Netanyahu deals major blow to Lapid, freezes key housing legislation

Netanyahu stopped the legislative process in its track, refusing to advance it until disagreements over the 2015 budget are resolved.

September 15, 2014 19:29
2 minute read.
Yair Lapid.

Finance Minister Yair Lapid.. (photo credit: REUTERS)

Prime Minister Binyamin Netanyahu has frozen Finance Minister Yair Lapid's controversial 0 VAT bill, setting up a showdown that could have wide-reaching political implications, Channel 10 reported on Monday.

Netanyahu stopped the legislative process in its track, refusing to advance it until disagreements over the 2015 budget are resolved. Lapid has drawn red lines for his party remaining in the coalition, and Netanyahu does not want to move forward with the finance minister's pet policy until it is clear he will remain in the government, Channel 10 reported.

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The news comes just hours after the bill passed through the Knesset Finance Committee after months of delays from the opposition.

The bill, however, will still have to go through the Knesset House Committee before continuing to the Knesset plenary for final approval in its second and third readings.

Following statements from Lapid on Channel 2 Sunday night that the law would cost a fraction of the previously reported figure, the opposition in the finance committee agreed to let they law move through by skipping discussion on reservations.

Since July, opposition parties had thrown thousands of reservations in the bill's path, effectively filibustering it. In exchange for allowing the bill to move forward, the opposition demanded that Lapid testify on the bill's true cost, which he pegged at NIS 1.3 billion instead of the NIS 3 billion figure that had been bandied about before.

The bill has been a central clash point between Lapid, who hopes to cater to his base with the benefit, and the country's economic leadership. Bank of Israel Governor Karnit Flug has warned that it would be ineffective at lowering housing prices, and the Finance Ministry's chief economist quit in protest of the law.

Arab and ultra-Orthodox groups have complained that it is discriminatory. An eligibility requirement limits the benefit only to those who have served in the IDF or national service, effectively cutting off ultra-Orthodox Jews, Arabs, people with disabilities and many new immigrants. The Knesset Legal advisor has warned that the Supreme Court could strike it down.

Finance Committee Chairman Nissan Slomiansky put the onus on advancing the bill on Netanyahu, who has been lukewarm on the policy.

Housing Minister Uri Ariel called on Netanyahu to advance the bill to final vote before the Rosh Hashana holiday to a final vote.

"Due to the complex reality in the housing market, I request your urgent intervention in order to bring the law for approval before Rosh Hashana," he wrote to Netanyahu. "This approval will be good and significant news for the public."

Uncertainty over the bill's future and length time period since its March announcement have stopped up the housing market. As young couples put off buying homes in hopes of securing the benefit down the line, the number of transactions in the second quarter fell to their lowest levels since late 2011. As construction companies felt the pinch, housing starts in the same period fell to a two-year low.

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