Legislation must now clear all Knesset readings by Nov. 4

Cabinet approves state budget for 1st time in 3 years in key test for government

Bennett: ‘After 3 years of stagnation, Israel is back to work’; Liberman says reforms focus on lowering cost of living; Horowitz said to secure NIS 2 billion increase for health

Cabinet approves the state budget, August 2, 2021 (GPO/Amos Ben Gershom)
Cabinet approves the state budget, August 2, 2021 (GPO/Amos Ben Gershom)

After marathon overnight talks, the cabinet voted on Monday to approve the national budget for the first time in three years, one that will introduce a slew of profound changes to the Israeli economy and society.

The complex legislation must now pass through committee stages and three readings in the Knesset plenum by a November 4 deadline — in a key challenge for the coalition, which holds a narrow parliamentary majority. If it does not pass by then, the Knesset would automatically dissolve and new elections would follow.

Prime Minister Naftali Bennett welcomed the advancing of the budget, which covers 2021-22, the negotiations for which mark a major test for the new government.

“After three years of stagnation, Israel is back to work,” the premier said in a statement from his office.

“I ask members of the government to understand the magnitude of the moment,” Bennett said. “After years of neglect, this morning we have produced the most daring, most competition-focused budget, the most helpful to the weaker sections [of society], and the most concerned about the future of our children.”

Finance Minister Avigdor Liberman said that the reforms, which still need to be passed by the Knesset, would bring tangible change to the lives of many.

“The reforms we have approved focus primarily on lowering the cost of living. We have invested huge amounts of funding in infrastructure, transportation and real estate, and we have implemented significant reforms that will reduce bureaucracy, making it easier for everyone in our day-to-day business or private life,” Liberman said in the statement.

Prime Minister Naftali Bennett (C) and Finance Minister Avigdor Liberman (L) at a cabinet meeting to approve the state budget, August 2, 2021 (GPO/Amos Ben Gershom)

In a key development, Health Minister Nitzan Horowitz reportedly secured a NIS 2 billion ($619 million) increase in funding for health care from the Finance Ministry.

The health minister had been threatening to vote against the budget if his demands were not met.

Horowitz had previously warned that the health system is “on life support and needs an urgent transfusion, irrespective of the coronavirus…. It is functioning in emergency mode and it’s impossible to continue like this.”

In addition to asking for more money, the Health Ministry was also reportedly insisting that a planned reform on imports to open up the market not include cosmetics.

Health Minister Nitzan Horowitz speaks during his visit to the Beilinson Medical Center, on July 27, 2021. (Avshalom Sassoni/Flash90)

Another stumbling block had been a planned agriculture reform, opposed by farmers and fresh produce providers, as well as some coalition members.

Farmers had protested against the plan Sunday outside the Foreign Ministry where ministers were meeting to discuss the budget.

Israeli farmers demonstrate against the Finance and Agriculture ministries’ plan to open up the fruit and vegetable market to imports, Jerusalem, August 1, 2021. Olivier Fitoussi/Flash90)

Other major reforms include the gradual raising of the retirement age for women to 65 over the course of 11 years, at a rate of four months a year for three years and three months a year for further eight years.

Ministers had raised reservations about various aspects of the budget.

Transportation Minister Merav Michaeli opposed the plan to introduce a congestion fee for drivers entering the Gush Dan area in the center of the country during rush hours, saying that public transportation is not yet up to the task of picking up the slack if drivers feel compelled to leave their vehicles at home, Channel 12 news reported.

Immigration and Absorption Minister Pnina Tamano-Shata warned she would not support the budget unless the Finance Ministry agreed to her demand for increased funding to bring Ethiopian immigrants to Israel.

After weeks of discussions, ministers gathered on Sunday morning for the talks ahead of the vote.

At the start of the meeting, Bennett said the budget “will be a milestone for government stability,” adding that it will enable ministers to carry out their roles without needing to curry favor with interest groups.

“This time, the budget is not serving the interests of this or that sector but of the entire State of Israel,” the premier said. “This government is free to act on behalf of the general interest. We are reducing bureaucracy and increasing competition, for everyone, but mainly for the weaker sectors. Those who will gain the most from competition and lower prices are the weaker sectors.”

The ministers continued their talks throughout Sunday until 8 p.m. and after taking a break, negotiations went on till past midnight, when another halt was called while Bennett summoned coalition chiefs for a meeting in his office. Negotiations then continued through the night until the agreements were reached.

The 2021-2022 budget ($187 billion for 2021, $173 billion for 2022) is being advanced by Liberman, though it faces significant hurdles in the Knesset before a November 4 deadline for passage.

The budget will require all the votes of the wafer-thin coalition to pass, with the opposition of a single lawmaker able to bring it down. The diverse composition of the new government led by Bennett — it is made up of right-wing, centrist and left-wing parties — complicates the effort.

A failure to pass a state budget will spell the automatic dissolution of the government.

Finance Minister Avigdor Liberman attends a press conference, presenting new reform in the Agriculture sector, at the Finance Ministry in Jerusalem, July 21, 2021. (Yonatan Sindel/Flash90)

The new state budget includes sweeping reforms of the kashrut establishment and the agriculture industry, steep taxes on disposable plasticware and sugary drinks, and considerable changes to import policies.

The budget will also raise the defense budget for 2022 to NIS 58 billion ($17.8 billion), according to a government statement last week. That will include a substantial increase — some NIS 7 billion ($2.15 billion), according to the Kan public broadcaster — for “rearmament and strengthening the Israel Defense Forces” to prepare the military for a potential strike on Iran, according to the statement from the prime minister, defense minister, and finance minister.

Israel’s last approved state budget was for 2019, before the country became embroiled in a two-year political gridlock. That budget that was passed in March 2018.

In the previous government, then-prime minister Benjamin Netanyahu refused to pass a budget — which allowed him to call elections without then-coalition partner Defense Minister Benny Gantz immediately becoming transitional prime minister under the terms of their rotation deal.

Liberman has said he believes the budget will pass because even most of the opposition does not want a fresh round of elections. Sources in the government have been talking to members of the opposition’s Joint List to negotiate support from outside the coalition for the budget, Kan reported Sunday.

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