Amid fierce opposition from Gantz and Barkat, cabinet unfreezes coalition funds

Ministers approve new war budget, redirecting some NIS 30b from 2023 budget to defense goals, while also unlocking hundreds of millions in frozen political promises

Carrie Keller-Lynn is a former political and legal correspondent for The Times of Israel

Left: Finance Minister Bezalel Smotrich at the Knesset on November 20, 2023. (Oren Ben Hakoon/Flash90); Right: Minister Benny Gantz attends a press conference at the Defense Ministry in Tel Aviv, November 22, 2023. (Chaim Goldberg/Flash90)
Left: Finance Minister Bezalel Smotrich at the Knesset on November 20, 2023. (Oren Ben Hakoon/Flash90); Right: Minister Benny Gantz attends a press conference at the Defense Ministry in Tel Aviv, November 22, 2023. (Chaim Goldberg/Flash90)

The cabinet on Monday approved a NIS 30 billion change to prioritize wartime needs in the remaining portion of Israel’s 2023 state budget, over objections that the plan also sends hundreds of millions of shekels in funding for ultra-Orthodox and West Bank settler priorities.

The funds to both causes were already approved by the Likud-led coalition as part of its political promises to partners, but frozen following the outbreak of the war on October 7.

Focusing on the last two months of 2023, the budget update diverts NIS 17 billion ($4.5 billion) to defense and NIS 13.5 billion ($3.64 billion) to civilian wartime needs, said Finance Minister Bezalel Smotrich at the Knesset on Monday.

War cabinet minister Benny Gantz announced on Sunday that his party’s five cabinet ministers would vote against the budgetary changes, as they will release hundreds of millions of shekels to fund such political promises.

Following the vote Monday night, Gantz and his party’s ministers — Gideon Sa’ar, Chili Tropper, Gadi Eisenkot, and Yifat Shasha-Biton immediately left, according to reports.

Sa’ar said a “different proposal could have been brought to this meeting, one that is in line with what’s best for the economy, one that grasps the [moment], one that reflects the unity of the people. Unfortunately, that is not what happened here tonight. He warned that Israel was entering “an extremely difficult economic period with a lot of uncertainty” and would need room to maneuver “when it comes to war expenses, both in security and related civilian expenses.”

Gantz has said he wants that money to be redirected to the war effort.

Economy Minister Nir Barkat, from the prime minster’s Likud party, has for weeks assailed Smotrich’s economic plan as misguided and indicated on Monday that he would vote against the budget update, confirmed a member of his staff.

Likud minister Ofir Akunis abstained from the vote, saying that Israel’s economic strength pre-war was not guaranteed and that during an earlier committee meeting Monday, there was “broad consensus that there would be no spending on anything that is not related to the needs of the war.”

The budgetary changes were expected to overcome this six-vote opposition and indeed, on Monday, they cleared the 38-minister cabinet, moving to the Knesset for final approval.

Israeli soldiers gather near the border with the Gaza Strip in southern Israel on November 26, 2023. (Menahem KAHANA / AFP)

At the start of the meeting, Prime Minister Binyamin Netanyahu said the government would be “bringing a huge budget of about NIS 30 billion…for all the needs of the war,” including he said, “to the IDF, to the police, to the families of the hostages, the wounded, the fallen soldiers and those people killed, to the families of the evacuees in the hotels, to the small businesses, to the reservists,” and the “rehabilitation of the [Gaza border communities].”

In October, the cabinet froze all funds for discretionary political priorities that had not yet been transferred out of the Finance Ministry, in order to reevaluate which resources could be diverted to the war effort. The attorney general later backed the move. Of the NIS 2.5 billion ($674 million) in these so-called coalition funds still available for reallocation, Smotrich said he cut some NIS 1.6 billion ($430 million), about 70 percent, to divert to the war effort.

The remaining 30% of coalition funds, which following approval can be transferred to various ministries and offices, include at least NIS 300 million ($81 million) for ultra-Orthodox private education, which skirts supervision by the Education Ministry, and what Hebrew media has reported as hundreds of millions of shekels to support settler priorities in the West Bank.

In addition, Smotrich told The Times of Israel that the budget update includes NIS 390 million ($105 million) for beefing up security and security infrastructure in the West Bank.

“In the budget that’s being approved today, there are no budgets for new construction in Judea and Samaria,” Smotrich said, using the biblical term for the West Bank. Rather, “there are budgets for security needs,” among them checkpoints and civilian rapid-response teams, and the weapons and equipment those teams would need.

“There are 2 million Nazis in Judea and Samaria, who hate us exactly as do the Nazis of Hamas-ISIS in Gaza,” continued Smotrich earlier, citing a poll of Palestinians that indicated stronger support for Hamas’s October 7 terror attack in the West Bank than in Gaza. Hamas, which controls Gaza, killed more than 1,200 people in Israel and took some 240 into captivity in Gaza Strip on that day, triggering the ongoing war.

A source close to Gantz said on Monday that the budget presented to the government is “a finger in the public’s eye,” according to a statement released by Gantz’s National Unity party.

War cabinet Minister Benny Gantz, Prime Minister Benjamin Netanyahu, and Defense Minister Yoav Gallant, at a press conference at the Defense Ministry headquarters in Tel Aviv, November 22, 2023. (Chaim Goldberg/ Flash90)

The budget is not yet public. The source said that passing the changes will bump funding for yeshivas by NIS 500 million ($133 million), allocate NIS 400 million ($107 million) to the National Missions Ministry — “whose purpose is unclear” and is run by Smotrich’s party — and triple the agreed-upon increase to private ultra-Orthodox school salaries.

The source did not specify if these changes were in the budget, or in the case of the Haredi school salary clause, are within the framework of coalition funds that can be released after the budget closes.

Ultra-Orthodox party United Torah Judaism had previously tried to pass an exemption to the October funding freeze decision to release the NIS 300 million earmarked in 2023 for Haredi schools, but Gantz shut down the move.

Sources close to the war cabinet minister said that he was unlikely to break apart the emergency war government he formed with Netanyahu over the issue, and that Netanyahu had to approve the move in order to assuage his ultra-Orthodox and far-right political partners.

Opposition Leader Yair Lapid had earlier Monday asked the government to reconsider the budget update, in light of political promises that remain embedded within the framework.

Opposition Leader and head of the Yesh Atid party Yair Lapid speaks during a faction meeting at the Knesset in Jerusalem, on November 20, 2023. (Yonatan Sindel/Flash90)

“I appeal to all government ministers, to all coalition members — you are signatories to these funds… You have the power to stop it… You can’t do this to the citizens of Israel,” Lapid said, speaking at the outset of his Yesh Atid party’s faction meeting at the Knesset.

He called the decision to fund political priorities “more proof that the State of Israel is fighting for its life [in the war against Hamas] with an army of heroes but with the wrong government and the wrong prime minister.”

Smotrich dismissed the criticism, saying it’s not worth fighting over “one percent of the budget” when the wartime need for leadership unity is more pressing.

“It’s possible to love them or not love them, but this debate is not connected to the war,” Smotrich said, in comments specifically tied to budget transfers benefiting ultra-Orthodox educational institutions.

In comments directed at the government’s chief budget rebel Gantz, Smotrich said: “Benny, it’s not a secret that we represent two different ways of thinking in Israeli society…but today” there is a need to work together.

In a long Facebook post written on Monday before his Knesset comments, Smotrich said that critics are “recycling the same false campaign” as was used against the original budget, passed in May.

Labor party leader Merav Michaeli also took at swipe at Smotrich’s budget update, saying that it shows that the government “steals” funds for political aims while Israel is distracted by the war.

“You have to pay close attention, but while the entire State of Israel is sitting glued to the television, biting their nails, with hearts in their mouths, with concerns and excitement, this government is continuing to maliciously take advantage of the situation in the most cynical way, to act against the State of Israel and our public,” Michaeli said on Monday.

“It steals public funds for needs and purposes that are the opposite of what the State of Israel needs, and causes damage to the State of Israel and to its security in the future,” the center-left Michaeli said.

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