Defense Minister Ehud Barak confirmed Wednesday that Israel was nearing a large incursion into the Gaza Strip in response to Kassam rocket fire. "When we really look at the Kassam challenge, it might be that we are getting closer to the point that we will need a large-scale ground operation in Gaza to stop the rocket fire and the military buildup there," Barak said at a pre-Rosh Hashana toast with Defense Ministry staff. Earlier Wednesday, senior government officials said that Prime Minister Ehud Olmert was opposed to cutting off utilities to Gaza even though the security cabinet directed the security establishment to draw up a plan to prepare precisely for that possibility. Following a five hour security cabinet meeting, where the ministers were briefed on the situation in the Gaza Strip and possible options and scenarios, the Prime Minister's Office issued a statement saying Israel held Hamas responsible for the Kassam fire and for terrorist acts carried out from the Strip. "While this murderous terrorist organization aspires to be responsible for the daily lives of Gaza's citizens, daily life in the communities near Gaza has been disrupted in an unacceptable fashion," the statement read. "Therefore, the security establishment, in cooperation with the Foreign Ministry and the relevant legal bodies, has been instructed to prepare a plan - taking all military and civil considerations into account - to disrupt the services that the State of Israel provides to the Gaza Strip in response to the continued criminal and indiscriminate attacks against the Israeli civilian population." Government officials pointed out that there was a huge difference between deciding to actually turn off the spigot to the Gaza Strip, and deciding to set up a panel to consider the ramifications of doing so. The decision to set up the committee, the officials said, was a compromise between Olmert and cabinet members such as Vice Premier Haim Ramon who favor a cutoff. Ramon's idea, discussed at the meeting, is to set a "price tag" for each Kassam, meaning that the Palestinians would know in advance that if rockets were fired, their utilities would be cut off for specific periods of time. The logic behind this idea is that it would give the Gazan population incentive to pressure Hamas to stop the attacks. Olmert's position, however, is that this policy would be unlikely to effectively stop the rockets, and would bring in its wake a huge international outcry. The international community, government officials said, has already been urging Israel not to cut off electric and water supplies to the Gaza Strip. In addition, Olmert fears that such a policy would only lead to more terrorism. "The decision the security cabinet made was to consider all the implications and ramifications of this idea, but there has still been no decision to implement it," the officials said. "If things continue with the Kassam fire, then if the decision is made at a later time to cut off utilities, everything will be ready." The security cabinet also decided against a large-scale military response at this time, but agreed to "continue intensive military operations against all those involved in launching rockets and in perpetrating other terrorist actions. Nobody among those responsible for terrorism will be immune." Barak reportedly told the meeting that as long as there was no effective rocket defense system in place to protect Sderot, continued targeted killings and intermittent incursions into the Strip would be necessary. He also said that efforts to fortify the home front needed to continue at the same time. Foreign Minister Tzipi Livni said there was a range of actions Israel could take without triggering a humanitarian crisis "to send the message to Hamas and the other terrorist organizations" that normal life will not continue in Gaza. Yaakov Katz contributed to this report.