Finance Minister Moshe Kahlon plans to work overtime fighting Prime Minister Benjamin Netanyahu’s insistence on a two-year budget, the Treasury chief announced in a briefing to reporters in the Knesset on Monday.
“I have a coalition commitment to a two-year budget,” Kahlon said, although he added: “Even if there is a two-year budget, I will say it’s not good.”
Israel introduced two-year budgets in 2009 and received wide praise for establishing a model that would help long-term planning.
But when the 2012 deficit swelled to over double its target, critics said the two-year model was to blame, explaining that forecasting economic conditions two years ahead was too imprecise.
When Yesh Atid leader Yair Lapid was finance minister, he did away with the model. However, the government has yet to pass a one-year budget, and the inability to pass a budget can bring down a government, something that contributed to the downfall of the previous two coalitions.
Kahlon charged that the two-year model was not good for the economy, adding that he accepted it only as part of coalition negotiations so that he could gain responsibility for the Israel Lands Authority and the Planning Authority.
He also expressed doubts about Netanyahu’s central argument in favor of such a budget – that it is likely to push off elections for another year.
“A two-year budget is not an ideology,” he said, “and I will try to convince [the prime minister] that a two-year budget is not an insurance certificate for the government.
A one-year budget doesn’t mean the government won’t last, and a two-year budget doesn’t mean it will.”
Looking back on his first year as finance minister, Kahlon said plans were underway to reduce the cost of living and introduce reforms. He touted progress on a negative income tax, which would aid the working poor, and reductions in taxes and transportation prices.
He defended his housing plans, which have yet to reverse steadily growing costs. He also urged passage of his plans to reform the credit market, where he faces some opposition from the Bank of Israel, and to reform the agricultural sector, where he faces opposition from farmers.
Aside from disagreements over the two-year budget, Kahlon expressed frustration that Netanyahu opposed his plan to introduce an estate tax. That tax, which tends to hit only the wealthiest, he said, was far superior to the regressive Value Added Tax, which he described as the most “evil” of taxes, presumably because it hits poor people much harder than it does the rich.
On a separate issue, the Kulanu Party leader said he had not yet given up on adding new partners to the government.
“It’s very difficult to function with a 61-MK coalition,” he said.
He added that his party was a stabilizing factor in the coalition, and, despite a dip in the polls, he did not seem concerned with how it would fare if stability proves elusive.
“Some polls are better, some polls are worse – the important thing is how we’re working,” he said.
“The public is happy with the Finance Ministry’s actions,” he went on.
“The public’s trust is most important. They want to see results, not promises. If they see we fought to lower the cost of living and housing, they’ll reward us. I’m relaxed and satisfied that we’re moving in the right direction.”
Kahlon took a swipe at another plan from the coalition, saying that Culture Minister Miri Regev’s proposal to allow her ministry to de-fund institutions that incite against the state would not be approved.
“The law currently says that the only person who can decide to deny funding is the finance minister,” he said, “and I am not willing to give up that authority.”
Under current regulations, a cultural institution that breaks the law, for example through incitement, can be penalized only by the Finance Ministry. As such, the Culture Ministry is required to continue funding lawbreaking institutions.
Regev’s controversial “Loyalty in Culture” proposal would have her ministry cut funds to institutions that incite to racism, violence or terrorism; support armed conflict or terrorism against Israel; reject Israel’s existence as a Jewish and democratic state; mark the establishment of the State of Israel as the “Nakba” (Arabic for “catastrophe”); or destroy or physically harm the dignity of the flag or state symbols.
Asked if he planned to use his authority to penalize such institutions, Kahlon said an inter-ministerial committee with representatives from the Finance, Culture and Justice ministries was meant to deal with the issue, although it had never been convened.
Whichever minister “wants to call a meeting of the committee can submit material and it will convene,” Kahlon said, implying that despite her complaints about incitement, Regev had not yet taken action already available to her.
As for the government’s approval of an aid package of as much as NIS 10 billion for Arab municipalities, Kahlon said: “As far as the Finance Ministry is concerned, it’s authorized. We are investing in infrastructure and schools.”
Debates within the government as to whether funding should be conditional on the municipalities obeying construction and planning laws only impact funding for construction, he added, saying that everything else in the plan was already moving forward.