Reality check: Where’s the money?

The finance minister will ultimately find himself going back on his word as the government seeks extra revenue source.

By
September 7, 2014 23:02
4 minute read.
Yair Lapid

Finance Minister Yair Lapid with first-graders in Sha'ar Hanegev.. (photo credit: RAANAN COHEN)

 
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A quick glance at the OECD’s Better Life Index on Israel should be compulsory reading for government ministers before they begin finalizing the country’s 2015 budget. Were they to make the effort, they would soon realize that cutting health, education and housing budgets in return for covering the expense of Operation Protective Edge and the defense establishment’s insatiable appetite for increased funding is precisely the wrong approach.

Across all social parameters, Israel performs worse than average compared to other members of the OECD, the Organization for Economic Co-operation and Development, whose mission is to promote policies that will improve the economic and social well-being of people around the world.

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The OECD is an elite group of 34 countries, and Israel’s joining the organization in 2010 was rightly seen by policy makers in Jerusalem as international recognition of the quality of Israeli governmental policy regarding regulation, administration and good governance.

As the Finance Ministry said at the time, OECD membership will help “Israel to establish internal economic reforms by comparative learning of the ‘best practices’ of member countries... and establishing ways to decrease inequality and social gaps.”

So how is Israel doing? Not very well has to be the answer. In terms of the quality of our education system, the average Israeli student scored 474 in reading literacy, maths and science in the OECD’s Program for International Student Assessment (PISA), well below the OECD average of 497. More worryingly, education is failing to provide a springboard to social mobility, as there is a huge difference in average results between students from the highest socio-economic background and those from the lowest socio-economic strata.

In the words of the report: “This suggests the school system in Israel does not provide equal access to high-quality education.”

In terms of health, Israel is also lagging behind other members of the group. Although average life expectancy in Israel is two years higher than the OECD average (82 compared to 80), total health spending accounts for 7.7 percent of GDP in Israel, less than the average of 9.4% in OECD countries. Israel also ranks below the OECD average in terms of total health spending per person, at $2,239 in 2011, compared with an OECD average of $3,322.



And as for housing, Israelis live in some of the most cramped housing among the OECD members, with the average Israeli home containing 1.1 rooms per person, less than the OECD average of 1.6 rooms per person.

Unfortunately, Finance Minister Yair Lapid is blind to these findings. Although he ran an election campaign based on the slogan “Where’s the money” and promised to redistribute state funding away from settlements and subsidies to the haredi sector in favor of mainstream Israel, he has done nothing to change this state of affairs.

For example, a report in last weekend’s Yediot Aharonot, based on findings from the Molad institute, showed that the World Zionist Organization’s Settlement Division, the government’s main arm for funding the periphery, this year allocated a stunning NIS 51.5 million to Beit El, one of the most established and wealthy West Bank settlements, a total that was NIS 2m. more than it distributed to all the communities in the north and south of the country combined. Broken down to a per person basis, settlers in the Har Hebron local authority received NIS 1,418 this year, compared to NIS 130 per person for people living in the Eshkol region, who suffered the brunt of the mortar attacks from Gaza this summer.

Lapid has failed dismally to nullify the settler’s grip, in the form of Knesset Finance Committee chairman Nissan Slomiansky, on the flow of government funding to the settlements. Instead, he has drawn up one of the most ill-conceived plans for solving Israel’s housing crisis – the VAT exemption on new houses for young married couples – that will only serve to line the contractors’ pockets.

The main factor stoking Israel’s housing bubble is the lack of supply; the only way to reduce prices is to release more government- owned land for construction, but Lapid stubbornly refuses to accept the obvious, mainly because it doesn’t fit his short-term political needs. Construction takes time, and prices of newly built homes will only fall way after the next election cycle.

His pledge not to raise taxes in 2015 is also politically driven and is likely to come back to haunt him. The fact is that Israel fought a war this summer and the country now has to pay for it. Raising taxes selectively, although not popular, is the only way to recoup the money spent in Gaza, not cuts in civil expenditure such as education, housing and health which, as mentioned above, are already under-funded.

The finance minister will ultimately find himself going back on his word as the government seeks extra revenue sources, leaving Prime Minister Binyamin Netanyahu the main benefactor of a potentially devastating hit to Lapid’s political standing. The war in Gaza will have claimed another victim.

The writer is a former editor-in-chief of The Jerusalem Post.

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