Cabinet approves NIS 740m. cut in 2008 budget

Prime Minister Ehud Olmert tells cabinet that budget cuts are the right thing to keep economy stable and maintain growth.

By SHARON WROBEL,
August 4, 2008 10:55
3 minute read.
Cabinet approves NIS 740m. cut in 2008 budget

olmert livni 88 224. (photo credit: )

The cabinet on Sunday approved a sweeping plan to cut government spending in 2008 by 6 percent, except for defense, education and local authorities, to free up NIS 740 million for "unbudgeted" expenditures. "Government ministers have demonstrated the necessary responsibility by approving these cuts," Finance Minister Ronnie Bar-On said. The new commitments resulted from several private member's bills, increased pensions for poor Holocaust survivors, a plan to hire 1,000 new policemen, salary agreements and High Court rulings. The Finance Ministry said these new commitments had created a NIS 2 billion gap in the 2008 state budget. The Treasury is under pressure to stay within the budget framework of a maximum 1.7% deficit. To combat fierce opposition to the broad budget cuts from the Labor Party, Shas and other MKs, the cabinet in parallel agreed to allow the ministries to make use of a total of NIS 314m. from their emergency reserves. The reserve budget serves as a safety cushion to be used with the approval of the Finance Ministry and is designated to overcome problems that were not anticipated when the state budget was approved. "The availability of the otherwise frozen reserve funds will help the ministries to absorb the cuts," Bar-On said. Before the vote, Prime Minister Ehud Olmert urged the cabinet to approve the 6% cuts to pay for "unbudgeted" commitments made since the budget was passed. "We have made several commitments this year that were not included in the budget. We cannot increase the budget, but rather must define priorities and remain within the approved budgetary framework," Olmert said at the regular weekly cabinet meeting on Sunday. "This is the right thing to do and is one of the reasons that Israel's economy has remained stable and maintained a rate of growth that other economies have not been able to attain." Following initial objection to the Finance Ministry's plan, the majority of cabinet ministers voted in favor of the cuts. Voting against were Public Security Minister Avi Dichter (Kadima), Industry, Trade and Labor Minister Eli Yishai (Shas) and Environmental Protection Minister Gideon Ezra (Kadima). Treasury officials view the cuts to the base line of the 2008 budget as a success since the 6% cut will also apply to the 2009 state budget. The ministry estimated that the budget squeeze this year will save about NIS 1b. next year. "Only this week we adopted the Dorner Commission recommendations in the matter of Holocaust survivors. It is impossible to expand the budget and expect that the money will come from some source that is not part of the government outlays," Olmert said. He added that it was at the request of Public Security Minister Avi Dichter, and in coordination with Bar-On, that a decision had been made to add 1,000 policemen. "This is a large expenditure for which somehow we must find the funding," the prime minister said. Dichter said the cuts would take a significant bite out of his budget, and that his ministry would be asked to cut more than any others. "What should the public understand from this?" he said. "What are the police to understand? That internal security is not important? This cut represents a significant blow to the police's efforts to upgrade its abilities." He added that the cuts would harm the police's ability to hire more police officers. Defense Minister Ehud Barak, meanwhile, said the cuts were an "important achievement," but that they would harm social programs. He said it was important that the cut was reduced by half, and would come in part from the ministries' budgetary reserves. "We did not harm the defense or education budgets, and that is in line with Labor Party polices," he said. Foreign Minister Tzipi Livni, in the thick of a primary race with Transportation Minister Shaul Mofaz for the leadership of Kadima, supported the cuts, saying that strictly across-the-board reductions did not reflect the government's priorities and should be avoided. However, she said, "since in this case the cut is needed to fund educational reform, strengthen internal security and for Holocaust survivors, it is in my opinion a proper defining of priorities."


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