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.

By SUSAN HATTIS ROLEF
Money 311 (photo credit: Bloomberg)
Money 311
(photo credit: 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.
Last 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.
The obvious 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 itself.
The current situation with regards to Finance Ministry control over policy and its budgetary implications is not a healthy one.
The 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 vision.
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).
Fortunately in 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 plants.
There are thousands of other examples of the malady.
The 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 them.
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 operandi.
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 insupportable.
However, I am not holding my breath, and am not really sure that if the plan is approved the positive results will outweigh the negative ones.
The writer is a former Knesset employee.