Is Finance Ministry dominance ending?
The current situation with regards to Finance Ministry control over policy
and its budgetary implications is not a healthy one.
The Jerusalem Post Photo: Bloomberg
One of the steps taken following the recommendations of the Trajtenberg
Committee was to establish a Governability Commission within the framework of
the Prime Minister’s Office to deal with structural malfunctioning in the state
service in the field of policy formation and execution highlighted by the
Trajtenberg Report. Dr. Ehud Prawer, head of the policy planning division in the
Prime Minister’s Office, chairs the Governability Commission.
Wednesday the Commission discussed a draft report prepared by Prawer on the
subject of a major reform in the functioning of the Finance Ministry, which
since the Economic Stabilization Plan of 1985 (one of the most important
achievements of the national unity government formed the previous year to deal,
inter alia, with a three-digit inflation rate), has assumed disproportional
power in determining and managing the state budget.
I couldn’t find any
information on what transpired in the meeting, but its deliberations were
undoubtedly fascinating. As reported in the The Marker, Prawer’s draft report
proposes that the power of the Finance Ministry be curtailed, and that the
government ministries be given much greater autonomy in the planning and
implementation of their individual budgets.
The ministry cannot be
pleased with these proposals, and even though it is apparently resigned to
accepting some change, it will undoubtedly continue to argue, as it did in the
past, that the other ministries cannot be trusted, and that without very strict
treasury supervision, financial havoc will break loose.
answer to this argument is that with a totally unpredicted budgetary deficit NIS
40 billion in 2012, havoc has already broken loose, and the blame can be placed
fairly and squarely on the excessively broad shoulders of the treasury
The current situation with regards to Finance Ministry control
over policy and its budgetary implications is not a healthy one.
ministry is manned by fine economists, who believe in the need to run the budget
on the basis of the strictest economic principles of free market supply and
demand (the defense establishment excluded), but leave very little room for
No doubt, if the fate of the magnificent National Water Conveyor
project of 1964 were in the hand of the ministry as it operates today, it would
never have been approved, because its cost effectiveness was elusive. Again, it
was the treasury which consistently put sticks in the wheels of all proposals to
start massive desalination efforts in Israel despite forecasts that Israel was
facing a major water shortage.
The ministry kept arguing that first the
supply of subsidized water to agriculture had to stop, the price of water raised
and watersaving mechanisms implemented – only then should desalination be
considered (in other words, in the days of the Messiah).
1999 then-finance minister Avraham Baiga Shohat told his senior officials that
he wasn’t interested in their views on the subject, and instructed them to sit
down and prepare tenders for the construction of desalination
There are thousands of other examples of the malady.
clash between conservative economics and vision first emerged in the Zionist
Movement after the First World War, when in the first Zionist Congress following
the war the American Zionists insisted that the Zionist endeavor should be based
on strict economic viability considerations. When the European Zionists rejected
this demand, the Americans simply walked out, and stayed away for over a decade.
Had the American Zionists won this debate, it is doubtful whether the Zionist
endeavor would have continued to develop as it did.
In its early stages
Zionism didn’t make any economic sense – that came much later. Today the State
of Israel, despite all its social distortions, certainly makes economic sense,
but if one excludes vision – as the Finance Ministry is inclined to do – the
Zionist soul of the state is liable to die.
Of course, there can be a
legitimate argument about what this vision ought to be – Greater Israel at any
cost, an egalitarian state, an Israel that is “a light to the nations” – but
that is a separate issue.
To return to the current proposals raised in
the Governability Commission, it is not clear whether in the final reckoning
these will actually be implemented, fully or in part. However, there is another
issue that must be taken into account before an attempt is made to implement
The fact is that in the past decade Israel’s governments have
become increasingly incoherent in terms of goals and ideology; the government’s
decision making process is faulty, and there is no effective policy
coordination. As a result, if the treasury loses control over the purse strings,
the only means of maintaining minimal coherence (at least in financial terms) in
the government’s activities will vanish.
This problem should not be taken
lightly. Israel is one of the few western parliamentary democracies where the
prime minister does not open each annual parliamentary session with a speech
regarding the government’s overall policy and legislation plans for the coming
year. Even if he tried, he couldn’t accomplish such a feat because he himself
does not know what his coalition’s overall policy is, and what bills his
ministers plan to table in the Knesset, should they be lucky enough to get them
approved by the Ministerial Committee on Legislation.
In the new
government Prime Minister Binyamin Netanyahu will be announcing within a month,
the situation is liable to be even more complicated, since he seems disinclined
to form a coherent government (a coherent government would involve leaving the
haredi parties out, at least in the first instance), which means that once again
the various coalition members will be more busy neutralizing each other than
reaching agreements regarding overall policy and modus
Furthermore, even his own party – the Likud – did not publish a
platform before the elections because with the current make-up of the party
there is disagreement on many major issues – and this is all before the
partnership with Yisrael Beytenu is reckoned with.
I still hope that the
Governability Commission will manage to get Prawer’s plan approved, since the
current situation has been going on for too long, and is
However, I am not holding my breath, and am not really
sure that if the plan is approved the positive results will outweigh the
The writer is a former Knesset employee.