Treasury presents budget to Knesset

Education spending to be increased NIS 4b., second only to defense.

Yuval Steinitz 311 (photo credit: Ariel Jerozolimski [file[)
Yuval Steinitz 311
(photo credit: Ariel Jerozolimski [file[)
The draft budget for 2011 and 2012 aims to secure the continued recovery of the local economy by keeping unemployment low and boosting spending on education and infrastructures, Finance Minister Yuval Steinitz said Tuesday.
“We are still in an economic climate that is difficult,” he said at a press conference in Jerusalem after submitting the draft budget to the Knesset. “The world economy is still going through havoc, and we are bound to get wet from the waves despite our sound macroeconomic figures.
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“Today we are submitting a serious and responsible biennial budget 2011- 2012. We have prepared it taking into consideration the difficult situation in the global economy. Our target is to accelerate growth while keeping unemployment low, leading us to a safe haven in a world of uncertainty.”
Steinitz called upon Knesset members to take into consideration the special situation of the world economy in the coming budget discussions and let serious and responsible economic policies reign over opposition or coalition interests and populist demands, to secure a continued recovery in the local economy.
“We have succeeded in changing priorities,” said Udi Nissan, head of the Treasury’s budget division. “Our ability to restrain the increase in the defense budget has freed up resources for spending on education, with an emphasis on higher education – with an addition of almost NIS 1.5 billion – transport and structural reforms.”
The defense budget, which is being cut by NIS 2.7b. over two years, would be NIS 49.3b. in 2011 and NIS 50.5b. in 2012, he said.
Nissan said more resources would be spent on infrastructures and transport, including an allocation of NIS 1.5b. for Netivei Israel.
As part of the 2011-2012 budget draft, spending on education is being increased by nearly NIS 4b., making it the second-largest budget after defense spending. The education budget, including NIS 7.40b. for higher education, will be NIS 42.9b. in 2011 and NIS 43.7b. in 2012.
The draft budget includes a decision to freeze a planned increase in child benefits for one year. The 2009-2010 budget stipulated that the benefits for a second, third and fourth child would be gradually increased until 2012. The decision to freeze the benefits will postpone expenditure of NIS 360 million from 2011 to 2012 and NIS 80m. from 2012 to 2013.
“The main discussion and point of disagreement will be on the government’s gradual plan to cut income and company taxes as opposed to the decision to freeze child benefits,” Knesset Finance Committee chairman Moshe Gafni said. “Measures are again being proposed to help the rich while cutting benefits for the poor.”
The Knesset marked International Poverty Day on Tuesday.
Steinitz said the biennial budget enables the government to undertake long-term planning and strengthen economic stability and certainty, while emphasizing the importance of boosting employment and the development of growth engines to narrow social gaps.
“The proposed budget is a social one that puts an emphasis on narrowing social gaps,” he said. “The economic policy plans within the budget for the next two years include social measures aimed at reducing unemployment and boosting employment through the encouragement of the Arab and haredi population to participate in the labor market by also offering them better education, while lowering the number of foreign workers. Other measures to support employment include the introduction of negative income tax and higher investment in day-care centers for women, especially in the periphery.”
The Economic Arrangements bill for 2011-12 is appended to the two-year budget bill.
If the draft budget is approved by the Knesset, spending will increase in real terms by 2.7 percent in 2011 and 2012, compared with 1.7% in previous budgets.
The budget will increase in real terms by NIS 8.7b. in 2011 and NIS 7b. in 2012. The state budget will be NIS 348.2b. in 2010 and NIS 365.9b. in 2012.
Nissan said the expected deficit for this year would be 4%, which was still high but much lower than the planned 5.5%.
“The main target in the proposed budget was on the one hand to try and maintain fiscal discipline and narrow the government’s debt-to-GDP ratio, and on the other hand increase services to the public,” he said.
The planned deficit is 3% in 2011, based on a growth forecast for the economy of 3.8%, and 2% in 2012, based on a growth forecast of 4%.