Coalition, opposition pound Lapid over budget

Finance minister defends budget in stormy Knesset section, says investment in education, infrastructure keeps economy growing.

June 11, 2013 16:06
4 minute read.
Finance Minister Yair Lapid at the Knesset's Finance Committee, June 11, 2013.

Lapid at Finance C'tee meeting 370. (photo credit: Knesset)

Finance Minister Yair Lapid defended his budget in a stormy session with the Knesset Finance Committee on Tuesday, as members of the coalition and opposition alike critiqued his unpopular economic plan and vowed to make changes before allowing it to move forward.

“The committee under my authority will make changes to benefit the middle class and weak sectors, and distribute the burden in a more just manner on all levels of society,” committee chairman Nissan Slomiansky (Bayit Yehudi) said following the discussion.

“There are things in the budget that will not pass this committee, such as the clause on housing upgrades, the tax on housewives, subsidizing daycare and a blanket increase in income tax” Likud Beytenu MK Gila Gamliel added.

Likud Beytenu MK Reuven Rivlin said that while the budget was “realistic under the circumstances,” it “could affect each family at the level of NIS 800 a month.” It was up to the Finance Committee to “save” the 2013-14 state budget, he said, by ensuring it protected the weak.

“A society that does not take its weakest into account is not worth of being called a society,” Rivlin said, arguing that unless national insurance and tax collection were unified into one body, Israel would have no way of measuring who the truly weak members of society are.

“We must keep the principles of our budget, the spending ceiling and the deficit target, but also strive to find the weak in society, through the union of collection, and aid them,” he said.

If critiques from members of his own coalition weren’t enough, the opposition did not spare Lapid either.

Meretz chairwoman Zehava Gal-On told Lapid that although “there’s no doubt you received a difficult inheritance, it’s amazing how quickly you adopted the rhetoric and policies that created it.”

The “cowardly” budget did not confront settlements or tycoons, she said, and allowed feckless defense spending that lacked transparency and oversight without adding to Israel’s safety. Worse, she chastised, there was no mechanism to ensure that additional spending measures through the year wouldn’t break apart the budget framework anyway.

Lapid expressed a willingness to reconsider taxes affecting housewives, VAT exemptions for fruits and vegetables, and the tax points for academics, but defended his budget proposal as addressing the root causes of poverty.

“Poverty is a terrible thing.

That is the reason that we did not touch benefits for the disabled and elderly, and added NIS 500 million for Holocaust survivors,” he said.

However, he continued, “the culture of benefits perpetuates generation after generation of poor here. Education is the solution. I do not believe in socialism. There were elections and socialism lost.” Lapid argued that the solution to Israel’s poverty problem was simple: work.

Only 4.5 percent of families with two working parents fall below the poverty line, he said, but demographic trends meant that in order to decrease poverty, the country would have to increase labor participation among haredi men and Arab women, in particular.

While 78.4% of the non-haredi Jewish population was employed in 2011, only 45% of haredi men and 27% of Arab women were. While the general population would only grow 1.1% between 2015 and 2019, the haredi and Arab populations were projected to grow at 4.3% and 3%, respectively.

Without incentives for those groups to join the workforce, Lapid said, the poverty level would only continue to rise.

The finance minister also argued that he was investing in areas like education and infrastructure to keep the economy growing. Programs such as the Open Skies Agreement, car market reforms and laws addressing market concentration, he argued, would lower prices and ultimately counter tax increases.

“It is true citizens will pay a little more in taxes, but at the end of the process they will live in a complete society. It doesn’t take two days; fixing is harder than destroying,” Lapid said.

According to data presented to the committee, the country’s structural deficit was on course to reach NIS 55.6 billion (5.7% of GDP) in 2013 and NIS 62.2b.

(6% of GDP) in 2014. Had he not made cuts and increased taxes, Lapid explained, Israel’s credit would be further downgraded, the amount it paid in interest would rise, and future deficits would further rise.

Extra money spent on interest “is money we’re throwing in the trash” instead of spending it on welfare, defense and citizens, he said.

Labor MK Stav Shafir said that if Lapid’s economic plan was predicated on raising employment levels, bringing down prices, and spurning economic growth, then he should set specific targets for those variables to test whether or not the policies were succeeding.

Taking on his critics directly, Lapid told the committee, “Your responsibility is not just to say ‘cancel, cancel, cancel.’ You have to offer replacements as well.”

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