Peretz: Finance Ministry acted anti-democratically

Budget passes with support of every cabinet minister but Hatnua MK; Lapid: This is the first phase in changing the Israeli way of life.

Amir Peretz 370 (photo credit: Screenshot Channel 10)
Amir Peretz 370
(photo credit: Screenshot Channel 10)
The cabinet passed the budget with the support of every minister save Environmental Protection Minister Amir Peretz early on Tuesday, after a full night of deliberations, negotiations and last-minute changes.
A source close to the minister recounted on Wednesday that shortly before the cabinet vote, at about 3:30 a.m., an agitated Peretz asked for permission to speak, even though Prime Minister Binyamin Netanyahu requested that the meeting end quickly ahead of his flight to Russia.
“I entered this government. It wasn’t simple; it was difficult for me, but I was sure about one thing – that this is a democratic government,” he said. “When decisions are made [in the cabinet], it is my responsibility to defend you in the Knesset and vote with you, but what I didn’t know is that someone would take away my right to vote according to conscience in the government. Red lines have been crossed. This is anti-democratic.”
Peretz said that Finance Ministry officials refused to speak to him or to his ministry, only making it clear that less funds would go to the Environmental Protection Ministry if he did not vote in favor of the budget.
“For someone to condition my budget on how I vote is unacceptable,” he said.
“Where do these threats come from? Why should my whole ministry have to pay for me following my conscience?”
Finance Minister Yair Lapid requested that Netanyahu stop the vote, and he and Peretz along with Treasury staff held a meeting outside the cabinet room.
In the end, the Environmental Protection Ministry received an additional NIS 130 million, and Peretz, who said the budget goes against his social ideology, voted against it.
Other last-minute changes to the budget were across-the-board spending cuts – excluding the defense budget and welfare spending – of two percent in 2013 and 3% in 2014 and a decision to increase corporate tax 1.5% instead of just 1%, which will bring it to 26.5%.
Lapid maintained that authorization of the budget was the first phase in improving the Israeli way of life.
“Soon, a law for equality of the army and civilian service burden and the economic burden will be submitted for government approval and the housing cabinet will begin implementing a national housing program that will lead to reduced housing costs in Israel,” Lapid said after the budget’s passage. He also promised to reform the Israel Electric Corporation and ports, and find ways to prevent big corporations from paying zero income tax.
The budget also included changes in the education system, a “Going to Work” program to incentivize people to join the labor market, cuts in child allowances and their elimination for people with annual incomes over NIS 800,000, recommendations on how to lower food prices, capture “black capital” – uncollected tax revenues – and reduce MK salaries.
Writing later on Facebook, Lapid said that although the budget was a tough one, it would lead to better economic conditions within a year and a half.
Federation of Israeli Chambers of Commerce President Uriel Lynn slammed the budget, calling it “uglier and more disappointing” with every passing day.
Lynn said the idea that raising taxes would increase revenues is “a testament to a complete lack of understanding in the field of economics,” and predicted that revenue forecasts would not be met.
Instead of raising corporate taxes that hurt businesses while making only “cosmetic changes” to the big corporations that indulge in massive tax breaks, Lynn said, Lapid should have eliminated all tax exemptions except those on personal savings and dealt with outliers in public sector wages, reducing those over NIS 20,000 a month.
Tourism Minister Uzi Landau praised the Finance Ministry for canceling its plan to charge incoming tourists VAT, following his ongoing battle against the policy.
“The government took responsibility – not only for 200,000 workers in tourism, but for the whole market,” Landau said. “I could not accept a situation in which thousands of workers would go home, because I believe in the power of tourism as a catalyst for economic growth and because the government has a responsibility for considering long-term ramifications.”
Opposition leader Shelly Yacimovich took a less-rosy view of the budget vote.
“After all the nice words, the smiles and promises of new politics, we’re repeating the mistakes of old politics, and even worse,” she said.
Yacimovich called the new budget “a ringing slap in the face to the public,” which breaks the parties’ promises of new priorities and help to the middle class while “cruelly trampling the poor.
“The across-the-board spending cuts that were added overnight show the character of the new government – lacking in vision, courage or leadership. This budget is full of despair and does not have even one engine for growth and hope.
We will fight a bitter struggle in the public and the parliament in order to moderate the difficult cuts and help the citizens of the country,” she added.
Noa Amouyal contributed to this report.