Israel was well on its way to its first state budget in three years on Thursday evening, after the Knesset passed in their first readings of the Arrangements Law, which accompanies the budget, and the budget bills for 2021 and 2022, following compromises on several disputes within the coalition.
The budget was passed in two votes of 59 - 54 and 59 to 53, while the Arrangements Law was passed earlier in the evening 59 to 54.
The budget for 2021 will be some NIS 432 billion, and NIS 452 for 2022, while the budget deficit for 2021 will stand at 6.8 percent of GDP, and is expected to fall to 3.9% for 2022.
Major budget increases were allocated to the Health Ministry which received an extra NIS 2 billion for its basic budget, as well as for elderly citizens where an extra NIS 1.5 billion was added in order to raise their minimum income to 70% of the minimum wage.
An additional NIS 300 million was allocated for Holocaust survivors to raise their monthly grant by NIS 2,500 to a total of NIS 6,500 for those eligible.
Another NIS 1.8 billion was added to assist the disabled, NIS 1 billion for wounded IDF veterans, NIS 1 billion to the Education Ministry, and NIS 700 million to the Labor and Welfare Ministry.
The final budget will need to be approved in its third reading in the Knesset by November 4 to avoid the automatic dissolution of the Knesset and a new election.
Finance Minister Avigdor Liberman presented the budget on Thursday morning, declaring that the advancement of the budget process by the coalition signified “the end of the era of trolling and a return to normality,” in reference to the failure to pass a budget for three years.
Although the majority of budget disputes within the coalition were largely solved by Thursday, one sticking point remained: the establishment of a state body to prevent excess regulation, a key demand of the Yamina Party.
The body, to be under the authority of the Prime Minister’s Office, is intended to review legislation and government decisions to ensure avoiding excess regulation that might harm economic activity.
Labor and Meretz expressed strong reservations about the powers of the new authority, in particular over its ability to stymie environmental and health regulations.
Negotiations on this issue continued throughout Thursday, until an agreement was reached whereby the establishment of the body was left as part of the Arrangements Bill, while its ultimate powers will be determined in separate legislation by the coalition.
The Arrangements Law, which includes legislation designed to implement the economic policies of the budget, was approved 59 to 54, and will now be assigned a Knesset committee to prepare the legislation for its second and third readings.
Other than the establishment of the regulatory review body, other significant points of contention within the coalition that were resolved during the course of Wednesday and Thursday were reforms to the agricultural sector, and raising the age of retirement for women from 62 to 65.
The agricultural reforms include plans to reduce tariffs on imported fruits and vegetables in order to open up those markets to competition.
Liberman noted in his comments introducing the budget from the plenum podium that since 2000, there has been a 100% increase in the cost of fruit and an 81% increase in the cost of vegetables, a phenomenon that he said has reduced the consumption of fruit and vegetables in the lower socio-economic sectors of society.
The government had intended to include eggs in the tariff reduction program, but pressure from the agricultural lobby and the Labor Party forced Liberman to remove those reforms from the Arrangements Bill, which will now also be advanced in separate legislation.
Labor and Meretz also demanded additional government funds in return for their agreement to raise the age of retirement for women, in order to assist women in vulnerable socioeconomic positions cope with the change.
The budget will now allocate an additional NIS 360 million on top of the NIS 630m. already assigned for this task.
The retirement age for women will now be raised gradually by three or four months a year over 11 years until it reaches age 65 in 2032.
“This is a day for celebration,” declared Liberman. “For three-and-a-half years this house has not had a serious debate on a budget... This is unprecedented... The budget sets out the priorities of the government, and the debate today symbolizes above all the end of the trolling era and a return to normalcy. This is proof that the government is functioning and the coalition is functioning.”
Liberman also claimed that the current budget was “the most social-minded budget in the annals of the state,” and that all ministries providing social services of different types were receiving budget increases.
Opposition and Likud leader Benjamin Netanyahu denounced the proposed budget, saying it would increase taxes in contravention of promises made by the coalition parties during the election campaign, and that the agricultural reforms would harm farmers.
The coalition plans to raise municipal taxes, and has also reduced subsidies for public transportation, steps that Netanyahu said would harm the lower socioeconomic sectors, the middle class, and those in the country’s periphery.
Likud MK and former Knesset speaker Yariv Levin took particular exception to the reduction of public transportation subsidies.
“We worked systematically to cancel the differences between the periphery and the center of the country, and this started with public transportation,” said Levin. “Now you come along and what is the first thing you do in the field of transportation? You impose a ‘periphery tax’ for those who work in the center and Tel Aviv.”
Shas Chairman MK Arye Deri also condemned the budget.
“This is a bad budget of a fat government that is disconnected from the people,” declared Deri. “It is a budget without mercy that does intentional harm to the weakest families in Israeli society and the residents of the periphery. The Bennett-Liberman government will be remembered as one that passed an anti-social budget.”
Manufacturers Association president Dr. Ron Tomer welcomed the approval of the Arrangements Bill, saying it would help strengthen economic growth and employment, and accelerate the development of infrastructure and national and social projects.
“The minister of Finance has shown that with responsibility, composure and professionalism, a budget can be passed that will give an injection of encouragement to the economy and businesses,” said Tomer.
He criticized the compromise over the establishment of the regulatory body, saying it could empty the proposal of content, “and lead to the Israeli public and businesses continuing to unnecessarily pay tens of billions of shekels,” adding that the organization would continue to fight for the full implementation of the measure.