and everything is by needs,” accused Zionist Union MK Manuel Trajtenberg, who was the party’s nominee for Finance Minister in the last election. The budget on offer, he added, didn’t even have a realistic chance of hitting its 2.9% target.
Kahlon shot back that “a time of crisis” was an acceptable time to increase deficit spending, but argued that the 2.9% target was still acceptable.
He accused Trajtenberg of wanting to raise taxes, whereas Kahlon has approved a reduction in VAT and taxes on alcohol.
He also touted a NIS 600 million load fund to small and medium businesses, increased tax on real estate purchases intended as investments, and reforms such as the “cornflakes law” to increase competition in the food market, which have been on the table for months. He discussed increased social spending as well, though many of the figures represented decreases from amounts already planned for 2015 and 2016.
Finance Committee Chairman MK Moshe Gafni (UTJ) said that he would only support a plan that helped all levels of society, but opposition MKs were stringent in their criticism.
Yisrael Beytenu MK Orly Levy-Abecassis slammed the budget for lowering urban renewal funding to a quarter of its level from a decade before, while Zionist Union MK Mickey Rosenthal said the budget did not address the closure of factories in the periphery.