The Knesset approved the 2015 state budget in the first reading late Monday.
Fifty-eight legislators backed the measures, while 46 voted against.
Presenting the budget proposal to the Knesset, Finance Minister Yair Lapid said that it is, first of all, a budget that addresses the middle and lower classes’ problems.
“Through this budget, we will be able to give our children a better education and opportunities we didn’t have. We will be able to give our parents medical care and the opportunity to grow old with dignity. We will be able to create more jobs and more engines for growth. We will be able to grant security to Israeli citizens facing Hamas tunnels, Hezbollah missiles and threats near and far,” the finance minister stated.
Lapid promised the budget will work for Israeli citizens, lowering food prices, going toward building more homes and funding his plan to cancel value-added tax on housing for new homeowners.
The finance minister pointed out that the 2015 budget does not raise taxes, saying he would rather not pass a budget than raise taxes.
The Knesset must approve a budget by March, or else it would be dissolved and there would be an election. Until the budget is brought for a final vote, the Finance Ministry is to review, debate and vote on its many articles.
Opposition leader Isaac Herzog (Labor) called the budget a “political adventure by a cowardly prime minister and a rookie finance minister that is destined to fail.”
According to Herzog, the budget enslaves future generations for political aims, increasing the poverty rate and inequality.
“The citizens of Israel are not chips on your gambling table,” Herzog told the Knesset. “This government must be overthrown. Even if it manages to pass this budget, it will be one of the government’s last acts.”
Meretz leader Zehava Gal-On expressed doubt about Lapid’s claims of the budget helping the middle and lower classes: “If we had a shekel for every time the finance minister lied, we’d pay off the deficit.”
Speaking at the meeting of his Yesh Atid faction earlier Monday, Lapid called the NIS 328 billion plan a social budget, mentioning spending increases over the previous year in key ministries. The education budget is NIS 3.2b. higher than the previous year, health is NIS 4b. higher and welfare NIS 2b. higher. It adds NIS 6b. to the defense budget.
“I’d rather not pass the budget than harm all the things that are important to the citizens of Israel,” he said.
The Bank of Israel, however, has harshly criticized the budget plan on several points. The increased spending on social ministries is the result of automatic additions already factored into the budget, while Israel’s spending on such programs remains relatively low by OECD standards.
“We have a very difficult problem. We have poverty at insane levels. And I ask myself if the current budget deals with this problem, and the answer is unquestionably no,” said Prof. Momi Dahan, an expert at the Taub Center for Social Policy Studies in Israel. Between the high cost of living, the soaring cost of rent, the low minimum wage, limited welfare for the poor and a dearth of educational and vocational opportunities, he continued, the poor could find little solace in the budget.
“It’s a problem of values and ethics, but also an economic problem,” he said.
Beyond social spending, BoI critiqued the deficit target, which Lapid has raised above the preset level for the third year in a row. Though the summer war in Gaza meant that the 2.5 percent target originally set for the year would not be feasible, the bank urged Lapid not to raise it beyond 3%. He settled on a 3.4% target, but BoI estimated that the deficit would run closer to 4%.
BoI Gov. Karnit Flug was among the most strident critics of Lapid’s zero-VAT housing policy, also included in the budget plan. The Knesset Finance Committee on Monday determined that the policy would be applied to 13,000 apartments, and would cost the government NIS 2b. a year. That amounts to a discount of about NIS 150,000 for each eligible apartment.
Flug and other economists have warned that the policy would push up housing prices by spurring more demand, while the supply of new homes fails to keep up.
The budget plan, the bank argued, was simply putting off tough decisions that would have to be taken in the future.
Higher deficits mean Israel in the future must devote more resources not only to paying back the debt but to making interest payments.
In brighter news for Lapid, the 2014 deficit seemed to be coming in below target. In the 12 months through October, the deficit amounted to just 2.5% Also Monday, MK Shelly Yacimovich (Labor) wrote to Knesset Speaker Yuli Edelstein asking that he delay the budget vote, because lawmakers were not given enough time to read it so as to effectively and thoroughly debate it.
The budget is thousands of pages long and given to MKs in a large box.
Yacimovich said she received it at 9:04 a.m. Monday, and the budget debate began at 6:15 p.m.
Building on Yacimovich’s remarks, Taub Center director Dan Ben-David said that the budget needs to be presented in a clearer, more digestible way that points out who is affected by what policy and lays out more strategic thinking.
“The fact that nobody knows how to read the budget in an organized fashion is a problem,” he said.
Still, in speaking to the Knesset and to the Yesh Atid faction, Lapid expressed pride that the economic arrangements bill, which is passed in tandem with the budget, is “thinner than ever” and does not include any “fake outs,” meaning articles that the finance minister knows will be voted down but includes anyway to protect other parts of the bill.